For Trump to Win the War on Fraud, States Must Be Held Accountable
For Trump to Win the War on Fraud, States Must Be Held Accountable
During his recent State of the Union address, President Donald Trump declared “war on fraud,” featuring a new task force led by Vice President JD Vance to curb waste and abuse in America’s welfare programs. Although official welfare fraud estimates are hard to come by, the Government Accountability Office estimated that Medicaid and the Supplemental Nutrition Assistance Program (SNAP) alone were responsible for more than $40 billion in improper payments (of which fraud is a component) in fiscal year 2024. But based on reports from Department of Agriculture officials and the Paragon Health Institute, the true scope of financial mismanagement is likely much higher. Every year, billions of working Americans’ taxpayer dollars go toward anti-poverty programs designed to help the needy but are lost to waste, fraud, and abuse.
On its face, Trump’s move should be welcomed by everyone, especially amid the fallout from Minnesota’s multibillion-dollar fraud scandal. But Congress must take the lead and fix the broken incentives that have allowed fraud to persist at such a scale in the first place.
Most of America’s means-tested programs are administered by the states but have federal government picking up the tab. This financing model creates a dangerous incentive misalignment, where states have little reason to be judicious with how they spend the money in the assistance programs they administer. When fraud happens, it’s someone else’s money, so it’s someone else’s problem.
The numbers bear this out. SNAP is 95 percent funded by the federal government. More than $320 million of that funding was lost to EBT card theft between October 2022 and December 2024, with card reader skimming being one particularly common form of loss. States can easily remedy this by adding chips to EBT cards, but 41 states have no plans to make the switch.
Similarly, Secretary of Agriculture Brooke Rollins claimed that at least 500,000 Americans in 28 states were collecting SNAP benefits in more than one state simultaneously. States can help fix this by adopting the National Accuracy Clearinghouse, a data-matching tool used to catch duplicate enrollments. Only 15 states have done so since its launch two years ago.
Why are states dragging their feet on adopting even standard technological safeguards? Because adopting these changes requires states to pay for adjustments they won’t see any direct fiscal benefit from, since the costs of fraud and the savings from preventing it don’t return to the states themselves.
Nothing illustrates this dynamic more clearly than Minnesota’s recent scandal. More than half of the $18 billion in Medicaid funds supporting 14 programs in the state since 2018 may have been lost to fraud. What the programs implicated in the scandal have in common is — you guessed it — that they were administered by state officials but funded largely by federal taxpayers.
State auditors had been raising red flags about programs like the Feeding Our Future nonprofit for years, but the state kept approving payments anyway, resulting in a $250 million fraudulent children’s nutrition program. Would state officials have been so tepid in their response if that money had come from their own budgets?
The perverse incentives don’t stop at negligence. The financing structure for many of America’s welfare programs actively encourages states to game the system with budget gimmicks and loopholes to get federal taxpayers to pick up the tab for state overspending.
For example, the federal government finances roughly 70 percent of Medicaid, the largest means-tested program. Between 2015 to 2024, federal Medicaid improper payments approached $1.1 trillion, according to some estimates. Additionally, states employ gimmicks like provider taxes — levies on health-care providers that are recycled back to the very providers who paid them — to draw federal funds out of thin air at no direct cost to state budgets. In 2022, one out of every five dollars spent on Medicaid was drawn down by states through legalized shell games like these. Federal taxpayers should be rightfully outraged that their money is being wasted on such fraud — and even more so that they’re only hearing about it now.
But the ones who suffer the most from this financial mismanagement are the people on welfare themselves. Every dollar that lines a fraudster’s pocket is a dollar that could’ve gone toward meals for needy children, or housing for the elderly or adults with disabilities, or medical services for children with autism, or substance abuse treatment, or a litany of other people belonging to demographics that the welfare state is supposed to help.
The system failed these people by divorcing authority from accountability. To the states, federal money will always be free money, and scapegoating immigrants and minorities won’t change that.
The best solution is to overhaul the system such that states foot the bill for the programs they run. If a state wants to run a welfare program, it should pay for it with state dollars. Or, it can step back and let civil society and private organizations provide more effective and personalized assistance.
But reforms of this kind can only be achieved through Congress, and that starts with Congress owning the role it played in designing and repeatedly failing to reform the financing models that enabled this mess.
Fraud is an issue that transcends party lines, and the solutions should, too. Democrats who care about the integrity of social programs should want every dollar to reach the person it was meant for. Republicans who care about fiscal responsibility should want a financing model that gives states real accountability for every dollar they spend — and real consequences for when they waste it.
Trump is right to wage war on fraud. Indeed, if the federal government is going to keep pouring hundreds of billions of dollars into welfare programs every year, it has the prerogative to ensure they’re being spent properly. But if he hopes to win it, then Congress has to work with Trump to build on the One Big Beautiful Bill Act’s reforms and completely restructure how these programs are financed to give states real skin in the game. Otherwise, the war on fraud is likely to end up like DOGE — making outsized promises but falling short of the systemic change that only Congress can deliver.
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