Government welfare programs are, by their very design, incubators of waste, fraud, and abuse. During the pandemic, the Biden administration created even more favorable conditions for all three to fester and for programs to hemorrhage money.
The government expanded benefits in some of those programs, loosened eligibility rules in others, and suspended basic verification requirements across the federal safety net — all ostensibly to deliver COVID-related relief. Some of those “temporary” changes persist in 2026, and abuses of federal money continue on a pandemic-era scale in many states. But, at last, Washington is taking steps to repair the impaired integrity of its trillion-dollar welfare state.
Last month, the Centers for Medicare and Medicaid Services deferred more than $1 billion in federal Medicaid matching payments — roughly $868 million from California and $199 million from Minnesota — after identifying claims that lacked sufficient documentation. During the pandemic, billions of additional federal dollars flowed to states and localities responsible for administering welfare programs — with few requirements that states ensure elementary safeguards and administrative support to prevent the money from flowing into fraudsters’ pockets. States may have grown accustomed to receiving open-ended federal reimbursements with too little scrutiny; yet subjecting their claims to federal review should not be controversial because federal taxpayers finance nearly two-thirds of Medicaid benefit spending nationwide.
The move to increase states’ responsibility for administering federal benefits began with last year’s One Big Beautiful Bill Act, in which Congress enacted several commonsense reforms. Specifically, the federal government’s share of state administrative expenses for the Supplemental Nutrition Assistance Program will fall from one-half to one-quarter, beginning in 2027. Moreover, states that erroneously distribute more than 6% of SNAP benefit payments will have to finance between 5 and 15% of the costs of their benefits, which are currently paid in full by the federal government. Following these reforms, states that systematically fail to determine eligibility and benefits accurately will bear more of the consequences of their own loose administration. For example, Maryland, which has an astounding 13% payment-error rate, will be responsible for more than $240 million in annual benefits costs.
Additionally, states must soon require certain able-bodied adults to devote 80 hours a month to work or community service — with an exception for students — to qualify for Medicaid. States will also start redetermining eligibility every six months for adults who benefit from Medicaid expansion and checking federal death records at least quarterly.
The Trump administration has proposed to implement the OBBBA’s limits on provider taxes. These taxes are a favorable financial gimmick that allows states to charge Medicaid providers, return the revenue through higher Medicaid payments, and use the arrangement to draw additional federal matching funds. CMS has likewise proposed caps on state-directed Medicaid payments that states have long abused.
Under its “Crushing Fraud, Waste, & Abuse” initiative, CMS created a Medicare Fraud War Room to detect suspicious billing and stop improper payments. In Los Angeles, CMS suspended payments to roughly 800 hospices and home-health agencies suspected of fraud and imposed a six-month nationwide moratorium on new providers in both fraud-prone categories. CMS asserts that its Medicare program-integrity savings rose 59% in 2025. Through CMS’s Medicaid Fraud War Room, recently launched with the newly established White House Task Force to Eliminate Fraud, the federal government seeks states’ cooperation to combat fraud.
The Trump administration touts saving $5.56 billion in six months through its fraud-crushing endeavors — or roughly one day’s worth of federal borrowing — while six months of means-tested welfare programs alone cost more than 100 times that amount. As Chris Edwards at the Cato Institute points out, “The federal government is a vast transfer machine. It spends more than $4 trillion a year on 2,400 aid, benefit, and subsidy programs — from Social Security and Medicare to hundreds of lower-profile programs that members of Congress probably don’t even know they are funding.” This machine is unfathomably inefficient, losing anywhere between $233 billion and $521 billion annually to fraud — and likely more. Then there is abuse of programs, their ineffectiveness in achieving intended social outcomes, and pervasive waste.
SNAP OUT OF IT: HOW OUR WELFARE SYSTEM INVITES THIEVES TO STEAL YOUR MONEY
Kimberley Strassel of The Wall Street Journal perfectly spells out to what the administration ought to aspire: “In a perfect world, we’d tear down the maze we’ve added to for a century and replace it with a central clearinghouse for short-term government support, able to interact efficiently with states.”
Hopefully, the Trump administration’s fraud-crushing endeavors will invite a congressional debate over an overhaul of the welfare state that has proved itself a failure for many years.
Vladlena Klymova is a policy analyst at the Taxpayers Protection Alliance.