Government programs have become one big fraud-fest

Government programs have become one big fraud-fest

How much of America’s $30.7 trillion national debt is a result of fraud? A lot, and it’s growing exponentially.

Eliminating “waste, fraud and abuse” is a standard political campaign mantra. It almost never happens. And while the problem has grown worse over the years, federal COVID-19 relief and the Biden administration have goosed the surge.

Here’s how New York Times reporter David A. Fahrnethold began a recent news article, “In the midst of the pandemic, the government gave unemployment benefits to the

 incarcerated, the imaginary and the dead. It sent money to “farms” that turned out to be front yards. It paid people who were on the government’s ‘Do Not Pay List.’ It gave loans to 342 people who said their name was ‘N/A.’”

The magnitude of the fraud is matched only by the magnitude of government incompetence. Pervasive fraud in government programs has spread from endemic to pandemic. And the feds are well aware of the problem.

In April, the Government Accountability Office (GAO) provided its latest update on the extent of the problem: “For fiscal year 2021, the Office of Management and Budget (OMB) reported that federal agencies had estimated about $281 billion in improper payments, which was an increase of about $75 billion from the prior fiscal year and approximately double the amount reported in fiscal year 2017.”

Note the improper payment doubling in just five years, from 2017 to 2021.

Worse yet, the GAO adds: “[T]his estimate is likely understated since it doesn’t include improper payments related to COVID-19 funding (such as the Small Business Administration’s Paycheck Protection).”

The GAO defines “improper payments” as “payments that shouldn’t have been made or were made in the incorrect amount.” In other words, improper payments aren’t all fraud, but a lot of it is.

The improper payments estimate may also be low because “the government still doesn’t fully understand the size of federal improper payments, partly because it doesn’t have complete, reliable, or accurate estimates,” explains the GAO.

With respect to the COVID relief programs, the fraud is mindboggling, what some prosecutors are calling the largest fraud in U.S. history.

NBC tallies up some of the known and suspected fraud:

  • $80 billion for the COVID relief plan known as the Paycheck Protection Program (PPP);
  • $90 billion to $400 billion for the COVID unemployment program; and
  • $80 billion from the COVID disaster relief program.

In June, House Majority Whip Rep. James Clyburn (D-S.C.) blamed President Trump for the COVID-19 Economic Injury Disaster Loan program, which was overseen by the Small Business Administration (SBA). That’s a ludicrous accusation.

Both Democrats and Republicans were eager to get the first pandemic relief legislation out in a matter of days, and neither party paid attention to the potential for fraud. The subsequent pandemic relief bills that passed in 2020 were also bipartisan. And President Biden’s American Rescue Plan, which passed in February 2021, was a Democratic party-line vote.

Democrats controlled the House and Senate in 2020. As majority whip, Clyburn could have demanded appropriate steps to control fraud before passing the bills. He didn’t. Nor did any other Democratic leader.

Moreover, Democrats have long pushed to expand federal programs that were rife with fraud.

Take Medicaid, the federal-state health insurance program for the poor. Democrats vastly expanded Medicaid in the Affordable Care Act (i.e., ObamaCare), with little effort to address systemic fraud in the program. And it has grown significantly since the pandemic began.

Last January, the Foundation for Government Accountability (FGA), a private, nonprofit, conservative-leaning public policy group, released a report on Medicaid’s improper payments. It notes that Medicaid now covers 89 million people at a cost of nearly $700 billion per year. While the national improper payment rate for Medicaid is about 22 percent, FGA says it can reach nearly 50 percent in some fraud-prone states.

FGA points out that “Virtually all improper payments are due to eligibility errors, administrative oversights, or outright fraud.” And it adds, “because eligibility errors make up more than 80 percent of improper payments, countless individuals are receiving Medicaid benefits for which they are not eligible.” Whether you consider covering ineligible people fraud or abuse, it costs hundreds of billions of taxpayer dollars.

Democrats have never taken major steps to expel the ineligible from Medicaid. Why would they? If you believe that every American should be in a government-run health care program, and many Democrats do, why would you go to the effort of removing those who aren’t eligible? They’re exactly where Democrats want them.

Can government limit the fraud? Only at the margins. The federal government is way too big, it hands out way too much money and government is way too inefficient to dramatically reduce fraud. To do that, government programs would have to be radically downsized or eliminated. And as the recent Build Back Better-lite legislation demonstrated, there is no desire to do that.

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter @MerrillMatthews.

Government programs have become one big fraud-fest