What Trump And Musk Really Mean When They Talk About ‘Efficiency’

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Elon Musk made news this week when he said his next target for spending cuts are the big federal entitlement programs like Medicare and Social Security.

“The waste and fraud in entitlement spending, which is all of the ― most of the federal spending is entitlements, that is the big one to eliminate,” the tycoon and top White House adviser said in a Fox News interview that aired Monday. “That’s the half trillion, maybe six, 700 billion a year.”

The statement was confusing, and sparked an instant debate over exactly what Musk intended to eliminate. But even if you give him the most generous interpretation, that he’s simply eying somewhere between $500 and $700 billion in annual savings from entitlements, you might be alarmed. And understandably so.

Combined annual spending on Medicare, Medicaid and Social Security was a bit more than $3 trillion last year. Additional mandatory spending, a category that includes programs like food assistance, was about another $1 trillion. Do the math and Musk’s pledge would work out to cutting these programs by at least 12% and probably a lot more, which would be well beyond any reasonable definition of waste or fraud.

“There is not $500 to $700 billion of waste in benefit programs every single year ― that number is absurdly large,” Bobby Kogan, a longtime Democratic budget analyst now at the Center for American Progress, told me this week. “There is no way to achieve that level of savings without cutting real benefits to real people.”

That doesn’t mean programs like Medicare are as efficient as they could be, Kogan made clear, or that going after waste is a bad idea. As it happens, one particularly inviting target was also in the news this week ― although neither Musk nor his putative boss, President Donald Trump, have expressed interest in going after it.

The Right Place To Look For Waste In Medicare

That target is Medicare Advantage, the private insurance alternative to traditional Medicare.

Medicare Advantage dates back to the 1990s, amid a serious debate in Washington over whether to transform Medicare from a single government health insurance program into a voucher scheme. The idea was that beneficiaries would choose from among a set of private plans, using a government-provided voucher that might or might not be enough to cover the costs.

Most Democrats wanted nothing to do with that. But plenty were open to the idea of creating a private insurance option, on the theory that some seniors and people with disabilities might like the choice ― and that the competition would spur innovation or, at least, help to drive down costs. (Similar thinking was behind the original design of the Affordable Care Act.)

Among those who supported the idea was then-President Bill Clinton, who signed off on an initial version called Medicare+Choice. Since then, the program has grown and evolved into the Medicare Advantage system, through which more than half of Medicare beneficiaries now get their health coverage.

The allure is not hard to understand. Medicare Advantage plans frequently offer extra services and benefits, which historically have included everything from eyeglasses (something traditional Medicare still doesn’t cover) to health club memberships. That can make the plans seem like a better deal.

But critics have long said the plans also have an unfair advantage, citing research showing they attract healthier beneficiaries with predictably lower medical expenses. More recently, research has focused on the way insurers can game the payment systems in ways that get them extra money from the federal government.

Just how pervasive these practices are, and whether they are even legal, has been the subject of long-running debate. Insurers, their trade groups and their allies maintain they are paid appropriately. Their plans are so popular, insurers say, because their greater efficiency allows them to offer more for less.

The government’s own accountants have consistently disagreed ― up to and including this week, when the Medicare Payment Advisory Commission (MedPAC) in its annual report said that the federal government was spending 20% more per Medicare Advantage beneficiary, relative to what it would have cost if that beneficiary had stayed in traditional Medicare.

Eliminating that differential could yield $80 billion in annual savings, or maybe even more according to the Congressional Budget Office. In theory, that would make it a perfect target for the kind of cost-cutting Musk and Trump have said they are trying to pursue.

“Medicare Advantage was supposed to save the government money,” veteran health care journalist Merrill Goozner noted in a recent edition of his newsletter, GoozNews. “Isn’t it time for taxpayers to earn a return on the two decades of overpayments to the private insurance companies that manage a growing share of Medicare?”

The Right Way To Cut That Waste In Medicare

Going after Medicare Advantage is far from an impossible task. But it would require legislative skill and attention to policy detail — not to mention raw political courage and an enthusiasm for government-provided insurance — that neither Musk nor Trump has shown so far.

Insurers would warn (as they do already) that cutting their payments would force them to scale back on benefits, or even to pull out of markets altogether. That’s bound to scare seniors already on Medicare Advantage, not to mention any members of Congress dependent on contributions from the insurance industry ― or those who might fear attack ads insurers could finance.

But the insurance companies have their own political vulnerabilities, given all the reports of their limiting or denying treatments on questionable grounds, especially in Medicare Advantage. In fact, this is widely thought to be one reason they tend to attract healthier beneficiaries: People with more serious medical needs don’t trust the insurers to pay for medically necessary care.

A determined Trump administration could certainly find plenty of allies — not just on the pro-consumer left, but even on the pro-business right. Among the organizations that have endorsed Medicare Advantage payment reductions (as part of a broader scheme to encourage more enrollment) is the right-leaning Paragon Institute, whose co-founder and president is former Trump White House adviser Brian Blase.

And there are ways to cut Medicare Advantage while insulating enrollees, according to Tricia Neuman, senior vice president at the health care research organization KFF.

“Gradual reductions in Medicare Advantage payments could be phased in to minimize the impact on enrollees,” Neuman, who may know as much about Medicare as anybody on the planet, told me this week. “The Medicare Advantage market today is fairly robust with multiple insurers competing in markets across the country, offering dozens of plans to enrollees. If payments are scaled back, insurers would have stronger incentives to find efficiencies so they could continue to attract and retain enrollees.”

But all that assumes that Trump and Musk have their eyes on waste in the entitlement programs, rather than simply the entitlements themselves. And the fine-tuned, policy-aware political approach doesn’t seem to jibe with the Trump/Musk agenda, which has taken a chainsaw as the metaphorical emblem of its approach to slashing so-called “waste.”

Some of it is a showman’s sensibility, of the kind that appeals to the publicity-hungry Trump and Musk — like appointing Mehmet Oz, a TV-famous doctor with a history of promoting Medicare Advantage, to oversee all of Medicare. And some of it is short-sighted destruction of the very things that would, ironically, help identify the fraud they claim to be targeting.

Take for example the other piece of health care news the administration made this week. As first reported here at HuffPost, on Tuesday HHS announced that it is closing six regional legal offices, reducing their number from 10 to four.

The attorneys who work in these branches are basically the in-house lawyers for the department, manning the front line for legal battles around standards, violations, and yes, fraud. Their advice is critical in guiding the way the department deals with issues like enforcement of quality standards for nursing homes and billing issues with hospitals.

HHS says the streamlined division can provide “the same geographic support for regional HHS offices at lower operating costs.” Sam Bagenstos, a University of Michigan law professor who led that division during the Biden years, was skeptical. “Firing all these lawyers won’t promote efficiency,” Bagnestos told me after the news broke. “It will just cause needless harm.”