When the news broke about welfare fraud in Minnesota’s Somali community, it was largely confined to abuse surrounding the Agriculture Department’s Federal Child Nutrition Program and a Medicaid-funded autism program. However, investigators now believe that over $9 billion was stolen by more than 90 people through 14 Medicaid-funded programs. It is possible that this wave of criminal fraud is isolated to Minnesota, but it is not likely, especially since the waivers at the heart of the scandal have been granted to dozens of other blue states nationwide.
Medicaid and Medicare have always been prone to fraud, which is why the Department of Justice has had a dedicated national task force to identify and prosecute Medicaid and Medicare fraud since 2007. But what is going on in Minnesota is not typical Medicaid fraud. The guilty are not doctors who bill for more expensive services than those actually delivered, then kick money back to patients. Nor are they doctors who order tests or treatments that are not needed, so as to increase reimbursement. No doctors are even involved because Medicaid is being used to pay for nonmedical services.
How did this happen?
The “social determinants of health” movement existed long before the Affordable Care Act expansion of Medicaid. But with federal taxpayers picking up 90% of new spending, the incentive for states to find new ways to spend other people’s money was larger than ever before. Proponents of SDOH claim to believe that health outcomes are primarily driven by social and economic conditions, meaning adequate provision of housing, food, education, and even income must be considered part of “healthcare.” With the Affordable Care Act Medicaid expansion money flowing in, many states began using Section 1115 waivers to use federal Medicaid dollars to fund and expand existing welfare programs or create new ones, all channeled through nongovernmental organizations stocked with Democratic Party community organizers and other activists.
In 2023, the Biden administration released its “Playbook to Address Social Determinants of Health,” embracing the SDOH approach and making it easier for states to use their Medicaid dollars for “nonstandard benefits,” such as housing, utilities, food, and even home remodeling. The additional advantage of tapping Medicaid funds for social welfare spending was that Medicaid is an entitlement program not subject to annual appropriations. Even through a government shutdown, the SDOH money spigot to Democratic nonprofit groups and their fraudulent allies keeps flowing.
This is how Minnesota’s “14 Medicaid programs” that have become such a magnet for fraud came into being. According to authorities, the 14 services funded by Medicaid dollars that have been identified as “high-risk for billing irregularities” include: early intensive developmental and behavioral intervention services for autism, integrated community supports (nonrent housing assistance and counseling), nonemergency medical transportation, peer recovery services, adult rehabilitative mental health services, adult day services, personal care assistance (nonmedical bathing/eating assistance), recuperative care, individualized home supports, adult companion services, night supervision, assertive community treatment, intensive residential treatment services, and housing stabilization services.
Importantly, none of these involve a doctor or nurse with medical training. They don’t require any training at all, which is part of what makes them so ripe for fraud.
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Blue states have been abusing federal Medicaid dollars to finance non-healthcare social welfare spending for years. They say such spending reduces overall healthcare costs and improves healthcare outcomes, but lack evidence to support these claims. The never-ending spiral of blue state Medicaid spending suggests otherwise.
As Republicans negotiate with Democrats over the extension of the COVID-19 Affordable Care Act bonus subsidies, the elimination of all non-health Medicaid spending should be part of the discussion. These programs do not improve health outcomes and are a magnet for fraud and abuse.