Television ads these days are filled with scare tactics that Republicans are going to cut Medicaid. No one is suggesting Medicaid should be taken away from those who need it. Don’t believe the lies that Democrats are pushing that Medicaid cuts will lead to children starving or babies dying. Those who are eligible for Medicaid will get what they need.

Here’s the truth about Medicaid and what’s happening in Congress. Karl Rove, writing in The Wall Street Journal, tells us the federal government admits it made $543 billion in inappropriate Medicaid payments from 2015 through 2024. Some experts think the real

number is actually $1.1 Trillion! The current House Republican proposal would cut the program’s spending by nearly $700 Billion over the next decade, according to preliminary Congressional Budget Office analysis.

That’s a lot of money but let me emphasize this is all about inappropriate Medicaid payments. That means payments beyond what eligible enrollees were supposed to receive. Let’s call it what it is: waste, fraud, and abuse. This has nothing to do with low-income, elderly or disabled Americans receiving the healthcare benefits they need.

Why is this a crisis?

Medicaid spending has skyrocketed in the last ten years. It has gone from about $450 Billion in 2013 to nearly $900 Billion in 2023. That’s way out of proportion to the rise in inflation and Medicaid spending now exceeds Defense Department spending. If we want to continue to have a strong military and be able to meet the real healthcare needs of low income and disabled Americans, we must reign in this out-of-control Medicaid spending.

How can Republicans get the truth to the American people?

Rove says, “Start by declaring a strong commitment to save the program. Because of Democratic policies, Medicaid is spending hundreds of billions on people it shouldn’t—those who are able-bodied and working-age. Republicans want this assistance to go to the people it was meant for—the elderly poor, disabled, and children in low-income families. Without reform, the program on which those Americans depend is at risk of rapidly becoming unsustainable.”

 He goes on to say the GOP should say that able-bodied adults on Medicaid should be required to work or look for work. “No freeloaders” on a program meant for the truly vulnerable is a powerful argument. A Feb. 25 Kaiser Family Foundation poll found 62% of Americans support “requiring nearly all adults to work or be looking for work” to qualify for Medicaid, while 38% were opposed. If told that such a requirement “could ensure that Medicaid is reserved for groups like the elderly, people with disabilities, and low-income children,” it was 77% support, 22% oppose.

Rove also says Republicans should drive home that—unlike radical Democrats—Republicans oppose illegal immigrants getting Medicaid. House Energy and Commerce Committee Chairman Brett Guthrie (R., Ky.) estimates that 1.4 million illegal aliens receive Medicaid. That isn’t only wrong; it encourages more aliens to try to cross our border illegally.

Make clear that Republicans want to end fraud while Democrats are content to perpetuate it. Specifically, Democrats have made it harder for states to check their rolls frequently for ineligible Medicaid recipients. For the sake of fairness and accountability, the GOP will make it easier to find and remove those who don’t qualify.

The Medicaid cuts Republicans are proposing will help stop the government from wasting Medicaid dollars that low income, elderly and disabled Americans need. Those who oppose these cuts are either playing politics with the issue or benefiting from ineligible payments; they’re not looking out for the country or the people who really need Medicaid.

Medicaid is under the spotlight now as Congress considers legislation to lower the cost of this entitlement program. I’ve written a lot about Medicaid recently, so if you’re a regular follower of this blog you’re familiar with the problem. The problem is out of control Medicaid spending.

My television is regularly showing advertisements calling on people to tell Congress not to cut Medicaid. President Trump and House Speaker Mike Johnson have repeatedly said they have no plans to cut Medicaid benefits to anyone who is eligible. They only intend to curb the excessive waste, fraud, and abuse that has driven the cost of Medicaid beyond Defense spending to $894 Billion a year in 2024.

How much waste, fraud, and abuse happens in Medicaid?

Lawrence Wilson, writing in The Epoch Times, tells us The Government Accountability Office has estimated that the federal government may lose between $233 billion and $521 billion annually to fraud. Based on data provided by that office, it appears that less than 3 percent of the estimated total of fraudulent payments are proven by a judicial verdict. Much of it appears to go undetected.

Yet fraud does exist in the Medicaid system. One state lost an estimated $2 billion to Medicaid fraud over the past five years, a staff member in that state’s attorney general’s office told The Epoch Times. The Department of Health and Human Services reported that more than $31 billion in Medicaid payments were made improperly in 2024 alone.

Of those, nearly $5 billion was paid for medical services for patients who were not eligible for Medicaid, and more than $10 billion was paid for claims for which no eligibility information was provided. Medicaid Fraud Control Units recovered $1.2 billion in 2023, which was more than three times the amount spent on fraud enforcement efforts, according to the Office of Inspector General. Investigators said they could eliminate more fraud if more funding for enforcement activities were available.

How do we eliminate the waste, fraud, and abuse?

Dr. Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, told senators during his confirmation hearing that he would improve Medicaid’s efficiency. Oz referred to ideas for using artificial intelligence to make prior authorization decisions for medical procedures more quickly and with less physician interaction and for using communications technology to allow nurses to provide remote support to rural nursing home staff members.

A frequently raised suggestion for reducing federal Medicaid spending involves lowering or eliminating the taxes some states levy on medical providers. These provider taxes, used by every state but Alaska, help fund states’ Medicaid expenses. The taxes are generally returned to the providers through increased payments for Medicaid services.

However, the increased payments to Medicaid providers then increased the federal reimbursement received by the state. The arrangement effectively shifts more of the financial burden of Medicaid to the federal government.

The Congressional Budget Office, which provides nonpartisan financial assessments to Congress, estimated that eliminating the provider tax would reduce the federal deficit by $612 billion over 10 years, and limiting the tax rate to 5 percent would reduce the deficit by as much as $241 billion. Others have suggested that setting a per capita cap on the amount the federal government would reimburse states for Medicaid. Altering the provider tax or setting a per capita cap on reimbursement would save federal dollars but would almost certainly increase the cost of Medicaid to the states.

There are also a significant number of people who are receiving Medicaid benefits who are ineligible, according to the expanded eligibility regulations stipulated in the original ObamaCare legislation. The upper limit of eligibility was set at 133% of the Federal Poverty Level (FPL), which amounts to about $22,000 a year for an individual and about $42,000 for a family of four. Forty states and the District of Columbia have chosen to provide this expanded coverage.

But many people who do not qualify for Medicaid based on these regulations are nevertheless on the Medicaid rolls due to the emergency provisions of the Covid pandemic extended several times since by the Biden administration. As a result Medicaid enrollment grew to a high of 94.6 million in April 2023, when states were required to maintain the “continuous enrollment” of nearly all Medicaid beneficiaries regardless of their eligibility status. Under the Families First Coronavirus Response Act of 2020, Medicaid coverage could not be discontinued unless the enrollee requested it, moved out of state, or died.

That provision expired in March 2023, but because of the large backlog of eligibility recertifications to be processed, states have had some flexibility in winding down their continuous enrollment. The deadline for all states to comply with Medicaid and CHIP eligibility requirements is Dec. 31, 2026.

Cleaning up this backlog of ineligible enrollees should go a long way toward reducing the extreme cost of Medicaid.

President Biden instituted drug price controls in 2022 as a part of the Inflation Reduction Act. This legislation required pharmaceutical companies to accept fixed prices on ten drugs named by the federal government that are covered by government healthcare programs such as Medicare and Medicaid. If the drug companies didn’t accept the prices, they couldn’t sell the drugs to these programs.

This legislation by Biden has been referred to as the “Biden Pill Penalty” because its unintended consequence is to inhibit new drug research and innovation. I wrote about this in an earlier post called Biden’s Pill Penalty.

Now, President Trump is addressing concerns about rising drug prices with an executive order of his own. This order establishes a “most-favored nation” policy which stipulates that the federal government will only pay the same price here in the U.S. as charged by pharmaceutical companies in other “favored nations” for drugs covered by Medicare and Medicaid. In other words, he wants America to start paying the same price for drugs as other countries in Europe.

For decades, America has carried the burden of paying higher prices for drugs here than pharmaceutical companies charge in other countries. Price controls are common in Europe so drug companies make up the loss by charging Americans more.  As the economic leader in the world, America has been expected to pay more while others pay less. This means America has been subsidizing the cost of drugs in other countries.

How is this different from Biden’s Pill Penalty?

Trump is not arbitrarily setting the price of the drugs. His order simply forces the drug companies to level the playing field; charging the U.S. no more than they are charging the most expensive prices of other similar economic nations. That means the drug companies will probably have to raise prices on the other nations to avoid losing money. If they do that without a significant impact on their profits, then new drug innovation should not suffer. However, if raising prices in other nations leads to lower profits, then new drug innovation will be impacted.

Some say this is just price controls by a different method. Tevi Troy, writing in The Wall Street Journal, believes the impact of Trump’s order will be as bad as Biden’s Pill Penalty. Troy says, “Americans are understandably frustrated about high prices. But the alternative to expensive new products is a slowdown in biomedical innovation. At a time when artificial intelligence, informatics and the unlocking of the human genome could generate tremendous advances in life-changing pharmaceutical products, it’s a dangerous time to alienate the industry that brings those products to fruition.”

Perhaps he is right. Trump is understandably outraged at the way Americans have been treated by the drug companies. He said the U.S. is being “ripped off compared to the rest of the world.” This is consistent with his views of tariffs being charged by other countries for products made in America.

The question is how much more will other countries be willing to pay to purchase their drugs and will that be enough to sustain new drug research? It looks like we’re going to find out soon.