No, Fighting Wasteful Scams Isn’t ‘Cutting’ Medicare

Following last month’s elections, much of official Washington — to say nothing of corporate America — has fixated on whether the incoming Trump administration’s effort to reduce spending, led by Elon Musk and Vivek Ramaswamy, will succeed. A recent exposé in The Wall Street Journal may provide a good test of the willingness of this duo, not to mention Donald Trump, to take on entrenched interests to achieve their goals.

Back in April, I noted in The Federalist that reducing waste and fraud in programs like Medicare and Social Security represents the furthest thing from “cutting” these programs, Democrat scare tactics notwithstanding. The Journal article provided a perfect example of such waste. The question is, will Musk, Ramaswamy, Trump, and a Republican Congress be willing and able to act?

Medicare Paid Insurers Billions to Provide Little Care

The Journal’s investigation examined Medicare Advantage plans targeted to veterans. These insurers receive payments every month for providing traditional Medicare benefits to seniors. But in the cases the Journal examined, the plans didn’t have to provide much if any care because the veterans in question received many of their health treatments through the Department of Veterans Affairs.

The Journal analysis found that about one-fifth of these veterans had no — zero — use of Medicare services in 2021, compared to roughly 1 in 30 individuals enrolled in other Medicare Advantage plans who used no Medicare services. From 2018 to 2021, the VA paid $46 billion to provide care to these veterans. Medicare Advantage plans got paid nearly as much ($44 billion) over the same period, but in many cases, the plans had to provide little if any additional care.

The Medicare program does pay these Medicare Advantage plans targeted toward veterans slightly less, ostensibly to reflect the fact that veterans receive many health services from the VA. But the Journal examined one Humana plan for veterans that received 22 percent less than other Medicare Advantage plans in a given area, but whose participants had 38 percent fewer days in the hospital, and 63 percent fewer doctor visits and surgeries. In other words, even though Humana received less than other Medicare Advantage plans, it was still paid too much — which probably explains why Humana and other insurers are creating these plans targeted at veterans in the first place.

End the Waste

Fixing this issue involves one of two policies: Either Congress or the administration could tweak the funding formula to reduce payments to Medicare Advantage plans targeting veterans to reflect that they use fewer Medicare services, or Congress could authorize the VA to bill Medicare Advantage plans for medical care not directly related to a veteran’s military service.

The Journal noted that the VA does exactly that with respect to Obamacare Exchange plans, writing, “The VA collected $3.7 billion in 2024 from non-Medicare insurers from such claims, VA budget figures show.” (Most Exchange enrollees qualify for sizable federal subsidies.)

But because the original Medicare statute from 1965 did not contemplate private insurers delivering health benefits, and because Congress never authorized a change to the law, the VA lacks authority to bill Medicare Advantage insurers. As a result, taxpayers effectively pay twice for the same care — once for the VA to deliver it and then a second time to a Medicare Advantage plan, which may not provide much actual care.

Fight the ‘Mediscare’ Demagoguery

At this point, the insurance industry would point out that all those (over-)payments to Medicare Advantage plans do provide benefits. For instance, 88 percent of Medicare Advantage plans for veterans provide those members with Medicare rebates — about $1,000 on average — compared to 11.7 percent of other MA plans. 

But Medicare is already functionally insolvent — with full insolvency projected within a decade — the federal government has $36 trillion in debt, and the Department of Veterans Affairs faces both a cash crunch and shortages of medical providers given a new influx of veterans seeking treatment. Given this dynamic, is it realistic or wise to provide billions of dollars in additional payments to Medicare Advantage plans, even if some plan participants receive rebates, or things like gym memberships? The question should answer itself. 

If Democrats want to defend the big insurance companies, they are free to do so. But these sorts of giveaways to insurers undermine Medicare’s solvency, not to mention that of the VA and the federal government as a whole. Trump, Musk, and Ramaswamy shouldn’t be afraid to take on these types of entrenched interests and fight to cut out the waste and the fat, even in programs like Medicare.