What Kentucky’s Audit Reveals About the Rest of the Country
Last week, Kentucky State Auditor Allison Ball testified before the House Oversight Subcommittee on Government Operations, sharing testimony that deserved far more attention than it received.
Ball reported a Long-Term Care payment error rate of 47.5 percent, alongside 28.5 percent for the Medicare Savings Program, 9.7 percent for TANF, and 5.3 percent for MAGI Medicaid.
Unfortunately, this issue is not limited to just Kentucky.
Not Just a Kentucky Problem
State-administered federal programs like Medicaid have long operated with outdated eligibility systems, fragmented data and limited capacity for real-time verification, all under often arcane and overly burdensome rules and policies. Auditors have routinely found the same problems in other states across the country, including improper payments, weak internal controls, and backlogs in mandatory facility inspections. Despite being on the front lines of program administration, most states lack the modern tools, skilled personnel, and procurement speed to root out error and fraud at scale. Legacy systems built decades ago were never designed for today’s volume or sophistication of bad actors. In other words, the issueThe deeper issue, however, is structural and it can best be addressed by modest, structural changes directed by Congress.
The technology and expertise to fix this exist today. What is missing is the policy framework that lets states access them quickly. Statutes dating to the 1970s still restrict eligibility determinations to full-time public employees in certain programs, which means states cannot quickly bring in outside specialists or technology even when they need to. Implementation of the recently passed One Big Beautiful Bill is creating significant new challenges in how states administer Medicaid and other major programs. States that already struggle to keep basic eligibility and payment integrity under control will now face added implementation pressure. These include new guardrails and reporting requirements and new incentives for efficiency. If states aren’t able to lower their error rates to below the new national threshold established by OBBB, they will trigger cost sharing clauses, forcing them to shoulder 15% of the costs. States across the country are now scrambling to ensure their error rates fall below this threshold. As but one example, Florida, which could face a $200 million fine if they fail to get a handle on the problem.
If states like Florida aren’t equipped with the flexibility and support to tackle these challenges, including partnering with proven private sector partners that have eligibility verification specialists, fraud-detection platforms, and cutting-edge data analytics tools that can flag suspicious patterns in real-time, conduct comprehensive audits to identify problems, and help states modernize the archaic systems that are costing the U.S. billions of dollars, error rates are nearly guaranteed to rise instead of declining. Moreover, all of this can and should be done in a manner which also ensures that qualified beneficiaries receive needed support in a timely manner.
We therefore must embrace the use of proven and reputable contractors.
Reconciliation Can Help Fix This
Congress has the responsibility to act before these error rates become the new normal, and the reconciliation legislation currently moving through the House is the right moment to pair the eligibility reforms with the verification infrastructure needed to make them work. The fraud prevention package should, at a minimum, give states clear authority to contract with qualified private-sector specialists for program integrity work, expand real-time data access so states can verify income and residency before payments go out rather than after, and establish accountability standards for states whose error rates remain above acceptable thresholds.
The same structural failures that produced a 47.5 percent Long-Term Care error rate in Frankfort are present in statehouses across the country, and Congress now has a narrow window to act before the One Big Beautiful Bill's new cost-sharing requirements turn today's administrative failures into tomorrow's fiscal emergencies. We have the tools to fix the problem. What we need is a policy framework to equip states with the resources they need to access and implement those tools.
As reconciliation legislation advances, Congress has a rare opportunity to get this done. Otherwise, the taxpayers who fund these programs will once again be responsible for footing the bill.