Medicaid Makes $289 Million in “Unallowable Payments” to Insure “Deceased Enrollees”

A decade after Judicial Watch reported that Medicaid, the government’ s fraud-infested health insurance program for the needy, spent $26 million to provide dead people in one state alone with benefits, a federal audit reveals the problem continues full-throttle with hundreds of millions of dollars in “unallowable payments” on behalf of “deceased enrollees.” It is an unbelievable story that illustrates government inefficiency, especially when it involves welfare programs. The waste has been well documented for many years, yet little has been done to correct the problem. With an annual budget of about $900 billion Medicaid is jointly funded by federal and state governments. The Centers for Medicare & Medicaid Services (CMS) administers the program at the federal level and states have CMS-approved plans to run their Medicaid programs, which provide low-income residents with medical coverage. In some states the government contracts with insurance companies and makes fixed monthly payments to provide coverage.

For years, the payments have continued even after the patient died. In other cases, millions of dollars of “unallowable payments” are made on behalf of incarcerated individuals, who lose Medicaid benefits once they are imprisoned because healthcare is provided by correction facilities. In a recent example, Illinois spent at least $9.5 million to provide ineligible inmates, who had been enrolled in Medicaid prior to incarceration, with medical benefits. As in many states, the Illinois Department of Corrections Prison Data Match collaborates with Medicaid Managed Care Enrollment Termination to provide a weekly list of incarcerated individuals, and the information is matched against the state’s Medicaid enrollment data to identify incarcerated enrollees, so Medicaid benefits are terminated. Although the system has been in place nationwide for years, a recent Health and Human Services (HHS) Inspector General (IG) probe examined Illinois records and determined that, between 2020 and 2023, at least $9.5 million in unallowable payments were made on behalf of imprisoned Medicaid recipients because the state failed to terminate managed care enrollment after being notified of incarceration.

The failure is similar involving dead people, though the price tag is much higher. Since 2016 the HHS IG has conducted 18 audits identifying that Medicaid agencies improperly made about $289 million in payments on behalf of recipients after they died. Even after all these years, “states continue to struggle with the issue,” according to the recently published audit. Investigators found that Medicaid agencies throughout the country doled out the money for the healthcare of deceased beneficiaries even though the deaths were officially recorded in the Social Security Administration’s Death Master File. In most cases the cash kept flowing, the HHS watchdog confirms, writing that “we determined that Medicaid agencies made unallowable capitation payments after enrollees’ deaths for 99 of the 100 sample payments.” Some of the overpayments were recovered by the government but the overwhelming majority were not, sticking it to American taxpayers as so many bloated welfare programs regularly do.

Improper payments have been a long-standing and significant problem in the federal government, according to the Government Accountability Office (GAO), the investigative arm of Congress, and Medicaid is among the biggest offenders. In fiscal year 2024 the GAO found that Medicaid made an estimated $31.1 billion in improper payments, which is equal to about five percent of the program’s total spending. A year earlier the HHS watchdog reported that 14 states made over $249 million in unallowable payments on behalf of dead people with 11 of those failing to consistently identify and process beneficiaries’ death information. A few years ago, an Oregon state audit revealed that $445 million in Medicaid benefits were paid to beneficiaries enrolled in one or more other states, including tens of millions for people covered under California and Washington state’s Medicaid program.