Medicaid waste is huge. Officially, the federal-state health program loses 6 percent of benefits to errors and fraud a year, or $37 billion in 2025. But some analysts argue that the waste is much larger because the official figures exclude certain types of improper payments.
Medicaid theft seems straightforward to execute. No brilliant scheme is required, as the Minnesota scandals illustrate. You submit fake paperwork to the state Medicaid agency for services not provided, and the government drops money in your bank account. Scams often last for years before authorities finally investigate.
Recently, seven individuals in Brooklyn were found guilty of stealing $68 million from New York’s Medicaid program. The theft began in October 2017 and continued until July 2024. State administrators were paying a lot of money for a long time to three fake health care businesses before law enforcement finally caught up.
Zakia Khan and Ahsan Ijaz owned and operated two social adult day cares (SADCs)—Happy Family Social Adult Day Care and Family Social Adult Day Care—as well as Responsible Care Staffing, which was a consumer directed personal assistance program (CDPAP). These entities billed New York Medicaid, and the two ringleaders paid people to recruit fake patients with bribes to pretend to receive services from the scam health care companies.
Why did it take seven years to bust this racket? Did state administrators ever inspect the facilities, call customers to check if services were actually delivered, or interview the business owners, Khan and Ijaz? After all, they were getting about $10 million a year of taxpayer money.
New York Post reporters recently visited 13 SADCs in New York City and “found little evidence of any medical support being offered or administered.” Apparently, the program’s rules are loose, government administrators don’t seem to audit much, and facilities appear to offer free lunch and games to able-bodied individuals. More ping pong tables than wheelchairs.
The Post reports that the “number of SADC centers has jumped from 40 in 2013 to almost 400 today, popping up in storefronts, apartments, and basements across the five boroughs.” Meanwhile, in New York, even “Governor Hochul has called CDPAP a racket … citing TikTok ads which reportedly attempt to recruit individuals at $37 an hour to care for their own relatives who may not actually need care.”
Laxity in rules and enforcement helps explain why New York State spends two and a half times more on Medicaid than Florida, even though the latter has a larger population.
The chart shows that federal, state, and local spending on Medicaid in New York State soared from $55 billion in 2013 to $116 billion by 2025, with federal taxpayers currently picking up 60 percent of the costs. How can we cut Medicaid fraud? Congress should block-grant the program and slash the federal payment share.
