Able Americans

Waste, fraud, and abuse aren’t just budget problems—they’re human ones.

By Leslie Ford, Sara Hart Weir, and Rachel Barkley

Medicaid was created in 1965 to ensure that Americans who were poor, elderly, or disabled could access basic health care. But for Americans with disabilities, Medicaid’s early design had a serious flaw: It was built around institutions.

For decades, people with significant disabilities often had to leave their homes, families, jobs, schools, churches, and communities simply to receive the care they needed. The system’s message was clear: support was available, but only if people surrendered the ordinary rhythms of daily life.

That began to change because of a little girl named Katie Beckett.

Katie was born in 1978 and contracted viral encephalitis as an infant, leaving her partially paralyzed and dependent on a ventilator. She lived in an Iowa hospital—not because her parents could not care for her at home, but because Medicaid would pay for institutional care, not home care. Her story reached President Ronald Reagan, who publicly intervened in 1981 and directed federal agencies to find a better solution.

That same year, Congress created the Section 1915(c) Home- and Community-Based Services (HCBS) waiver authority, allowing states to use Medicaid dollars to support people in their homes and communities as an alternative to institutional care. Medicaid’s HCBS pathway became available in 1983.

The idea was both practical and humane: people with disabilities and older Americans should not be forced into institutions simply because government funding was structured that way.

Today, HCBS is one of the most important sources of daily support for Americans with disabilities. It can provide personal care, respite for family caregivers, supported employment, assistive technology, home modifications, case management, behavioral supports, and other services that private insurance generally does not cover.

For millions of people, HCBS is the difference between living in a facility and living at home. It is the difference between isolation and community. It is the difference between surviving and participating.

That is why fraud, waste, and abuse in HCBS must be taken seriously. When Medicaid dollars are diverted, misspent, or poorly overseen, taxpayers are harmed—but so are the individuals with disabilities and families the program exists to serve.

Recent federal scrutiny with the Fraud Taskforce and investigative journalist discoveries of fraud in home health care in Ohio has made this urgency clear.

CMS has increased attention on states with Medicaid spending patterns dramatically out of sync with others, including investigations into fraud, waste, and abuse in states such as Minnesota, Maine, California, and New York. In Minnesota, federal officials moved to defer $243 million in matching funds, citing concerns that the state failed to adequately identify, prevent, and address fraud, waste, and abuse.

These problems are not abstract. In one Minnesota case, Janelle “Sky” Hansen, a young woman with severe autism, was supposed to receive Medicaid-funded housing and daily support services. Her provider was paid public dollars intended for her care but reportedly stopped paying her rent and failed to deliver services. Sky was evicted and spent months homeless. She did nothing wrong. The system and fraudulent providers failed her.

That is the human cost of weak oversight.

It is important to distinguish among fraud, waste, and abuse. Fraud is intentional deception—billing for services never provided or creating fake accounts to steal Medicaid funds. Waste is spending that may be technically legal but misdirects scarce resources away from those with the greatest needs. Abuse includes unsound provider or fiscal practices that drive unnecessary costs without improving care.

Fraud, waste, and abuse are usually not caused by individuals with disabilities or their families. It is enabled by weak oversight of providers, poor financing incentives in Medicaid policy, complex government contracting arrangements, and providers or intermediaries who exploit vulnerable systems.

HCBS programs are especially vulnerable because they are administered through layers of state agencies, contractors, fiscal intermediaries, case managers, and providers. Families often must navigate a maze of eligibility rules, compliance requirements, redeterminations, and provider networks. Meanwhile, states provide no transparent data on who is being served, what services are authorized, what providers are billing, and whether care is actually delivered.

This is particularly troubling because HCBS serves people with significant needs, while hundreds of thousands remain on waitlists. Since 2016, national HCBS waitlists have hovered around 700,000 people, with an average wait of roughly 40 months. The largest share are individuals with intellectual or developmental disabilities. Some states screen for need before placing people on a waitlist; others do not. Some maintain public information; others leave families in the dark.

HCBS remains far less expensive than institutional care. In 2023, HCBS cost about $17,369 per recipient, compared to about $55,133 per institutional recipient. It is also overwhelmingly preferred by individuals and families. But rising costs without adequate outcome measurements should concern policymakers. Every dollar lost to fraud, waste, or abuse is a dollar not going to a person waiting for services, a family caregiver in crisis, or an individual trying to live independently.

The answer is not to get rid of the HCBS waiver program. It is to preserve President Reagan’s vision by strengthening the integrity, oversight, and transparency of the system.

Here are 6 ways we can fight the fraud problem:

1. Create and Enforce Transparency: States should be required to publish transparent HCBS dashboards showing waiver waitlists, eligibility criteria, individuals served, provider directories, service rates, and per-person expenditures. Families should know what services are available, and taxpayers should know where funds are going.
2. Increase Federal Oversight: CMS should increase oversight of state waste, especially where eligibility thresholds are broad, spending is far above national norms, or new service categories lack clear standards.
3. Utilize Data for Consistent Fraud Detection: States should use consistent fraud detection systems, including predictive analytics, claims review, electronic visit verification, and independent audits to identify billing spikes, duplicate claims, and high-risk providers.
4. Cut Out the Middle Men: Recipients with severe disabilities, particularly who face waitlists and provider shortages, should be empowered to direct their own care. Individuals and families should be able to access electronic visit verification records, correct inaccurate provider logs, and choose care arrangements that preserve autonomy and dignity.
5. Measure and Report Outcomes: States should report whether people actually receive authorized services, whether waitlists prioritize the highest-need individuals, and whether HCBS improves stability, independence, health, and community participation.
6. Ensure Integrity of Third-Party Providers: Medicaid funds intended for care should not be used for lobbying, forced unionization, excessive administrative profits, or political influence. Provider ownership and related-party arrangements should be transparent.

Fraud must be rooted out. Families and people with disabilities should not be uprooted with it.

HCBS is one of Medicaid’s most humane innovations. It corrected a system that once forced people to spend their lives in institutions to receive care. But preserving that promise requires accountability. Policymakers must target fraud, waste, and abuse where the risks are real—among weak systems, poor oversight, and bad actors—without placing new burdens on the people HCBS exists to serve.

The goal should be simple: protect taxpayers, strengthen trust, and ensure that Medicaid dollars reach the people with disabilities and older Americans who need support to live with dignity in their homes and communities.

Leslie Ford, Sara Hart Weir, and Rachel Barkley serve with the National Center for Public Policy Research’s Able Americans project—Leslie and Sara as Senior Fellows, and Rachel as Director. Able Americans is a nonprofit, nonpartisan think tank project dedicated to advancing innovative, free-market solutions that empower Americans with intellectual, developmental, and physical disabilities.