Medicare expansion increases government mismanagement.

Medicaid’s reported improper payment rate declined in the 2022 report to 15.6 percent, which is an artificially low figure due to CMS’s decision to reduce eligibility audits. Medicaid now provides coverage to about one in four Americans.[10] Such rapid expansion and high rate of improper payments are indicators that taxpayers are suffering from poor government policy and program management.

A poorly run Medicaid program also harms the truly needy by misallocating resources.[11] The recent, drastic growth in improper payments has coincided with the Affordable Care Act’s (ACA’s) Medicaid expansion. Medicaid was originally designed to assist the most vulnerable Americans, such as low-income pregnant women, children, seniors, and individuals with disabilities. However, the ACA expanded Medicaid to able-bodied adults by enticing states with generous financial incentives. Much of the improper payment problem in Medicaid results from the enhanced federal reimbursement rate for the ACA expansion population. The enhanced reimbursement rate creates a significant incentive for states to enroll people under the expansion criteria even if those people would have been eligible to be enrolled under the prior criteria and thus at the lower reimbursement rate.

Indeed, the ACA’s Medicaid expansion not only diverts more resources from those most in need but also has produced much higher improper payments. In the two reporting years before the ACA’s Medicaid expansion took effect, Medicaid’s improper rate averaged about six percent. With the expansion, the improper payment rate increased substantially, reaching more than 20 percent in the 2020 and 2021 reports.[12] The main reason for the growth in Medicaid’s improper payments is that states have failed to ensure people on the program are actually eligible. After conducting audits over a six-month period in 2014 and 2015, HHS’s Office of the Inspector General estimated that just two states—California and New York—made at least $1.7 billion in Medicaid improper payments to cover at least 1.6 million enrollees who were ineligible for the program (estimating at least $4.3 billion more in spending on 3.9 million “potentially” ineligible enrollees, or those enrolled without a proper review of their information and may not have been eligible).[13]