DOGE Is Missing $2 Trillion in Healthcare Waste – The American Spectator | USA News and PoliticsThe American Spectator

When President Donald Trump formed the Department of Government Efficiency (DOGE), he chose Elon Musk to lead the charge. The mission: eliminate $2 trillion in federal waste to help balance the bloated budget. When Musk’s 134-day tenure ended, DOGE claimed to have found “hundreds of billions” in waste. NPR suggested that the number would be closer to $2 billion. The House of Representatives just passed a bill claiming $9.4 billion in DOGE savings.

Whatever the final amount, it’s a long way from the $2 trillion target. But there’s one place DOGE hasn’t touched, and it’s where more than $2 trillion in waste is hiding in plain sight: the U.S. healthcare system.

Waste, as defined in management terms,  is “use or expenditure that is careless, extravagant, or to no purpose.”

In healthcare, the end user is the patient. Money that doesn’t result in better access to care or improved outcomes is wasted. And based on well-established data, the amount of wasteful spending in American healthcare likely far exceeds $2 trillion per year.

In 2024, the U.S. spent $4.8 trillion on its healthcare system. A 1999 study found that 31 percent of healthcare spending went to regulatory overhead. After the Affordable Care Act (2010), that share climbed to at least 50 percent. That means about $2.4 trillion went not to nurses or doctors but mostly to waste for what we call BURRDEN — bureaucracy, unnecessary rules and regulations, directives, enforcement, and noncompliance activities.

Between 1970 and 2020, the number of practicing U.S. physicians rose by about 100 percent. Over that same period, the number of healthcare bureaucrats exploded by more than 4,400 percent! The result wasn’t better care — it was less access. BURRDEN siphons resources away from providers and burdens them with compliance tasks that reduce their time with patients and drive doctors out of medicine. (RELATED: Protect Healthcare for the Most Vulnerable)

Many reforms could reduce the waste of both money and time caused by the federal healthcare bureaucracy. Three such reforms are the repeal of employer-sponsored health insurance, the consolidation of medical savings accounts, and federal Medicaid block grants to states.

Here’s how it would work. Under the current FMAP (Federal Medicaid Assistance Percentage) model, the more a state spends on Medicaid, the more it receives in federal matching funds. This open-ended structure creates a perverse incentive to over-enroll and overspend. For instance, when California added 700,000 illegal aliens to its Medi-Cal program, it triggered a $6.2 billion shortfall that had to be backfilled by taxpayers.

By contrast, an unrestricted block grant would give each state a fixed amount of federal funding annually. That amount could be adjusted based on inflation, but it would be predictable and capped. Most importantly, states would gain the flexibility to design and administer their Medicaid programs according to the unique needs of their residents, without the shackles of one-size-fits-all federal mandates. (RELATED: Make Medicaid Great Again)

Block grants would eliminate the incentive to expand Medicaid rolls to increase federal payments. It would also allow governors and legislatures to innovate, finding locally appropriate solutions that improve care and reduce costs. States could fund direct primary care clinics, wraparound services, or tailored benefits based on community health priorities without waiting on Washington’s permission, which is typically withheld.

Unrestricted block grants would reduce BURRDEN. They would eliminate layers of wasteful spending on federal micromanagement and compliance, allowing resources to flow directly to patients and providers. They would also help Congress by enabling Medicaid allocations to be forecasted and constrained, making federal budgeting more rational and responsible.

Beyond block grants, we’ve long argued for additional reforms like consolidating medical savings accounts into a single, no-limit Health Savings Account (HSA) and ending the outdated practice of employer-sponsored health insurance, which distorts the market and strips individuals of choice. In 2023, the average worker lost $23,968 in compensation to employer-paid health insurance premiums. That money should go directly to workers, tax-free, in an HSA they control.

But even if DOGE did nothing else, simply targeting Medicaid’s flawed funding model and embracing block grants would represent a giant leap toward that elusive $2 trillion goal.

The BURRDEN in healthcare is what the military might call a target-rich environment. If DOGE and Congress are serious about cutting costs, they should start with the biggest and most obvious source of federal waste — one that also happens to be one of the easiest to fix — simply empower patients.

READ MORE from Waldman and Ginn:

Rage Against the (Healthcare) Machine

Federal Bureaucracy Is Biggest Healthcare Rent-Seeker

Deane Waldman, M.D., MBA is professor emeritus of pediatrics, pathology, and decision science; former director of Center for Healthcare Policy at Texas Public Policy Foundation; former director of New Mexico Health Insurance Exchange; and author of 13 books, including the latest with Dr. Ginn, Empower Patients–Two Doctors’ Cure for Healthcare. Follow him on X.com @DrDeaneW or contact via www.deanewaldman.com. 

Vance Ginn, Ph.D., is president of Ginn Economic Consulting, host of the Let People Prosper Show, and previously chief economist of the first Trump White House’s Office of Management and Budget. Follow him on X.com at @VanceGinn.