Medicaid Blows $109 Billion on Promotional “Demonstrations”

In a classic example of government waste, the taxpayer-funded program (Medicaid) that provides health insurance for the poor spends over $100 billion on “demonstrations” to promote the benefit that already covers millions of people nationwide. That’s an astounding 33% of Medicaid’s total federal budget for experiments and projects that supposedly help states test and evaluate new approaches to deliver the welfare benefit, which is already spread thin.

Medicaid is administered by states and is jointly funded by the federal government and states. Millions of low-income adults, children, pregnant women and people with disabilities are covered under the program, which cost American taxpayers an eye-popping $545.1 billion in 2015, according to government figures. A little-known section of the Social Security Act gives the Secretary of Health and Human Services (HHS) authority to approve experimental, pilot or demonstration projects that promote the objectives of Medicaid and its counterpart, the Children’s Health Insurance Program (CHIP), as if they really need to be further publicized. The purpose of the demonstrations, according to the Social Security Act, is to expand eligibility to individuals who are not otherwise Medicaid or CHIP eligible, provide services not typically covered by Medicaid and use innovative service delivery systems that improve care, increase efficiency and reduce costs.

Ultimately, the goal is to increase and strengthen states’ overall coverage of low-income individuals, enhance access to provider networks that serve low-income populations and boost the efficiency and quality of medical care through “initiatives” that “transform service delivery networks.” This could mean anything. The only restriction is that the demonstrations must be “budget neutral,” which means that the money comes out of the federal portion Medicaid’s budget. In fiscal year 2015 Uncle Sam blew $109 billion to promote Medicaid, according to a scathing federal audit, that blasts the program for wasting 33% of its budget on such nonsense. Medicaid’s demonstration spending ballooned from $29 billion in 2005 to the $109 billion in 2015, the audit reveals. In ten states demonstration expenditures comprised 75% or more of total Medicaid expenditures, the probe reveals. Six other states spent between 50% and 75% of their Medicaid budget on demonstrations.

California takes the prize for wasting $76.4 million on Medicaid demonstrations in a five-year period analyzed by investigators from the Government Accountability Office (GAO), the investigative arm of the U.S. Congress. The Golden State went from spending 2.6% of its Medicaid expenditures on demonstrations in 2005 to a whopping 55% in 2015. California’s exorbitant demonstration budget caught the attention of congressional investigators who flagged state for having financial compliance issues. “As of the end of fiscal year 2013, California withdrew $1.3 billion more in federal matching funds for its Medicaid program than it reported in actual expenditures and according to CMS officials California could not account for the difference,” the report states, adding that the discrepancy is specifically related to demonstrations.

Like many bloated government programs Medicaid has long been plagued by uncontrollable fraud and corruption that gets worse with time. Less than a year ago Judicial Watch reported that an HHS Inspector General probe found Medicaid spent $26 million to provide dead people with health insurance in one state alone. The investigation centered on Florida and covered a five-year period from 2009 to 2014. The government simply continued making payments to the insurance companies contracted to provide medical coverage for the state’s low-income residents long after beneficiaries had passed away. Years earlier the GAO uncovered tens of thousands of instances of fraud involving Medicaid’s prescription drug program in only a handful of states, estimated to cost U.S. taxpayers about $65 million.

In an embarrassing effort to combat fraud, Medicaid devised a program that cost the government more than five times the amount of scams it identified. The failed anti-fraud project is known as the National Medicaid Audit Program and it was launched to tackle a monstrous epidemic of overbilling for medically unnecessary treatments, services and procedures not covered under Medicaid. Back in 2012 Judicial Watch reported that the National Medicaid Audit Program cost the government $102 million to operate while identifying only $19.4 million in overpayments.