The door is open for Musk's DOGE to achieve a quick win: Slashing billions of dollars in fraud in federal programs like Medicare

• The government lost billions of dollars to fraud and improper payments last year.

• Elon Musk and Vivek Ramaswamy have indicated they'll crack down on fraud through DOGE.

• Some policy experts are optimistic about cutting fraud by upgrading data and technology systems.

Elon Musk and Vivek Ramaswamy have an opportunity to take on fraud in government programs once President-elect Donald Trump takes office.

Musk and Ramaswamy are tasked with leading the Department of Government Efficiency, or DOGE, an advisory group that aims to reduce government waste and slash spending. Musk set a goal of identifying $2 trillion to cut from the federal budget.

One of Musk and Ramaswamy's aims for DOGE could win early bipartisan support: rooting out fraud in federal programs like Medicare. In a recent interview, Ramaswamy told CNBC that "the dirty little secret is that many of those entitlement dollars aren't even going to people who they were supposed to be going to in the first place."

"There are hundreds of billions of dollars of savings to extract" through basic fraud prevention measures, he said.

Musk shared that sentiment, posting on X in November: "The sheer magnitude & audacity of government fraud is mind-blowing!"

Data from the Government Accountability Office showed that government agencies have made about $2.7 trillion in improper payments since 2003, and in fiscal year 2023, the GAO estimated agencies made $236 billion in improper payments. Notably, those improper payments include other categories than intentional fraud, like administrative errors, Orice Williams Brown, the GAO's chief operating officer, told Congress in September.

"While all fraudulent payments are considered improper, not all improper payments are due to fraud," Brown said.

The top impacted agencies were Medicare and Medicaid, which the GAO said had $51 billion and $50 billion in improper payments, respectively, followed by pandemic programs, including the Paycheck Protection Program.

Some researchers told Business Insider that DOGE could make the most progress if it identifies effective solutions to cut waste, such as system modernization and improved data analysis, areas where Ramaswamy and Musk could leverage their Silicon Valley tech experience.

Both fraud and improper payments have been difficult for the government to address because of "outdated technology and a limited focus on program integrity," Linda Miller, cofounder of the Program Integrity Alliance — a group that focuses on fraud prevention in the government — told BI.

"You need to use advanced technology and data in order to really move the needle," Miller said. "And the government is not using advanced technology and data to solve this problem."

Jetson Leder-Luis, an assistant professor at Boston University and researcher on government fraud, told BI that DOGE could pursue "a lot of low-hanging fruit ideas" to combat fraud in big industries like healthcare.

"I think DOGE has the opportunity to make big strides on fraud," Leder-Luis said, adding that if Musk and Ramaswamy could push to boost enforcement funding and create enhanced data pipelines, "they have a major opportunity to save tens of billions of dollars."

The Trump transition team did not immediately respond to a request for comment from BI.

How government programs make way for fraud

Miller and Leder-Luis said the government hasn't been successful in implementing widespread fraud intervention in recent decades because of a lack of resources and staff to investigate fraud and a failure to modernize data and technology systems.

The GAO found that the government's annual financial losses from fraud were between $233 billion and $521 billion, based on data from fiscal years 2018 through 2022.

Miller pointed to the pandemic as the "perfect storm" for fraud, with the Paycheck Protection Program and disaster loan programs as key examples. Miller said that with so much aid available and limited government oversight during a national emergency, fraud was easier to go undetected; some of the programs allowed individuals to self-certify their loan applications, paving the way for misrepresentations.

"The lack of modernization of our digital technology at the state government level was a real hindrance to fraud prevention during the pandemic," Leder-Luis said.

While politicians and the media have often focused on — and in some cases demonized — individuals for "welfare fraud," Miller said "large-scale fraud schemes" are the real problem, and they cost the government millions of dollars. For example, the FBI opened an investigation into a scheme that Medicare officials said defrauded the program out of $3 billion after some companies billed the program for catheters patients never requested or used.

Lawmakers and the Department of Justice have worked to take action over the past years to address fraud, including with the federal Pandemic Response Accountability Committee that oversaw pandemic-era programs. Still, Miller said that while agencies are focused on getting benefits to the beneficiary, there still isn't enough attention on ensuring benefits are going to the right person.

"That's the kind of thing that I think really angers Americans," Miller said. "You wonder, 'What are your tax dollars going to if they're not stopping that kind of fraud?'"

Where DOGE can play a role

Miller said DOGE could look for some quicker fixes, such as pushing to modernize IT systems or to invest more resources into fraud detection.

"It can be very helpful to have a private sector lens come in and look at this," Miller said, which is why Musk and Ramaswamy's backgrounds could be useful in introducing new technology to government systems.

However, she said the DOGE leaders would have to convince Trump and Congress to provide some up-front investment. Modernizing technology won't come without costs.

The GAO's Brown also outlined recommendations for federal agencies to better prevent fraud, including using external data from third parties to verify information Americans provide on loan and insurance applications.

With Republicans soon holding control of both Congress and the White House, DOGE's recommendations to Trump and lawmakers could have an easier path to passage. Addressing fraud has also seen Democratic support; Rep. Jamie Raskin introduced the Government Spending Oversight Committee Act in April, which would give federal inspectors general tools to combat fraud across major funding bills.

Some lawmakers and policymakers are skeptical of DOGE's approach. The US spent $6.75 trillion in fiscal year 2024, data from the Treasury Department showed, and it wouldn't be as simple as the DOGE leaders have said to ax that spending, lawyers told BI.

While administrative law requires a lengthy process to rescind regulations in federal agencies, Musk and Ramaswamy previously said they would recommend a list of regulations that Trump could "immediately pause." Some lawyers previously said the process is a lot more complicated, and the administration would likely face legal hurdles if they pursued that route.

Musk and Ramaswamy are hardly the first to suggest cuts to government spending. Former President Ronald Reagan's Grace Commission, aimed at eliminating waste and inefficiency in the federal government, eliminated $22 billion in social welfare programs, which were offset by his tax cuts and defense spending.

Still, Leder-Luis said, what DOGE determines as "waste" is up for interpretation, whereas fraud is illegal, and there's support across the aisle to take that on.

"If we lose $50 billion a year to fraud in just the healthcare system alone, that's ultimately paid for by us," Leder-Luis said. "There are so many things that people want the government to be able to pay for that we all think are good and valuable, like better roads and schools. And when we say, 'I'm sorry, we can't afford that,' well, we are affording healthcare fraud instead."

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