Recent headlines from Minnesota, California, Maine, and Washington document staggering fraud in welfare and business-relief programs. The natural instinct is to frame this as blue-state mismanagement: newcomers and refugees allegedly bleeding out generous local systems. But the evidence points to a different truth. The perpetrators in many of these headline cases are not draining individual state treasuries. They are exploiting federal pipelines—Medicare, Medicaid, and Small Business Administration (SBA) programs—filled by taxes from all 50 states. The victim is the collective U.S. Treasury, not Minnesota or California alone.
Start with the money. State Medicaid and welfare programs are heavily—often mostly—funded by Washington. Minnesota’s massive “Feeding Our Future” scheme and the subsequent $9 billion fraud estimated in state-administered Medicaid services were financed not by state revenue alone, but by federal-matching dollars approved by Congress and drawn from nationwide taxpayer receipts. When an operator in the Twin Cities bilks Medicaid, the federal share of the loss drains accounts that belong to taxpayers in Montana and Mississippi as much as to Minnesotans.
The SBA scams tell the story even more starkly. California was not the only victim when federal investigators identified over $8.6 billion in suspected Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) fraud and suspended more than 111,600 borrowers in the state alone. That money originated as a congressional appropriation; it was borrowed, printed, and backed by the full faith and credit of the United States. The SBA referred 562,000 suspected fraudulent loans totaling $22 billion to the Treasury Department for collections. Treasury doesn’t belong to Sacramento or Augusta or Olympia. It belongs to all of us.
Medicare and health-care fraud compound the pattern. The 2025 National Health Care Fraud Takedown charged 324 defendants in 50 federal districts for schemes exceeding $14.6 billion in intended losses. States from Maine to Washington participated in the sweep because the fraudulent claims were submitted to, and paid by, federal Medicare trust funds and federally matched Medicaid. A provider in Seattle committing upcoding, or a clinic in Portland submitting phantom Medicare claims, is not merely stealing from Washington or Oregon. They are stealing premiums and payroll taxes contributed by workers in Ohio and Oklahoma. The geography of prosecution is localized because U.S. Attorneys work by district; the source of the stolen funds is national.
The nature of immigrant participation in certain prosecuted clusters underscores the federal—not state—nature of the theft. Many defendants in Minnesota’s Medicaid and nutrition-program fraud prosecutions were recent entrants who established shell nonprofits and bogus health-care entities. They did not target Minnesota because of its welfare magnetism alone. They targeted a program administered through a state office but underwritten by federal reimbursement formulas, using federal tax identification numbers, federal EINs, and federal loan guarantees. The spoils were wired from U.S. Treasury accounts, not Minnesota’s general fund.
The political debate usually asks why some states tolerate such fraud. The better question is why federal program architecture allows cross-border criminal networks to treat the SBA and CMS as a shared commons to poach. A fraudster in MaineCare or Washington’s state Medicaid office is billed to a 50-state treasury. A fraudulent EIDL loan approved through a California hub is Uncle Sam’s debt, not Gavin Newsom’s.
None of this absolves states of their duty to audit and verify. But it clarifies the stakes. If the public concludes that Minnesota or Maine is uniquely “ripping off” its own taxpayers, it misses the larger picture: the dollars lost were federal dollars, appropriated by Congress, borrowed against the national debt, and repaid by all Americans. The host states were the door; the vault was federal. The collective is looted.
In sum, the exposure of fraud in Minnesota, California, Maine, and Washington should be understood not as rogue states sabotaging themselves and at risk to their credit ratings, but as criminal operations—often immigrant-run, multi-state, and networked—locating weak entry points inside states to siphon the shared resources of the entire nation. The rip-off is not local. It is national.
Editorial comments expressed in this column are the sole opinion of the writer
