Social Security's dead people and Medicare's fraudsters are real. But stopping them won't rescue the federal budget.

By Brett Arends

Comptroller of the U.S. makes rare public comments

Gene Dodaro, comptroller general of the United States and head of the Government Accountability Office, is the government's top watchdog.

Waste, fraud and abuse are real at Medicare, Medicaid and Social Security, the head of the government's top watchdog has confirmed in a rare public comment.

That includes outright fraud, medically needless treatments and, yes, even Social Security checks being sent out to dead people.

The problem? The total amounts in question don't add up to much in the context of the federal budget. Least of all when compared with our "unsustainable" and mind-boggling deficits.

Gene Dodaro, the long-running comptroller general of the U.S. and head of the nonpartisan Government Accountability Office, was speaking at the latest meeting of the Medicare Payment Advisory Commission, an independent governmental body that advises Congress on Medicare policy.

Among Dodaro's more remarkable revelations was that "epic" and "epidemic" fraud during the COVID-19 crisis, totaling hundreds of billions of dollars of taxpayer money, was enabled by a decision by Congress in 2015 to shut down an effective watchdog operation in order to save ... $2 million a year.

'During the pandemic, fraud was epidemic.'Gene Dodaro

When they teach the concept of "penny wise and pound foolish" in grade schools, colleges and business schools in the years to come, this could be one of the first lessons. Naturally none of the people in Congress responsible for this monumental blunder will face consequences.

Dodaro rarely speaks in public or gives interviews, and he declined to talk to MarketWatch when we asked some months ago, so his comments at the latest MedPac meeting are noteworthy. The GAO is a nonpartisan body dating back to the 1920s that's tasked with tracking waste and inefficiency across the federal government. It was Elon Musk's "DOGE" 100 years before that so-called department was conceived. The GAO is almost certainly too small and has too few powers, but its recommendations have generated huge savings for taxpayers over the years.

Years of Social Security and Medicare fraud

Arguably his most intriguing comments were about Social Security. Yes, indeed, he said, the Social Security Administration has actually been sending checks out to dead people (as Musk, Donald Trump and others have insisted).

"I worked for about 10 years to get Congress to pass legislation to require the Social Security Administration to give a full death master file to the Treasury Fiscal Service," he said. "As odd as it seems, they wouldn't do it ... under the guise of privacy. ... I never thought it'd be so hard to get the agencies and Congress to agree to stop paying dead people."

Now the federal government is running a pilot program to stop this absurdity. "And so, finally, there's a pilot now, and it's [shown to be saving] millions of dollars."

Dodaro didn't specify his numbers, but the phrase "millions of dollars" tells a story. The Social Security Administration is currently sending out monthly checks averaging $1,865 to just over 70 million people. Total cost: $131 billion a month, or nearly $1.6 trillion a year. Savings of millions, while a good thing, will not, sadly, make any impact whatsoever on the federal budget. Even saving billions would not help much, unless there are many of them.

The budget picture is slightly better in Medicare, apparently. "Fraud continues to be a problem in Medicare," Dodaro said. A special task force led by the Justice Department has been prosecuting fraud cases, "and every year, they bring charges against several hundred people, and the adjudicated fraud is anywhere from $2 [billion] to $5 billion a year." On top of that, Dodaro said, you need to add the (unspecified) figures recovered through settlements and civil cases.

Dodaro's comments rebut claims and suggestions that somehow this issue was going unaddressed under previous administrations. On the contrary, enforcement has been going on for years.

I continue to argue that if Donald Trump really wants to crack down on Medicare fraud, he should put Senate Republican Rick Scott in charge of his administration's efforts on this front. The Floridian knows more about Medicare fraud than anyone else in Washington: When he was a healthcare executive in the 1990s his company was found to have committed the biggest single fraud against the program in its history. It ended up paying $1.7 billion to settle the case.

On top of Medicare fraud is waste, Dodaro said, including medically needless procedures. "That's maybe about 17% of the improper payments" made by the program each year, in his estimation. As the total improper payments made by traditional Medicare and privatized Medicare Advantage totaled $51 billion last year, that means medically needless treatments may come to about $8.5 billion.

Sadly, none of this is going to make much of a dent in the total Medicare budget, which came to $1.03 trillion last year. And it pales against the excessive costs of running the entire privatized Medicare Advantage program. MedPac itself estimates that Medicare Advantage costs taxpayers $83 billion a year more than they would have to spend insuring those beneficiaries through traditional Medicare. Or, to put it another way, MedPac reckons the waste on Medicare Advantage is 10 times as big as the entire estimated cost of needless medical procedures. (The private insurers profiting from Medicare Advantage dispute this claim, naturally.)

Intriguingly, Medicare data also show that the rate of "improper payments" in Medicare Advantage actually isn't that much lower than in traditional Medicare, despite all the extra costs and the involvement of private companies. The rationale for the program is that private insurers, with more "skin in the game," will police waste better. Medicare says the total amount of "improper payments" in traditional Medicare amounts to 7.7% of expenditure, while the amount in Medicare Advantage is 5.6%. Yet this seems a poor gain given that private health insurers also spend about 11% of each dollar on administration, overhead, executive pay, dividends and the like.

Traditional Medicare, by contrast, spends about 1.1% of each dollar on administration.

It's yet more grim evidence that while there is money to be saved in the federal government, it won't rescue the budget. Trying to balance the budget by cutting "waste, fraud and abuse" would be like trying to bail out the Titanic with a soup ladle.

Plus: Social Security on track for insolvency in less than 10 years - but commissioner says there's 'plenty of time'

Pandemic-era fraud worse than financial crisis

Meanwhile my eyes were drawn to Dodaro's revelations about the astonishing and continuing economic costs of the federal response to the COVID crisis.

When Elon Musk was running 'DOGE,' he claimed the GAO had estimated total fraud in the federal government at $500 billion a year. Actually, the GAO said it was somewhere between $230 billion and $520 billion, and it based those numbers on analysis it did for 2018 to 2022 - meaning that three of the five years in the sample were during the coronavirus crisis.

"During the pandemic, fraud was epidemic," he said. The amount of money doled out by the federal government "very quickly resulted in an epic fraud, in my opinion." And, he added, it launched a new industry of federal fraud. "What happened during the pandemic is that, in actuality, a whole new group of fraudsters got trained," Dodaro said. "And it's international as well as domestic, and it's organized crime as well as the 'entrepreneur,' if you will. And so it's more sophisticated."

That level of pandemic fraud was behind the estimates of total federal fraud widely touted early this year. When Elon Musk was running DOGE, he repeated in several interviews that the GAO had estimated total fraud in the federal government was about $500 billion a year. Actually, the GAO said it was somewhere between $230 billion and $520 billion, and it based those numbers on analysis it did for 2018 to 2022 - meaning that three of the five years in the sample were during the coronavirus crisis, and two of the five were the epic years of 2020 and 2021.

Meanwhile the federal deficit has totaled $2 trillion over the past 11 months.

The fraud during COVID was vastly worse than it was during the global financial crisis of 2008-09, even though that episode, too, involved sudden and gigantic federal spending, Dodaro added. (He had already taken over as de facto comptroller when the crisis hit in 2008.)

The reason? Back in the financial crisis, "the Congress created an inspector-general group, Recovery Accountability Transparency Board, gave them $80 million, and their job was to help prevent fraud in the Recovery Act. And they did a pretty good job of stopping fraud, and there was nowhere near the amount of fraud in those two big efforts that we had during the pandemic."

Incredibly, the accountability program was allowed to expire in 2015. Dodaro said he tried to persuade both the Treasury and Congress to keep it going, to no effect. It would have cost just "$2 million a year" to keep the program operating.

"So, five years later, what happens? Pandemic comes. [The] group's disbanded. The first efforts in March 2020, where the first $2 trillion were given out, the group wasn't established. It wasn't until 2021, and by the time they got established, there was already a couple trillion dollars out of the door."

There are plenty of important lessons for the U.S. government and for citizens and taxpayers in all of this. But arguably the most important is to focus on the big issues and not the small ones.

We cannot fix a $7 trillion federal budget or close a $2 trillion deficit by saving a few million here or even a few billion there.

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09-20-25 1443ET

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