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Study Reveals Staggering Losses
A report from the Paragon Health Institute, released on March 3, 2025, estimates that Medicaid issued approximately $1.1 trillion in improper payments over the past decade. This figure, nearly double the $543 billion reported by the Centers for Medicare & Medicaid Services (CMS), highlights a critical gap in federal oversight, driven largely by unexamined eligibility errors.
The analysis, titled 'Medicaid’s True Improper Payments Double Those Reported by CMS,' draws from government audits and Payment Error Rate Measurement data. It argues that CMS’s official numbers understate the problem by excluding eligibility reviews during several years, a practice that obscured the true scale of misspent funds.
Unpacking the $1.1 Trillion Figure
Total federal Medicaid spending from 2015 to 2024 reached $4.3 trillion. The Paragon study applies a 25 percent improper payment rate—derived from years like 2019 and 2020 when eligibility audits occurred—to arrive at the $1.1 trillion estimate. By contrast, CMS’s decade-long tally of $543 billion reflects periods when such audits were paused, notably from 2015 to 2018 and 2021 to 2024.
The difference underscores a stark reality: when eligibility was rigorously checked, error rates soared past 25 percent, revealing billions in payments to ineligible recipients or mismanaged claims. This discrepancy suggests that taxpayers have shouldered a far heavier burden than previously acknowledged.
Systemic Failures Fuel the Crisis
The Affordable Care Act’s 2014 Medicaid expansion significantly widened eligibility, but lax verification processes exacerbated improper payments. A 2018 Government Accountability Office report found that 70 percent of hospital-based ‘presumptive eligibility’ enrollments later proved ineligible, a loophole that ballooned costs as states rushed to maximize federal reimbursements.
The COVID-19 public health emergency worsened the issue. From 2021 to 2024, CMS halted eligibility redeterminations under the Families First Coronavirus Response Act, allowing millions of potentially ineligible enrollees to remain on the rolls. The Paragon report notes that this suspension masked additional billions in erroneous payments.
Taxpayer Burden Grows
Improper payments, totaling an estimated $110 billion annually, drain federal and state budgets funded by taxpayer dollars. The GAO’s 2024 report pegged Medicaid’s share of fiscal year 2023 improper payments at $50.3 billion, part of a government-wide $236 billion total, yet the Paragon analysis indicates the decade-long toll is far greater when eligibility errors are fully accounted for.
Such losses divert resources from legitimate beneficiaries. With Medicaid spending up 80 percent over the past decade, the program’s fiscal integrity hangs in the balance, as funds intended for low-income healthcare vanish into administrative errors and unchecked fraud.
Calls for Reform Intensify
The Paragon findings have fueled demands for action. The report urges Congress to penalize states with error rates exceeding 3 percent, a proposal aimed at curbing the $1.1 trillion waste. Texas demonstrates potential progress, having reduced improper payments in 2024 through data analytics, according to state program updates.
Legislative momentum builds as well. The House Budget Committee’s 2024 Improper Payments Transparency Act seeks to compel federal agencies to address these errors, a step that could reclaim hundreds of billions if applied to Medicaid’s sprawling budget, ensuring funds serve their intended purpose.