DOGE: To Save Medicaid Billions – Follow the Law!

 Elon Musk and Vivek Ramaswamy recently published the legal background, justification, and their plans for the Trump-created temporary, non-governmental DOGE, Department of Government Efficiency. They have numerous ideas of how to clean up what the military calls a “target-rich environment” of federal sloth, waste, inefficiency, corruption, and demonstrably illegal activities by the administrative or “deep” state.    

Start with Medicaid. It is highly dollar inefficient, spending too much while getting too little value – timely access to medical care – wasting billions of taxpayer dollars.

In 2023, CMS (Centers for Medicare and Medicaid Services) in Washington spent more than $860 billion running a program it is legally prohibited from running. When regulated by Washington, Medicaid is ILLEGAL!

Section 1801 of the Amendment to the Social Security Acts of 1965 that created Medicaid reads as follows. Note the Section’s title and Congress’ explicit prohibitions.

SEC. 1801. PROHIBITION AGAINST ANY FEDERAL INTERFERENCE

“Nothing in this title [the law] shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer or employee of any institution, agency, or person providing health services; or to exercise any supervision or control over the administration or operation of any such institution, agency, or person.”

Despite the specific intent of the law, over decades, CMS (Centers for Medicare and Medicaid Services) has taken control of eligibility standards, benefits, i.e., medical care provided, and the payments allowed. Washington applied a one-size-fits-all approach for Medicaid enrollees in every state program.

If the DOGE wants to cut nearly one trillion dollars from the federal budget, and  simultaneously improve (!) access to medical care, follow the Medicaid law as written. 

The Affordable Care Act is a good example of over-regulation of Medicaid by Washington, but there were dozens of others. Most annual OBRAs (Omnibus Budget Reconciliation Acts) since 1975 have contained some section that increased Medicaid benefits, expanded eligibility, or reduced payments.

A program originally intended for less than four million “Old-age, Survivors, and Disab[led]" Americans, exploded by December 2022 to include 92.3 million enrollees. The federal government gave 27.6 percent of the U.S. population no-charge-to-consumer Medicaid coverage paid by taxpayers. The already exorbitant cost of this program will increase even further because California and Oregon have added illegal immigrants to their Medicaid rolls.  

Musk and Ramaswamy intend the DOGE to use three approaches to improve federal efficiency: regulatory rescissions (canceling regulations), administrative reductions (“reductions in force”), and cost savings, such as radical simplification and rigorous auditing of government procurement. They utilize all three approaches when implementing Section 1801. As prescribed by law, stop federal interference in state Medicaid programs other than providing block grants. Eligibility, benefits, payments to insurance companies as well as to providers should be decided by the states, not the federal government. Reports on medical and financial results of Medicaid programs should go to respective state legislatures, not Washington.

Discontinue the FMAP (Federal Medical Assistance Percentage) formula which incentivizes spending and discourages saving. Currently, the more a state spends on its Medicaid program, the more taxpayer funds it receives from Washington. Make federal funding a negotiated, fixed amount. Washington can then budget for a known quantity, not a variable dependent on states’ budgeting. With block grants, states will operate their programs as they know best, adding whatever state funds are necessary to support their medically vulnerable residents.   

In their Wall Street Journal blueprint for improving government efficiency, Musk and Ramaswamy wrote, “we will focus particularly on driving change through executive action based on existing legislation rather than by passing new laws.” They could have been (and hopefully were) writing about Section 1801. Activating the legal prohibition against “any federal interference” with state-controlled Medicaid programs is precisely what needs to be done to cut billions in costs and at the same time save American lives.

All current federal regulations that control state Medicaid programs would be rescinded. The current CMS/Medicaid actuaries and accountants, administrators, bureaucrats, compliance officers, enforcement agents, oversight inspectors, and rule and regulation writers would be gradually transitioned into the private sector. This very large reduction in force would save taxpayers billions in wasteful, illegal federal spending.

By following the Medicaid law as written, DOGE can rein in an out-of-control federal bureaucracy. The 47^th President can use Section 1801 to drain the Medicaid portion of the swamp.

Deane Waldman, M.D., MBA is Professor Emeritus of Pediatrics, Pathology, and Decision Science; former Director of Center for Healthcare Policy at Texas Public Policy Foundation; former Director of New Mexico Health Insurance Exchange; and author of 12 books, including multi-award winning, Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine.  Follow him on X.com @DrDeaneW or contact via www.deanewaldman.com. 

Vance Ginn, Ph.D., is president of Ginn Economic Consulting, host of the Let People Prosper Show, and previously chief economist of the Trump White House's Office of Management and Budget. Follow him on X.com at @VanceGinn. 

https://www.realclearpolicy.com/articles/2024/11/28/doge_to_save_medicaid_billions__follow_the_law_1075244.html