Rooting Out Waste, Fraud & Mismanagement
Taxpayers across the country have been increasingly concerned about government fraud after revelations that abuse within Minnesota’s social service programs may have cost taxpayers billions of dollars. The most notorious example involved an organization called Feeding Our Future, which claimed to provide meals to children through schools and after school programs. According to federal prosecutors, the organization and its associates submitted fraudulent claims, fabricated documentation, and diverted public funds towards luxury automobiles, jewelry, and resort vacations. Millions of dollars were allegedly transferred overseas.
Most troubling of all, warning signs reportedly existed long before the scheme was uncovered. Yet payments continued to flow. The organization’s leader was just sentenced to 500 months in prison for her lead role in the $250 million fraud scheme that exploited a federally funded child nutrition program. The Minnesota scandal has become a symbol of a much broader problem. Americans who have spent recent years coping with rising prices, higher interest rates, and tighter household budgets naturally wonder whether the taxes they pay are being spent responsibly.
Families across the country have had to scrutinize every expense and eliminate unnecessary spending, and even make painful cuts to things like family vacations. In some cases, government programs, by contrast, often face no comparable discipline. The result is growing public concern that vast sums intended to help vulnerable populations are instead being lost to waste, fraud, and mismanagement.
Thankfully, President Donald Trump has created a task force to eliminate fraud, led by Vice President J.D. Vance, bringing together officials from Washington and across the country to investigate abuses and identify weaknesses in government programs. The objective is not merely to recover stolen funds, but to answer a larger question, Why do such abuses persist year after year, despite repeated warnings? The answer lies not only in individual wrongdoing, but also in the incentives built into government programs themselves, fraud does not occur in a vacuum. It flourishes where accountability is weak and where decision makers do not bear the costs of their decisions.
Medicaid provides a useful example. The program was originally designed to provide health care assistance to primarily low-income individuals with disabilities, pregnant women, and children. The goal was both compassionate and practical, yet the structure of the program created incentives that make effective oversight very difficult. Medicaid is administered by state governments, but financed jointly by the states and federal government, for every dollar state spends on Medicaid, the federal government contributes at least a matching amount, and often considerably more. This arrangement weakens the incentive for states to aggressively reduce costs. Every dollar saved by eliminating improper payments or fraudulent claims is not merely $1 removed from expenditures, it is also $1 that reduces the amount of federal money flowing into that state.
The bad incentives become even more distorted under Medicaid expansion established through the so-called Affordable Care Act, or Obamacare. As a result, states receive substantially greater support for enrolling able-bodied working-age adults than they do for many of the populations Medicaid was originally intended to serve. This is not a criticism of any particular recipient; it’s a criticism of a system that separates decision making from financial responsibility. When state officials spend money, and someone else pays most of the bill. The pressure to control costs inevitably weakens.
The problem is not unique to Medicaid. It is a recurring feature of programs in which those making spending decisions are often insulated from the consequences of waste. Economist Milton Friedman famously observed that people spend money most carefully when they spend their own money on themselves. They spend at least carefully, however, when they spend someone else’s money on someone else. Much of modern government operates according to that latter principle. Unfortunately, funds are collected from taxpayers, distributed through multiple layers of bureaucracy, and then ultimately spent by officials who bear little personal costs when mistakes occur.
Yet, there’s no such thing as someone else’s money, as we know. Every dollar spent by government originates from a taxpayer at a time when the national debt is approaching $40 trillion Members questions around oversight and accountability can no longer be dismissed as minor administrative concerns. They are central to our nation’s future and our national security.
The Vice President’s Fraud Task Force has already reported significant findings, and efforts like these should continue at every level of government. That’s why we created our Alec Government Efficiency Coalition to continue this work at the state and local level. Recovering stolen funds is important, but preventing future abuse is even more important. Ultimately, the goal is not merely to punish fraud after it occurs, but to create institutions in which fraud is far less likely to occur in the first place. For more information on this and our ALEC Government Efficiency Coalition work, you can go to alec.org.
