• The government lost billions of dollars to fraud and improper payments last year.
• Both Musk and Ramaswamy have indicated they'll crack down on fraud through DOGE.
• Some experts told BI they're optimistic about action on fraud, but the DOGE leaders have to be willing to invest in the issue.

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 new Department of Government Efficiency, or DOGE, which seeks to reduce government waste and slash spending. Musk set a goal of cutting $2 trillion in annual outlays.

One of Musk and Ramaswamy's aims for DOGE could lead to a relatively early win with bipartisan support: eliminating 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, said in a September testimony to Congress.

"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.

Experts told Business Insider that there's potential for DOGE to make progress on the issue if they focus on effective solutions like system modernization and improved data analysis, an area 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Both fraud and improper payments have been difficult for the government to address because of "outdated technology and a limited focus on program integrity," Linda Miller, cofounder of the Program Integrity Alliance — a group that focuses on fraud prevention in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 they 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

The government has been unable to implement widescale 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, according to Miller and Leder-Luis.

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 all that aid being available, coupled with limited oversight at the government level during a national emergency, made it easier for fraud 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.

There have been a number of instances where individuals attempt, and sometimes succeed, to game the system and score welfare benefits that they're not entitled to. But, Miller said, the bigger concern is beyond the individual circumstances; it's the "large-scale fraud schemes" that have taken millions of dollars from the government. 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 she expects DOGE to look for "quick wins" soon after Trump takes office. These could include modernizing IT systems and investing more resources into fraud detection. A critical point DOGE will have to contend with is that cracking down on the cost of fraud would require some upfront investments.

"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 two DOGE leaders have to be willing to invest in new fraud detection systems because, even amid their goals to slash spending, modernizing technology is not going to be free.

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 would likely see 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.

To be sure, some lawmakers and experts 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 DOGE leaders would likely face legal hurdles if they pursued that route.

Musk and Ramaswamy also aren't 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 that ended up being 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."