CMS is finishing work on a rule that would limit what states can route to providers through Medicaid managed care. The agency proposed it in May, closed comments in July, and Administrator Mehmet Oz has framed the whole effort around a simple idea: Medicaid was never meant to be a blank check.
The Trump administration has made rooting out fraud in Medicare and Medicaid a central pillar of its policy agenda, an effort best embodied by J.D. Vance’s Task Force to Eliminate Fraud. Their success against fraudulent billing suggests they’re making headway.
Dr. Oz is right. But the rule polices only one end of the pipe. It governs what a plan pays out. It says nothing about how the money got into the plan in the first place.
Fraud enforcement has focused, understandably, on outright criminality. But there is a quieter drain on Medicaid — one created not by criminals, but by the actuarial assumptions buried in state bureaucrats' spreadsheets.
This quieter form of waste deserves CMS Administrator Dr. Mehmet Oz’s attention, too. Florida, which Dr. Oz called a Medicaid “fraud hotspot,” offers one cautionary example.
Last year, Florida’s Agency for Healthcare Administration moved behavior analysis services — therapies used largely by children with developmental disorders such as autism — into the state’s Medicaid managed-care system. The goal was to make sure low-income families with special-needs children could obtain important care. The problem came with how the state’s unelected bureaucrats chose to fund it.
Although these services are overwhelmingly used by children, the state allocated the funding as if it would be spread much more broadly across age groups and regions. It set its behavior analysis services budget as if everyone, including seniors, were meaningful consumers of these therapies even though seniors are a negligible share of the people who receive them.
That’s especially troubling, because federal probes from the Trump administration have identified that autism treatment funding gluts are a major target for fraudsters, who often bill Medicaid for services they never delivered.
The funds were devoted where they weren't needed and pulled from where they were needed. One estimate says roughly $300 million has been diverted from Florida pediatrics in less than two years because of the poor assumptions it used to project its behavior analysis services funding estimates.
Children with autism rightly deserve access to behavior analysis services, and families across Florida already wait months for an appropriate provider. But rates built on inaccurate assumptions serve no child well, including the children the funding was meant for.
States should, of course, retain the ability to run Medicaid in ways that fit their populations. But federalism does not mean that states get blank checks from the federal government. When federal taxpayers supply hundreds of billions of dollars, CMS must ensure that state bureaucracies are using honest numbers and directing money to the patients for whom it was intended.
Fortunately, CMS already has the tools to act. It does not need new authority from Congress.
Because states deliver much of Medicaid through private managed-care plans, they must submit their payment rates to CMS each year, and CMS must approve them as actuarially sound. Washington therefore has both the authority and the responsibility to ask whether those rates rest on accurate assumptions.
Dr. Oz and President Trump have already made healthcare accountability central to their agenda, from fighting improper billing to demanding greater price transparency and cutting needless red tape. Requiring states to use accurate Medicaid data and funding formulas is a natural next step.
CMS should compare what states projected against what actually happened, especially when vulnerable populations such as children are affected and if there’s evidence of potential fraud. It should demand timely corrections when the evidence shows money is being routed away from the patients it was supposed to serve.
CMS does not need a new program or a new bureaucracy to do this. It needs to use the authority it already has and require every state Medicaid agency to show taxpayers its math.
Taxpayers will be grateful it did.
Joe Grogan is a visiting senior fellow at the USC Schaeffer Center and the former director of the United States Domestic Policy Council and assistant to President Donald Trump. Prior to serving in the West Wing as Domestic Policy Advisor, he was Associate Director for Health Policy at OMB, shaping policies directly impacting $1.3 trillion of federal health spending. He has played a major role in some of the greatest healthcare policy fights that America has faced in recent memory. He also served as Special Assistant to the FDA Commissioner during the George W. Bush administration.
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