The Extent of Improper Payments in the Medicaid Entitlement

Dec 14, 2020

The government bureau that oversees Medicare and Medicaid, the Centers for Medicare and Medicaid Services (CMS), is required by law to track waste, fraud, and abuse in the entitlements. The federal Office of Management and Budget (OMB) has identified several parts of the entitlements that are “at-risk” for fraud. CMS recently released its report on improper payments for the past fiscal year. (here)

The report states that the improper payments are “not necessarily indicative of, or measures of, fraud.” These are evidently payments that don’t meet regulatory or legal requirements and could be underpayments as well as overpayments.

It should be noted that CMS measures the payment history and the records of each state once every three years. So the recent report in actuality reflects numbers from only one third of states.

The improper payment rate for Medicaid for 2020 was 21.36 percent or $86.5 billion. The improper payment rate for the Children’s Health Insurance Program (CHIP), which overlaps with Medicaid, was 27 percent or $4.8 billion.

The CMS report goes on to state that improper payments were usually based on:

  • Eligibility errors where there was insufficient documentation.
  • CHIP patients who were actually Medicaid eligible.
  • Non-compliance on the part of providers to validate enrollment.

Last year, authors of an opinion article in The Wall Street Journal found that improper spending in the Medicaid entitlement increased over 300 percent after the passage of Obamacare. (here) Prior to the Affordable Care Act, funding for traditional Medicaid was split more or less 50/50 percent by state and federal governments. Half of the newly insured under Obamacare are in the expanded Medicaid program, where any able-bodied adult age 18 to 64 who earns less than 138 percent of the federal poverty level is eligible. The ACA enticed states to expand Medicaid because the federal government would ultimately pay 90 percent of the funding. The Obama Administration encouraged enrollment in the expanded program and oversight became somewhat of an after-thought.


The critical point in the CMS report is that the government office which is in charge of Medicaid admits to an improper payment rate of over 20 percent. Tragically, this is the history of virtually every government entitlement. One can only imagine how long a private company would stay in business with that kind of lack of oversight.