States would do more to police improper payments if they had better financial incentives to do so.
There’s a simple way to lower healthcare costs without requiring Americans to bear unacceptable trade-offs: prosecute Medicaid fraud and put the recovered funds back into citizens’ pockets. In recent weeks, the Trump administration has been focused on this, but long-term progress requires changing the misaligned incentives between federal and state government.
The underlying problem is that Medicaid rewards states with more money when they waste money. Here’s the solution: a deal with the federal government that allows states that combat Medicaid fraud to keep a greater share of what they save. If I am elected governor of Ohio in November, my state will be ready to commit in January.
Consider the math facing a governor today. In Ohio, about 65% of every traditional Medicaid dollar comes from the federal government. That means for every dollar a state recovers by hunting down a fraudulent home health agency or a phantom hospice, less than 35 cents return to the state treasury. The rest goes back to Washington.
Now reverse the math. On Jan. 8, 2021, the first Trump administration approved an agreement that for the first time let a state, Tennessee, keep a share of the savings it generated through better management of its Medicaid program. By late 2025, TennCare’s “shared savings” had exceeded $1 billion, money the state has used for rural health, coverage for children and pregnant women, and no-interest disaster-relief loans for counties hit by 2024’s Hurricane Helene. Dollars recovered from fraudsters became dollars spent on care for law-abiding families.
A more tailored version can focus on fraud recovery alone, creating incentives for state and local law-enforcement agencies to investigate and prosecute the criminal misuse of Medicaid dollars. The increased proceeds can then be reinvested in healthcare.
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