Elon Musk Calls for Medicaid Cuts Amid Fraud Concerns

As the head of the Department of Government Efficiency (DOGE), Elon Musk has advocated for substantial cuts to Medicaid. Musk claims the program wastes billions annually, largely due to fraud. Here, we explore the extent of Medicaid fraud and its alignment with Musk’s assertions.

The Context of Medicaid

Medicaid, established during President Lyndon B. Johnson’s “Great Society,” serves approximately 79 million Americans, providing critical health coverage. Notably, it finances 60% of nursing home care and about 40% of all births in the United States.

Where to invest $1,000 right now? Our analyst team has identified the 10 best stocks to buy at this time. Learn More »

Musk contends that Medicaid is plagued by fraud, prompting the DOGE to consider significant reductions in this joint federal and state program. On February 25, the House of Representatives passed a budget resolution that aims to cut $880 billion from federal spending over the next decade, with Medicaid expected to face the most substantial reductions.

Image source: Getty Images.

Examining Fraudulent Claims

During a segment on Fox Business Network, Musk mentioned that entitlement programs, including Medicaid, Medicare, and Social Security, could see cuts ranging from $500 billion to $700 billion due to waste. Although his figures clash with those from the Centers for Medicare & Medicaid Services (CMS), the House is relying on these cuts to facilitate the president’s proposed tax reforms.

CMS reported “improper” Medicaid payments totaling $31.1 billion in 2024, raising questions about the program’s oversight. Improper payments may arise from various issues, such as insufficient or missing documentation, or a failure to verify eligibility.

A closer look suggests that significant savings through cuts may be challenging without adversely affecting beneficiaries who depend on Medicaid.

Breakdown of Improper Payments

Every year, CMS publishes data on improper payments. Here’s how the $31.1 billion categorized as improper in 2024 breaks down:

1. Insufficient Documentation

Approximately 74% of these improper payments stemmed from insufficient documentation. This broad category includes several possible issues, such as:

• The reviewer couldn’t confirm whether services were rendered.
• The billed amount couldn’t be validated.
• The services were deemed not medically necessary.
• Specific documentation was missing from claims.
• A physician’s signature was absent or illegible.
• A claim was incomplete.
• Lack of detail in the physician’s descriptions.
• Incorrect service codes were used.

CMS clarifies that these improper payments often arise from administrative oversights rather than fraudulent activity. Of the reported $31.1 billion in improper claims, $23.4 billion were linked to insufficient documentation.

2. Not Medically Necessary

About 15.6% of improper payments were due to services deemed unnecessary or beneficiaries being ineligible for those services.

3. Provider Enrollment Issues

The remaining 5% of claims were categorized as improper because the medical provider was not enrolled in Medicaid or due to other issues.

While nearly 95% of Medicaid payments in 2024 appear legitimate, approximately 5.09% raised concerns. This percentage highlights a critical issue, as Medicaid fraud diverts taxpayers’ money. The government actively seeks to identify and prosecute those involved in fraudulent activities.

However, unless new evidence arises, current understanding indicates that the financial losses from Medicaid fraud are insufficient to achieve the anticipated $880 billion in budget cuts.

The $22,924 Social Security Bonus Often Overlooked

Many Americans may be lagging in their retirement savings. However, some little-known “Social Security secrets” could enhance retirement income significantly.

One simple strategy could increase your income by as much as $22,924 each year! By learning to maximize Social Security benefits, this could help future retirees gain the confidence and security they seek. Join Stock Advisor to explore these strategies.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.