Fighting Fraud Is A High Priority

By John Hood

RALEIGH — It has long been a dodge to respond to chronic fiscal gaps with a promise to tackle “waste, fraud, and abuse.” A recent example came from the Artful Dodger himself, Donald Trump, who said on April 3 that a new anti-fraud initiative led by Vice President J.D. Vance had the potential to “balance our American budget.”

No, it doesn’t. Washington’s deficits — running nearly $2 trillion a year, about a quarter of federal spending — are too large to close by eliminating fraudulent claims, improper payments to households or businesses, and malfeasance by government contractors. Moreover, it is simply impossible to eliminate fraud entirely. It exists at every level of government, and indeed across both the public and private sectors.

Nevertheless, the Trump administration’s campaign against fraud is helpful and praiseworthy, as are comparable efforts here in North Carolina by State Auditor Dave Boliek, State Treasurer Brad Briner, and other public officials to diminish it within state and local government. In fact, some of the most egregious abuses of recent years have occurred right here in the Tar Heel State.

Consider the case of improper enrollment in Affordable Care Act plans. According to a new report from the Paragon Health Institute, some 446,000 North Carolinians signed up for ACA exchange plans in 2025. Only 134,000 were truly eligible enrollees, however. Thanks to anti-fraud measures included in last year’s federal reconciliation bill, health insurers lost the opportunity and incentive to game the system so aggressively. According to Paragon’s latest estimates, approximately 181,000 North Carolinians improperly enrolled in ACA plans in 2026. Although still far too many, that’s a big improvement over last year’s 312,000 improper enrollees.

The argument is not, by the way, that hundreds of thousands of North Carolinas are actively scamming taxpayers by claiming health-insurance subsidies for which they do not legally qualify. What appears to be happening is that insurers enroll beneficiaries without the latter’s knowledge, thus receiving government subsidies without having to pay for any medical services that might be consumed by their (unknowing) enrollees.

Another large-scale fraud, involving Medicaid payments for treatment of autistic children, has an embarrassing North Carolina connection. A couple of weeks ago, a front-page story in The New York Times spotlighted a clinic in Concord serving autistic children. “Naps cannot be longer than seven minutes before children are awakened to resume therapy,” the newspaper reported. “The company says this is necessary to prevent fraud since clinics can be paid only when children are awake and getting services. But it also allows the clinic to bill insurers or Medicaid for more hours.”

As previously reported by Carolina Journal, annual Medicaid payments for autism therapy in North Carolina skyrocketed from $1.4 million to $660 million in the span of just five years. Higher autism incidence, or even diagnosis, can’t come close to explaining so rapid and costly an increase. Staffers for Boliek and the General Assembly are currently investigating the issue.

The U.S. General Accounting Office estimates that from 2018 to 2022, improper or fraudulent payments cost American taxpayers between $233 billion and $521 billion a year. To the extent Medicaid, unemployment insurance, or other joint programs are involved, we can safely add hundreds of millions of North Carolina tax dollars to that total. Because the period includes the worst of the COVID pandemic, ongoing losses may well be at the lower end of the range. That does not, however, make them low.

Contrary to the president’s assertion, investigating and deterring fraud will not resolve our fiscal crisis. Policymakers must still eliminate some programs, downsize others, apply a means test to Social Security and Medicare, and reduce the extent to which Washington subsidizes North Carolina and other governments for transportation, education, and medical costs.

But fighting fraud must clearly be part of a comprehensive fiscal strategy. As the Manhattan Institute’s Robert VerBruggen put it, government contractors and beneficiaries “shouldn’t be anywhere near as successful as they are when it comes to bilking American taxpayers.”

John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy with American history (FolkloreCycle.com).