Is there really a “fraud crisis” in Medicaid?

As budget negotiations in Washington intensify, Medicaid has been named as a focal point for freeing up taxpayer dollars. Congressional leaders are floating proposals to slash the program by as much as $880 billion over the next decade, often citing "waste, fraud, and abuse" as justification. Unfortunately, this framing relies on misinterpretation and misinformation, not reality.

One of the most commonly cited figures in this debate is the Medicaid improper payment rate, reported annually by the Centers for Medicare & Medicaid Services (CMS). By definition, improper payments are payments that fail to meet program rules, often due to clerical or documentation errors. The 2024 improper payment rate for Medicaid was 5.09%, a significant drop from 8.58% in 2023 and 21.69% in 2021. Nearly 75% of those 2024 "errors" were due to missing documentation—not because the payment was illegitimate, but because paperwork wasn't saved properly.

Eligibility-related errors, such as verification steps not being properly documented, made up just 3.31% of the total rate. These are technical missteps—not fraud or waste. In fact, CMS and the U.S. Government Accountability Office (GAO) repeatedly clarify that most improper payments are administrative, not malicious. As Jennifer Wagner of the Center on Budget and Policy Priorities testified before Congress:

"There is no reason to believe that the applicant was not in fact eligible, but since the paperwork is missing, it's considered an improper payment. This is a technical systems and training problem, not a fraud problem."

Despite these facts, organizations like the Paragon Institute and Economic Policy Innovation Center claim the real improper payment rate is more than double what CMS reports. Their evidence? They took 10 years of federal Medicaid spending, assumed a 25% error rate, and called it a $1.1 trillion problem.

This approach is not only statistically unserious, but dangerously misleading. It ignores the complexity of Medicaid, which serves 83 million Americans, is administered by 56 separate agencies, and is operated in many states through private managed care organizations (MCOs).

This assumption also disregards that fee-for-service improper payments have dropped each year, from 13.9% in 2021 to 4.83% in 2024, and that managed care errors remain under 0.04%.

Beyond the numbers, there's a real danger here: cutting Medicaid weakens the entire healthcare system. When hospitals and providers lose funding, they don't just close their doors to Medicaid patients—they shut down entire departments, eliminate services, or close altogether. That affects everyone, regardless of insurance status.

The Protect MI Care coalition, a growing alliance of more than 150 Michigan organizations, strongly opposes using misleading data to threaten health care access for millions. Now is not the time for lawmakers to weaponize misleading data for political gain. Instead, they should support ongoing CMS efforts to streamline eligibility documentation and help states reduce honest administrative errors. That's how to strengthen Medicaid, not sabotage it.

Visit protectmicare.org to learn more and join the fight to protect health care for millions.