When fraud becomes a political weapon
Fraud has been in the news lately, and increasingly the headlines have one thing in common: they are distinctly partisan. The Department of Labor warned all fifty governors to clean up unemployment insurance fraud, but the public announcement cited problems specifically in California, Illinois and New York, three states where Democrats control the governments.
The Justice Department announced a lawsuit aimed at New York health officials over an alleged scheme to rig a $10 billion Medicaid homecare contract. And Minnesota Attorney General Keith Ellison walked out of a Fox News interview rather than answer questions about Vice President Vance’s referral of him and Governor Tim Walz to the DOJ.
The fraud in question is very much real, and a serious problem. New York’s homecare vendor allegedly billed at inflated rates after a sham bidding process. Minnesota’s Feeding Our Future scandal cost taxpayers hundreds of millions of dollars. Unemployment insurance fraud is real and well-documented by the Government Accountability Office.
But a pattern is emerging that should concern anyone who actually wants to solve this problem: The focus is on states that vote a certain way.
It would be one thing if the data backed up the targeting, but it doesn't. As the AP noted in its coverage of the Labor Department's letters, there doesn't appear to be a strong connection between which party governs a state and how much fraud or overpayment occurs. Unemployment insurance fraud nationally ran between 11 and 15 percent of pandemic-era payouts, a problem rooted in identity verification and eligibility systems that exist in all fifty states, under governors of both parties.
In fact, the administration’s own enforcement record undercuts the selective framing. Two months before suing New York, the administration acknowledged it had made a significant factual error in justifying its fraud probe into the state’s Medicaid program, an error that surfaced in the middle of a campaign aimed almost entirely at states it does not govern.
Some of these investigations may well uncover real misconduct. If they do, that misconduct should be exposed and prosecuted, regardless of which party is embarrassed by it.
Fraud prevention turns dangerous when it stops functioning as a governance mission and starts functioning as a partisan instrument, because the incentive flips. Officials in the crosshairs have more reason to deny a problem than to fix it. If acknowledging a fraud problem in your state hands ammunition to the opposing party, the rational response is what you saw from Ellison— minimize the impact, dispute the number, attack the messenger. That's worse than doing nothing, because now warning signs get suppressed rather than just unaddressed.
Instead of asking “Where are the vulnerabilities?” people start asking
“Which side can be blamed?”
Fraud rings don’t care whether a state votes red or blue. Organized criminals target weak controls, fragmented oversight, and verification gaps. They go where the system is easier to exploit than to defend, and those gaps exist everywhere, not just in the four states currently making headlines.
New York’s homecare fraud is not fundamentally a New York story. It is a vendor-oversight story, a story about what happens when a state hands a single contractor control of a $10 billion program with no mechanism to catch self-dealing in real time. Minnesota’s Feeding Our Future scandal is not fundamentally a Minnesota story. It is a payment integrity and subrecipient oversight story. Unemployment insurance fraud is not a red-state or blue-state problem. It is a verification problem, and it shows up everywhere because every state runs roughly the same outdated systems.
Yet the national conversation increasingly treats fraud as evidence of partisan failure rather than institutional weakness. The partisan infighting consumes all the oxygen, leaving little left for a conversation about what actually needs to change.
Every fraud scandal produces a brief window of political will. Lawmakers and administration officials suddenly start paying attention. Congressional committees schedule hearings and agency heads send letters to governors. That attention is a scarce resource, and right now nearly all of it is being spent on intergovernmental lawsuits, and cable news confrontations rather than prevention.
Prosecution and litigation are the slowest and most expensive way to address fraud, because by the time a case is filed, the money is usually gone. The New York lawsuit proves the point. The state’s home health program had already been running for years under a contract with no real-time mechanism to catch a vendor billing above its allowed rate. The actual fix is upstream. Pre-payment detection systems that flag fraudulent billing and applications before the funds go out the door would have caught that pattern in months, not years. Banks have run real-time transaction screening for over a decade. Most federal grant programs still rely on post-payment audits and referrals to law enforcement, the fraud equivalent of installing the alarm after the house has already been emptied.
That is where the energy from these scandals should go— toward funding and mandating the analytics infrastructure that would let agencies stop the next homeware fraud or the next Feeding Our Future before the checks clear, regardless of which party runs the state cashing them.
Every hour spent proving Tim Walz or Kathy Hochul should have caught this sooner is an hour not spent asking why no state, of either party, has a system that flags a vendor billing above its contracted rate before the money moves. That is the only question that prevents the next ten-billion-dollar program from becoming the next scandal.
Photo by Kelly Sikkema on Unsplash. Article first posted on GovIntegrity.