The Trump Administration's Anti-Waste in Health Care Campaign

The Trump administration is targeting health care fraud and abuse at a pivotal moment. Combined federal spending on Medicare and Medicaid is high and rising rapidly, as reflected in the administration's just-released 2027 budget. In 2036, the government expects their expenditures to reach 7.3 percent of GDP (not counting Medicare premiums collected from beneficiaries), up from 6.2 percent in 2026. With defense obligations also spiking, there is no room for complacency toward waste wherever it is found, and health care has been a perennial vulnerability. The administration is moving quickly to capitalize on artificial intelligence (AI) to get ahead of the problem.

Program integrity in health care is challenging because the main entitlement programs are sprawling. In 2021, the Centers for Medicare and Medicaid Services (CMS) estimated it processed over 1.1 billion Medicare fee-for-service claims and made payments to 1.5 million institutional providers and clinicians. Medicaid is run by fifty separate state agencies and pays for a broad array of services, including non-medical support for the disabled and elderly. With the federal Treasury footing much of the total bill, it is not surprising that the programs are vulnerable to abusive schemes.

The Trump administration is attacking waste in these programs from multiple angles. To curb abuses in Medicaid, it has announced special investigations into four states (California, Maine, Minnesota, and New York) and then followed that up by initiating a combined Medicare-Medicaid investigation in Florida, which has been the location for multiple fraudulent schemes going back to the 1990s.

In Medicare, CMS has already taken steps to curb abusive billing practices for coverage of skin substitute treatments for wounds, which will eliminate billions of dollars per year in unnecessary expenditures. In 2024, Medicare spent over $10 billion on these treatments after spending just $242 million in 2019. Some clinicians were submitting claims for payments for patients who were unlikely to benefit from the products. Last year, CMS announced it was closing the coding loopholes that allowed some of the abusive bills to get paid.

In 2026, the agency has turned its focus to durable medical equipment, which is notorious for attracting suppliers with dubious credentials. In February, the agency announced a six-month moratorium on the approval of new DME vendors with the intention of providing a window for establishing tighter oversight and new boundaries that will separate the legitimate from illegitimate suppliers. DME companies deliver oxygen equipment, wheelchairs, and other health-related products often directly to the homes of Medicare beneficiaries. A common scheme involves clinicians ordering DME supplies when they are not necessary and then profiting, most likely indirectly, from the Medicare payments.

The most promising recent development is CMS's announced plan to use AI and other information technology tools to strengthen oversight of FFS payments. With a high volume of annual claims in both Medicare and Medicaid, automated systems are crucial. Emerging AI technology offers the prospect of building anti-fraud and abuse protocols directly into its existing payment approval processes, which means the government might finally be equipped to stop wasteful spending in health care before it occurs.

Two initiatives could make a difference.

First, in June 2025, the agency launched the Wasteful and Inappropriate Service Reduction Model, or WISeR, with the objective of building AI-facilitated prior authorization screens into Medicare FFS payment systems to reduce spending on unnecessary and low-value care. The initial targets would be services that have been flagged in previous reviews as vulnerable to abuse. The hope is that WISeR will help the government build tools resembling those used by some private managed care plans.

Second, in February, CMS posted a request for information (RFI) to solicit from the private sector new ideas for changing federal regulations to combat fraud and abuse in all of the government's major health programs, with a specific focus on using AI to detect the most costly schemes. The initiative, called the Comprehensive Regulations to Uncover Suspicious Healthcare, or CRUSH, will lead to rule changes affecting Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and the premium subsidy program created by the Affordable Care Act (ACA).

WISeR and CRUSH bear watching because they could institutionalize tighter oversight of program spending. The government's other efforts are important but depend somewhat on continued vigilance among program administrators, which is not guaranteed.

It is possible that today's emerging tools could have unexpected effects on total expenditures. CMS's plan is to use AI to screen out unneeded services and abusive claims, but the industry wants to use it to identify underuse of care in Medicare and Medicaid, and also fees that are below their incurred costs. That information will then be used to press Congress to increase health entitlement spending rather than reduce it.

In other words, the battle for program integrity and spending discipline in health care is never fully won or over.

The post The Trump Administration's Anti-Waste in Health Care Campaign appeared first on American Enterprise Institute - AEI.