Washington calls it “improper payments.” A private firm would call it grounds for termination.
If a controller at a mid-size company signed off on $28 billion in payments with no invoices, no proof of eligibility, that person isn’t getting a fact sheet. They’re getting a box and an escort to the parking lot.
The federal government issued a fact sheet.
Here’s what CMS’s - Center for Medicare and Medicaid Services'- own fiscal 2025 books show: $28.83 billion in Medicare fee-for-service payments that broke the rules on the books. Another $23.67 billion in Medicare Advantage. $4.23 billion in Part D. $37.39 billion in Medicaid. Add it up and you clear $94 billion in one reporting cycle, in health programs alone. The Government Accountability Office found $186 billion across 64 federal programs government-wide, and 82 percent of that was money that should never have left the Treasury.
Agencies call it error. Or missing paperwork. Or, their favorite: “not indicative of fraud.” None of that brings the money back. A taxpayer whose file gets stamped “oversight” instead of “crime” is out the same amount either way.
Under federal prompt-payment rules, Medicare contractors face automatic interest penalties if they don’t push a clean claim out within 30 days — so the law all but orders them to wire the cash first and hope the audit catches the crooks later. The checks clear anyway. Call half of that $94 billion legitimate care snagged on paperwork, generously. The other half is exactly the fog organized fraud hides in.
That’s the story — not some talking point about phantom Social Security checks balancing the budget. A payment pipeline built to pay first and ask questions later, if it asks at all.
What “Improper” Actually Bought
Inside traditional Medicare, durable medical equipment posted a 24.12 percent error rate — $2.27 billion paid out with no proof behind it. No product line fails a basic paperwork check that often unless the checking is just for show.
Medicare Advantage’s $23.67 billion problem comes down to risk scores built on diagnoses nobody verified. Insurers get paid more when the chart makes the patient look sicker — so charts got sicker. Kaiser Permanente affiliates paid $556 million to settle claims that doctors were pushed to tack on diagnosis codes for conditions patients weren’t actually being treated for: roughly half a million added diagnoses, about $1 billion in improper payments between 2009 and 2018. Kaiser admitted nothing. Two whistleblowers, Ronda Osinek and Dr. James Taylor, took home a combined $95 million for surfacing it. Pay for the chart instead of the exam, and the chart grows to meet the price.
Medicaid’s improper payments jumped to $37.39 billion once states started re-checking who actually qualified. CMS blames most of it on missing state paperwork. Missing paperwork, on a $37 billion line.
The Indictments Behind the Ledger
Late June, the Justice Department charged 455 people, 90 of them licensed medical professionals, in schemes totaling more than $6.5 billion in false claims. CMS moved at the same time: 1,079 providers suspended, billing privileges revoked for 1,403 more, 295 of those Medicaid cases worth over $518 million.
The category that sums up the whole culture: skin substitutes, wound grafts marketed and billed like they’re luxury biologics. Medicare Part B spending on them went from $256 million in 2019 to more than $10 billion by 2024 — some codes paid out past $2,000 per square centimeter. A home visit billed four times what a clinic visit did. Doctors with zero wound-care background suddenly started billing like wound clinics. Traditional Medicare paid full retail on the spike. Medicare Advantage, working off managed contracts, paid a fraction for the identical product.
Regulators finally rewrote the payment model for 2026 — a flat $127.28 per square centimeter, wiping out billions in projected Part B spending. In Arizona, prosecutors convicted a couple who ran a $1.2 billion graft-billing operation, slapping expensive amniotic patches on hospice patients who were dying anyway. Kickbacks alone topped $279 million. They got 15½ and 14 years in federal prison and agreed to pay $309 million to settle the civil case.
Labs, genetic screens, catheters, sham hospices — same playbook every time: bill first, collect the wire, write the chart later if anyone asks. In Los Angeles, prosecutors charged hospice operator Oren David Shachar with paying a funeral home employee and a patient marketer $1,000 to $3,000 per name for the identities of deceased Medicare beneficiaries, then billing Medicare $27 million for end-of-life care nobody received. Fifteen thousand dollars of it went straight to a lease deposit on a $530,000 Rolls-Royce Phantom. At the takedown press conference, HHS Secretary Robert F. Kennedy Jr. put it bluntly: “One of the ways that we’ve been able to detect that fraud is, that in many of them, the patients never die, they live forever. That’s not supposed to happen in hospices.” CMS suspended Medicare billing at roughly 800 Los Angeles hospice and home health agencies that had collectively billed $1.4 billion.
Social Security: Narrower Margins, Persistent Leaks
The 2026 Trustees Report has the Old-Age and Survivors Insurance fund running dry in late 2032 — after that, benefits drop automatically to 78 percent of what’s scheduled. Combined with Disability Insurance, the fund lasts until 2034, at 83 percent. That’s a full year earlier than last year’s report. Why? The Committee for a Responsible Federal Budget dug into the Trustees’ own numbers and found demographics doing most of the damage: lower birth rates alone account for a 0.35-point hit to the fund’s actuarial balance, revised immigration numbers another 0.21 points. The 2025 tax law’s cut to benefit-taxation revenue barely moves the needle by comparison — 0.16 points.
None of that is fraud — it’s a financing shortfall, plain and simple. The sloppiness is a separate problem. SSA’s own inspector general found retirement and disability overpayments running $3.4 billion a year, $13.6 billion over four years. Ninety-three percent of it, SSA says, is beneficiaries who didn’t report a raise or a change in assets. Four percent kept flowing after someone died. The last three percent: straight-up identity theft and people claiming benefits off residencies they’d lied about. None of it closes the trust fund gap. All of it is money that went out the door unchecked.
Internal controls fail here too. A former SSA claims rep in Puerto Rico ran benefit files through dead people’s identities for 12 years and pocketed $1.8 million before getting caught — 23 federal counts. Then there’s the paperwork SSA doesn’t chase down on its own: an OIG audit found the agency skipped its own clawback rules in 47 percent of sampled deceased-beneficiary cases, about $106 million sitting unrecovered across 8,486 accounts. A separate audit of administrative sanctions found errors in 75 percent of the files reviewed — roughly $49.6 million, 454 beneficiaries affected.
The Pay-and-Chase Engine
Pay-and-chase is the actual business model, by law. Set the code high, let it ride. Health plans collect a bonus for a sicker-looking roster, and nobody checks the chart until years later. States cut the check first and chase the money afterward. When the tally comes in ugly, the agency drops its annual error report and reminds everyone that missing records aren’t a crime.
Unverified paperwork moving tens of billions a year isn’t an accounting footnote. It’s the exact cover fraud needs.
A private company fires the signer on the spot. CMS, by contrast, puts out a press release congratulating itself: a record $41.9 billion in program integrity savings for FY2025, a 22.3-to-1 return on enforcement. Chasing money after it’s gone is real work, and it matters. But until the rule changes — verify before the check goes out, not after — the next fraudulent code gets exploited the second this one lands in a courtroom.
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