The flawed policies driving Medicare waste — and how to fix them

Medicare hemorrhages about $60 billion a year in waste, fraud, and abuse — money lost from a program serving 69 million Americans. Fraud reflects deliberate deception, but much of Medicare’s waste stems from flawed policy and perverse incentives.

The Trump administration is on the warpath, taking unprecedented administrative steps to curb this abuse of taxpayers’ dollars. Congress has the chance to complement these efforts by enacting reforms that would generate economic efficiencies and reduce waste in the giant program.  

Fraud is greater in traditional, fee-for-service Medicare than Medicare Advantage, the alternative system of competing private health plans. Both programs, however, generate waste. Of all program payments, according to a 2025 government analysis, “improper payments” are greater in traditional Medicare ($28.8 billion) than Medicare Advantage ($23.7 billion). Such payments are unjustified by law or regulation.  

Traditional Medicare’s improper payments stem from its centralized payment system, which uses price controls. This system often leads