How does government fraud become so pervasive?
Minnesota has become a high-profile example of how fraud can metastasize when federal dollars flow through state systems. A notable line from the Wall Street Journal editorial board on January 5:
More than 90 defendants have been charged in schemes to defraud Minnesota’s various welfare programs. The first indictments were filed under Joe Biden and involved a pandemic-era program for feeding children when schools were closed. But the scope of the investigations has grown as prosecutors uncover how more programs were looted.
The fraud is so pervasive that current Gov. and former vice-presidential candidate Tim Walz declined to run for a third term.
The American Experiment, which is where I have read most of the reporting on this scandal, now tracks the total level of the fraud cost at $1.5 billion. “Last month, US Attorney Joe Thompson announced that “half or more” of the $18 billion paid out by 14 Medicaid programs run by the state Department of Human Services (DHS) since 2018 had been lost to fraud,” writes John Phelan at the American Experiment.
The dam broke on this scandal last month when a 23-year-old citizen journalist named Nick Shirley posted a video of how Minnesota’s child-care subsidies are allegedly flowing to non-existent daycare centers, many of them Somali owned. Past state-level investigations have highlighted the fraud but it appears that state agencies did not do enough to address the problem. From the Washington Post editorial board:
Residents, mostly of Somali descent, targeted established Medicaid programs. They opened fake food distribution centers and autism centers to funnel resources away from the neediest.
According to Fox News, some of the funds found there way overseas and allegedly into the hands of terrorist organizations.
The common denominator is the abuse of a free flow of federal dollars into the states. Other states will now be under the microscope, too. The pervasive fraud is a reminder that states rely too heavily on complex federal-state partnerships that can drift into “money out the door” management. When there is no real accountability for the funds, there is little to do but hope that those responsible are held accountable, assuming they are caught. And if money is sent overseas, it’s near impossible to recover any of the funds. In the end, the biggest loser is the American taxpayer and the truly needy those programs are intended to serve.
—Ray Nothstine
— The Federalism Beat