Health Care

Kristina Ribali | June 1, 2015

A Three-Step Plan to Prevent Welfare Fraud

Kristina Ribali

Fraud of state welfare programs including Medicaid and food stamps is far too common, and the Foundation for Government Accountability (FGA) has released a report documenting cases of abuse and how state legislators can stop it.

Let’s take a look at just a few of the many egregious cases where taxpayers are on the hook for millions of dollars in welfare scams.

Just last year in Arkansas, the Department of Human Services removed almost 5,000 enrollees from the state’s Medicaid expansion after learning that they were ineligible to receive these benefits in the first place. Some of these enrollees where receiving both Medicaid and Obamacare subsidies.

In Illinois it was determined that the state had paid out $12 million worth of Medicaid benefits to dead people. A report by the Auditor General’s office noted that between 15 and 20 percent of Medicaid cases were overdue for an annual review, a review that could have helped identify the improper payments to deceased Illinois citizens.

In Minnesota, an audit found that nearly 17 percent of the records reviewed were not eligible for the Medicaid program. Auditors found that by simply matching applicants to other existing state databases they were able to identify recipients who had drastically underreported their income levels, in many cases by up to $70,000 per year.

The problems in each of these states could have been prevented with the implementation of better safeguards. The FGA plan to stop these scams is simple. As FGA CEO Tarren Bragdon noted, “the states have a responsibility to ensure taxpayer dollars are being properly managed, especially when very limited resources are being diverted away from the truly needy and into the hands of fraudsters and criminals.”

How can legislators protect taxpayers and state resources?

First, states should do a better job of screening people at the front door. If states used enhanced data-matching technology, it would enable them to verify and crosscheck income, residency, identity, employment, citizenship status, and other important eligibility criteria.

When discrepancies arise, states can suspend eligibility determinations until the discrepancies are resolved and applicants are given an opportunity to produce sufficient evidence to establish their eligibility.

Arkansas could have avoided paying benefits to Medicaid enrollees who were also receiving Obamacare assistance by using a more rigorous screening process. By matching applicants to other available databases, the state could have saved taxpayer dollars and ensured they were enrolling only those citizens truly eligible for assistance.

Second, it’s key that states take a proactive role in regularly reviewing the eligibility of their program enrollees to be sure they aren’t paying people for services they no longer need. By extending the data-matching technology a state uses to check program applicants, they can easily review the eligibility of program enrollees.

For instance, data show that nearly half of Americans who fall into poverty for at two months will leave poverty within four months. The vast majority of those individuals will exit poverty altogether within a year.

Federal law only requires states to perform eligibility checks once a year, but by reducing the amount of time between these reviews, states can catch expense eligibility errors sooner, saving their taxpayers hard-earned dollars and ensuring that only the truly needy get the assistance they need.

Had Illinois been employing these practices, they no doubt would have caught some of the $12 million in improper payments to deceased enrollees.

Finally, in order to deter defrauding of Medicaid, food stamps, and other welfare programs, it is critical that states prosecute those who abuse and scam the system. Each case of fraud and abuse should be prosecuted by the proper authorities and every dollar of improper payments should be recovered. Those individuals who have committed fraud in one public program should be removed from all government support.

Regular oversight hearings by state lawmakers would ensure they are receiving regular updates on the progress of these anti-fraud initiatives.

These examples of wasteful spending by states “threaten the long-term stability of these programs, and in most cases they can be prevented relatively easily,” Bragdon says.

Kristina Ribali


Kristina Ribali is the senior coalitions director for the Foundation for Government Accountability, a nonpartisan think tank equipping policymakers with principled strategies to replace failed health and welfare programs nationwide.

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