American taxpayers have been victimized by at least $36 billion and possibly as much as $3 trillion in fraud through federal government entitlement programs since 2020, a new investigative report states. The fraud revelations provide a great opportunity for Congress and the president to offer real reforms that would cut this enormous waste — especially in the most-corrupted entitlements, those for health care — to ensure that the benefits are reserved for the truly needy.
Massive fraud is embedded in the very structure of the system. Unfortunately, politicians, big corporations, and tens of millions of people benefit from the corrupt system and block change at every opportunity.
The U.S. Department of Justice (DOJ) documented $36 billion of fraud in nearly 300 cases from 2020 through 2025, The Center Square calculated by examining DOJ findings in all reported cases. Numerous other cases prosecuted by U.S. attorney’s offices, states, and offenses as yet undiscovered indicate a vastly greater total, the Center Square report noted.
A 2024 U.S. Government Accountability Office report concluded fraud cost federal taxpayers $233 billion to $521 billion per year from 2018 to 2022. The “entitlement programs constitute the bulk of federal spending and presumably fraud, too,” American Enterprise Institute Senior Fellow Matt Weidinger told The Center Square.
Annual Medicare and Medicaid fraud has more than doubled since 2020, the news agency reports. The DOJ found multiple cases in which medical professionals defrauded the federal government of hundreds of millions of dollars apiece.
Scandalous as they are, the recent revelations of Medicaid fraud and other entitlement scams in Minnesota identified only a tiny part of what is being stolen. A minor initial effort at Medicaid eligibility verification under just one requirement in the One Big Beautiful Bill Act found more than 10,000 Indiana residents were wrongly or illegally enrolled in Medicaid, potentially wasting hundreds of millions of dollars of taxpayer money if left undiscovered, Gov. Mike Braun told Newsmax.
Programs’ Flawed Design
The very design of these programs rewards theft and invites corruption. The dual-funding structure of Medicaid, with the federal government providing most of the money, enables states to profit by allowing ineligible people to draw benefits. The vast majority of these wasted dollars go to insurance companies to pay for Medicaid policies for people who do not qualify. Insurance companies’ revenues have tripled in the decade since Obamacare and Medicaid expansion went into effect.
Fully legal rip-offs are another big problem. “[S]tates like California are quietly siphoning off billions in federal Medicaid dollars through legalized budget fraud tied to the Intergovernmental Transfer loophole,” writes Vince Ginn, coauthor of the Empower Patients Initiative. It’s a complicated system in which states expand their federal subsidies by overpaying health care providers run by local governments and then kicking back most of the funds to the provider.
“No new services are delivered,” Ginn writes. “No patients are helped. But billions in federal money change hands — and California is the poster child for using this racket to cover its budget gaps.”
As these examples indicate, the dual-funding system corrupts state and local governments, makes health care unaffordable for those not on these programs, increases recipients’ dependency on the government and traps them in the system, greatly increases inflationary federal deficit spending, transfers hard-earned taxpayer money to thieves and grifters, unfairly enriches insurance companies and unscrupulous health-care providers at taxpayer expense, fosters economic crimes such as kickback schemes and false or exaggerated claims of service provision, rewards wasteful-spending politicians with big campaign contributions, and undermines the credibility of all levels of government, among countless other deleterious effects.
Reform Needed
The proper reform of this fundamentally destructive system would be to kick all the entitlement programs — Medicaid, Medicare, the Supplemental Nutrition Assistance Program, housing assistance, Social Security, and everything else — down to the state level with no federal spending, oversight, or regulation. The appalling condition of the federal entitlement system proves the founders’ wisdom in leaving issues such as health care to the states. The fact that all this government spending expands demand and makes health care unaffordable for millions of people is a national scandal.
However, the gigantic beneficiary class for these programs makes a return to constitutional government politically impossible. In addition, the federal government has characterized Social Security and Medicare as earned pensions, albeit deceptively.
Yet the current major problems of federal budget pressures and health care affordability for all consumers require action, beginning with elimination of the dual-subsidy approach and third-party payment mechanisms in health-care programs.
The federal government should convert its Medicaid and Obamacare contributions into block grants and require the states receiving that taxpayer money to pass it directly to recipients (through flexible, personal health care savings accounts) for the latter to pay to providers directly, as President Donald Trump has suggested. That would foster competition and force the health care industry to adopt true price transparency because patients would demand it. It would thus help increase affordability in the health care system.
States are now required to enforce federally established eligibility requirements. Congress should strengthen the incentive by reducing an offending state’s grants by more than the amount of any fraud they fail to report, to make the states pay for their own transgressions. The feds could identify fraud through database comparisons, whistleblower rewards, investigative “stings” of suspected violators, and the like.
With razor-thin Republican majorities in Congress, even these reforms are unlikely to happen unless a collapse in the federal government’s borrowing ability forces a serious reckoning. That is in fact likely to occur within the next seven or eight years unless Congress passes these major entitlement reforms. More than 74 million Americans received entitlement money in 2025, and businesses and politicians reap benefits from all this spending. Nobody is eager to give that up.
The choice, however, is to reform it now or lose it all in a few years.
