Federal Budget Bill Successfully Realigns State Incentives to Reduce Waste and Fraud
Source: Christopher Jacobs. "Trump's Big, Beautiful Bill Is Reversing Rampant State Waste." April 24, 2026. thefederalist.com
The Gist
States weren't stopping fraud in federal programs because they didn't have to pay for it - Washington picked up the tab either way. A new law changes this by making states pay penalties when fraud happens, which should motivate them to actually crack down on waste.
Conclusion
The federal budget reconciliation bill's provisions will effectively reduce state waste, fraud, and abuse by realigning incentives that previously encouraged states to ignore these problems
Premises
- States previously had little incentive to crack down on fraud because the federal government paid most program costs regardless of fraud levels
- Kentucky's audits revealed massive waste including $836 million in duplicate Medicaid payments and numerous other fraud indicators
- Kentucky reduced its SNAP error rate from 9.1% to 3.5% in one year when incentivized, proving rapid improvement is possible
- The new budget bill creates specific requirements and penalties including quarterly death file checks, duplicate enrollment prevention, and error rate penalties
- These new provisions directly address the documented problems by requiring states to share costs when fraud occurs
Assumptions
- Financial incentives are the primary driver of state behavior regarding fraud prevention
- States have the capability to implement anti-fraud measures but choose not to without proper incentives
- Kentucky's problems are representative of nationwide issues
- The specific provisions in the budget bill will be effectively implemented and enforced