It’s Not Just Minnesota—Fraud Is Everywhere

 If you tried to steal a billion dollars from a bank, you would probably fail. You might even get shot for your trouble. But if you tried to steal the same amount from Medicaid, Medicare, or other federal safety-net programs, your odds of success are much better. Just submit phony bills, and the government will pay you.

That’s what Somali fraudsters did in Minnesota. They netted more than $9 billion, according to a top prosecutor. It’s an old trick that has worked thousands of times.

In response to the scandal, the Trump administration was quick to blame Minnesota governor Tim Walz for being “asleep at the wheel” amid “a clear dereliction of duty.” Mehmet Oz, who heads the Centers for Medicare and Medicaid Services (CMS), said that federal officials “have never seen anything like this.”

In reality, frauds against government health-care programs are both common and costly. Fraudsters routinely scam CMS for billions of dollars. States themselves run schemes of their own. Covid-related frauds, for example, exceeded $280 billion, with another $123 billion wasted or misspent. Obamacare enrollment fraud is pervasive, likely costing taxpayers $27 billion in 2025 and $21 billion in 2024.

Fraudsters in Russia and other East European nations scammed Medicare for $1 billion over three years by submitting phony bills for durable medical equipment. Companies operating out of Connecticut, Florida, Kentucky, New York, and Texas pilfered about $2 billion by submitting phony bills for products like wigs for cancer patients and urinary catheters. Fraudsters who submitted bogus bills for orthotic braces, pain creams, and other items took federal health programs for more than $1 billion.

CMS’s own estimate—“comfortingly low,” in the words of one professor—is that it made $87 billion in “improper payments” to fraudsters and people who provided insufficient documentation in 2024. The real number is likely double the official estimate; over the past decade, it totals more than $1 trillion in Medicaid losses.

State officials also engage in behavior that, while not technically fraudulent, is at least sketchy. Every year, 49 states (all but Alaska) use “provider taxes” to tap CMS for about $160 billion. Federal law says states should be raising this money themselves, but states use the “provider tax” loophole to evade this restriction. That’s one-sixth of total Medicaid spending. States can even divert some of the money to non-Medicaid purposes. Either way, each state that participates is effectively (if legally) stealing from taxpayers in other states. Further, when the federal government has repeatedly tried to constrain the provider-tax provision, states have created new workarounds and loopholes to keep the money flowing from the U.S. Treasury.

Oz has announced that CMS will “stop paying the federal share” of Minnesota’s Medicaid program unless state officials agree to greater oversight. That’s great news, but the same scams are running in every state, and CMS knows it. For years, Florida has been ground zero for health-care fraud, according to an FBI official. Why haven’t Trump and Oz raked Florida governor Ron DeSantis over the coals or threatened to withhold funding?

During his first term in office, President Trump could have imposed financial controls preventing fraudsters of all nationalities from raiding the Treasury. He neither did so nor asked Congress to help. He also pardoned or commuted the sentences of convicted health-care fraudsters, including Philip Esformes, who stole $1.3 billion.

When it comes to fraud, many public officials don’t care. Why should they? Thieves are stealing taxpayers’ money, not theirs.

It’s politically risky to confront fraud, given how dependent states are on the dollars. Financial controls would also imperil payments to doctors, hospitals, and other health-care businesses, all of which together make a powerful lobby.

Public officials have had six decades to impose needed financial controls on Medicaid and Medicare. It seems unlikely they ever will. If we can’t fix them, we should remake these programs on the model of Social Security, a program harder for fraudsters to raid because it makes direct payments to beneficiaries. Giving money directly to consumers could also make health care better and more affordable by allowing market forces to work.

Charles Silver is the Roy W. and Eugenia C. McDonald Endowed Chair of Civil Procedure at the University of Texas School of Law and an adjunct scholar at the Cato Institute. David Hyman is Scott K. Ginsburg Professor at Georgetown Law and an adjunct scholar at the Cato Institute.

https://www.city-journal.org/article/somali-fraud-minnesota-government-health-programs-medicare-medicaid