Musk targets hundreds of billions in entitlement fraud; Democrats call it an attack on old and needy

President Trump’s plans to cut taxes and reduce the federal budget have put a bull’s-eye on significant wasteful spending entrenched in the Medicaid, Medicare and Social Security programs.

Democrats say Mr. Trump’s government efficiency adviser, Elon Musk, is exaggerating the cost of misspending within the programs when he said $700 billion could be saved by eliminating waste, fraud and abuse.

Federal officials and think tanks say hundreds of billions of dollars are improperly distributed annually and show the government cannot rein in flagrant misspending tied to the nation’s expanding entitlement programs.

Federal spending on Medicare and Medicaid alone has grown by almost 80% over the past decade as the aging U.S. population, increased longevity and rising health care costs strain safety net programs.

“Growth in these and other health programs is projected to continue,” the Government Accountability Office reported in 2023.

With the growth comes an increased opportunity for fraud, such as false medical billing involving stolen patient identities, unneeded treatments and money laundering.

The Justice Department recently arrested dozens of people accused of committing billions of dollars in Medicare billing fraud. Among those arrested last year were owners of a company that charged Medicare $900 million for unneeded wound grafts ordered for 500 dying patients. The government uncovered a similar wound-care scam in Arizona that bilked Medicare out of $330 million.

Far more taxpayer money is lost to other flaws in the nation’s massive entitlement system.

The government issued $72 billion in improper Social Security payments from 2015 through 2022, the Social Security Administration inspector general reported last year. As of late 2023, $23 billion remained uncollected and administrators had failed to implement recommendations for fixing the problem.

“Without better access to data, increased automation, systems modernization, and policy or legislative changes, improper payments will continue to be a major challenge for SSA into the future,” Assistant Inspector General Michelle L. Anderson said in August.

The House Republicans’ budget, which paves the way for extending tax cuts, calls for slashing $880 billion in federal spending. Democrats say this cannot be achieved without cuts to entitlement programs.

Republicans and Mr. Musk said those reductions can be reached by stopping federal misspending.

Mr. Musk, who heads the Department of Government Efficiency, has called waste, fraud and abuse in entitlement spending “the big ones to eliminate.”

Democrats scoffed at the plan. They said improper payments comprise just 1% of all benefits paid under Social Security Administration programs and Republicans are preparing to gut critical spending on retirees and the needy.

“The richest man on earth repeated again a bevy of lies that entitlement programs tens of millions of people rely on are riddled with fraud and abuse,” said Senate Minority Leader Charles E. Schumer, New York Democrat. “That’s a pretext to slashing them. But it’s false.”

Democrats argue that the percentage of misspending is tiny, but the totals add to staggering losses.

Last year, Social Security payments cost $1.4 trillion and accounted for 21% of the federal budget. Mandatory federal spending on Medicare, Medicaid, Obamacare and the Children’s Health Insurance Program made up 24% of spending in 2024, costing $1.7 trillion.

Brian Blase, president of the conservative Paragon Health Institute, said Medicaid’s waste, fraud and abuse are significantly underestimated.

In a March 3 report, he said Medicaid issued nearly $1.1 trillion in improper payments over the past decade, double the $543 billion error rate reported by the federal government.

The federal government underreports improper payments by excluding money mistakenly paid to those ineligible for Medicaid, he said.

Obamacare made the problem worse, quadrupling improper Medicaid payments by discouraging states from ensuring applicants were eligible for the money.

“They have no incentive. They actually make money if they improperly enroll people. So that is certainly waste and abuse,” Mr. Blase said.

By reducing Medicaid’s improper payments, he said, the federal government can save “hundreds of billions of dollars” in the next decade.

The federal government estimated that Medicaid made improper payments of more than $31 billion in 2024 alone, much of it to people who may have been ineligible for the program. Medicaid officials estimated that more than $50 billion in improper payments were made in 2023. The number of misspending detected in 2024 shrank by $20 billion, likely because the Biden administration suspended some eligibility requirements during the COVID-19 crisis.

A 2023 study by the Government Accountability Office determined that Medicare and Medicaid programs made more than $100 billion in improper payments that year. An improper payment includes overpayments, underpayments and any payment that should not have been made.

The misspending on Medicaid and Medicare made up 43% of all improper federal payments.

In response, the Centers for Medicare & Medicaid Services improved Medicare fraud prevention and Medicaid management oversight with increased investigations.

The GAO said its recommendations for reducing waste, fraud and abuse, as well as other reforms to Medicare and Medicaid, have resulted in $200 billion in “financial benefits” since 2006.

“Action on recommendations that remain unimplemented,” the GAO said, “would further enhance program integrity and save billions of dollars in Medicare and Medicaid spending.”