President Donald Trump aims to reshape the federal government in part by dramatically cutting spending. Health care is an appealing target for cost-cutting because it accounts for about 30 percent of the federal budget.
The United States spent more than $1.8 trillion on Medicare, Medicaid, and other health programs in 2023. The budget deficit was $1.7 trillion that year.
Medicaid alone accounts for $616 billion in federal spending, or 8 percent of the federal budget.
Medicaid is a federal and state program providing health coverage for about 80 million low-income Americans. States operate the program with oversight from the federal government, which reimburses states for a certain percentage of the amount spent for each beneficiary.
In 2022 the total cost of the program was $804 billion. States paid 29 percent of that amount, making it the largest single expense for all states.
As federal budget negotiations are now underway, some lawmakers have hinted at changes to Medicaid, such as placing a cap on the amount reimbursed per person, cutting the rate of reimbursement to states, or adding work requirements for some beneficiaries.
Meanwhile, Trump has said there will be no alterations to Medicaid—or Medicare and Social Security—except to root out fraud.
So how much fraud, waste, and abuse exists in the Medicaid program?
It’s difficult to determine because much fraud goes undetected.
Based on data from the Government Accountability Office (GAO) and the Office of Management and Budget (OMB), it appears that less than 3 percent of the estimated total of fraudulent payments are proven by a judicial verdict. Some suspected cases are resolved by out-of-court settlements, but much fraud appears to go undetected.
Beyond fraud, Medicaid loses billions through improper payments each year. In 2024, Medicaid made improper payments totaling more than $31 billion dollars, the Department of Health and Human Services (HHS) reported.
Most of those payments resulted from clerical errors. However improper payments include all types of erroneous payments, including fraud, abusive billing, and waste.
The Epoch Times examined data on fraud and improper payments in the Medicaid program and interviewed several current and former staff members including the heads of Medicaid Fraud Control Units across the country.
They spoke on the condition of anonymity, as they were not authorized to speak to the media, about how fraud and abuse impact the program and the low-income patients in need of medical care.
We learned about the extent of the problem, how much it may be costing, and how it hurts the people who need help the most.
Fraud
In Medicaid, as with all federal payment systems, fraud is a fact of life.“No area of the federal government is immune to fraud,” a GAO report on the subject states. “We estimated that the federal government could lose between $233 billion and $521 billion annually to fraud.”
An OMB report indicates an average loss of $6.5 billion to fraud over the last eight years, but that includes only confirmed cases determined by a court. It does not include suspected cases or cases settled out of court.
Given the wide gap between confirmed and estimated losses, it is difficult to determine the amount of actual fraud in Medicaid or any government program.
Yet it exists.
States enforce fraud cases across a variety of provider types, including doctors, mental health professionals, and providers of laboratory services, home care, durable medical equipment, and long-term care.
Billing for services not rendered may be the most common type of fraud, sources told The Epoch Times.
One state lost an estimated $2 billion to Medicaid fraud over the last five years, a staff member in that state’s attorney general’s office told The Epoch Times.
“They were preying on individuals who were in need of behavioral health services,” the staff member told The Epoch Times.
The alleged perpetrators were luring people to live in substandard conditions and billing Medicaid for treatments. “They were, in fact, providing them with alcohol and a place to live, but not much else,” the staffer said. Similar schemes, often preying upon homeless people, have been perpetrated in other states.
Prescription drug kickback schemes are also common.
Mississippi, along with 37 other states and Puerto Rico, reached a settlement in an alleged kickback scheme involving Biohaven Pharmaceutical Holding Company Ltd., a wholly owned subsidiary of Pfizer, Inc.
Pfizer agreed to pay $59.7 million, plus interest, to settle allegations that Biohaven submitted false claims to Medicaid and other federal programs by offering cash and other inducements to health care providers.
Four pharmacists received prison sentences for their role in an international scheme to bill Medicaid and Medicare for prescription drugs that were never delivered. The fraud resulted in a loss of $13 million.
Hospice fraud is another common scheme, The Epoch Times has learned. Patients are enrolled in a hospice program without their knowledge. When the benefit runs out, the patient’s billing is moved to another “hospice” owned by the same provider.
Residential facilities such as nursing homes may commit fraud by accepting Medicaid funds but providing inadequate care for Medicaid patients.
A Louisiana company owning nine nursing homes in four states agreed to a $750,000 settlement with the federal government and Maryland in 2014 to dispose of charges that it billed Medicaid and Medicare for “materially substandard and/or worthless skilled nursing facility services.”
Improper Payments
In 2024, Medicaid made improper payments totaling more than $31 billion dollars, the Department of Health and Human Services (HHS) reported. That includes overpayments, underpayments, and cases in which it is not known if the claim was payable.About 74 percent of those payments lacked the required documentation, such as the provider’s National Provider Identifier or an indication that the patient had been recertified for eligibility after one year.
Yet more than $5 billion was paid for services that the patients were not eligible for or to providers who are not enrolled in the Medicaid system.
The Epoch Times requested clarification from the Centers for Medicare and Medicaid Services (CMS) on the percentage of 2024 improper payments that were determined to be payable based on the later submission of required documentation. No response was received by the time of publication.
The rate of improper payments dropped to 5 percent in 2024, down from 8.6 percent in 2023 and significantly lower than a high of nearly 22 percent in 2021.
The rates from 2020 to 2023 were affected by a COVID-era waiver of the requirement that the eligibility of each Medicaid patient be redetermined annually. State compliance with program requirements also improved in 2024, according to CMS.
The federal government made more than $161 billion in improper payments in 2024, of which more than $7 billion were confirmed cases of fraud, according to data from the OMB.
Obstacles
Medicaid Fraud Control Units recovered $1.2 billion in 2023, which made a return of $3.35 for every dollar spent, according to the Office of Inspector General (OIG). Investigators say they could do much more if more resources were available.The lack of manpower hampers both detection and investigation. Most agencies rely heavily on tips, complaints, and referrals from other government agencies to uncover cases of fraud. Some investigative units have in-house data analysts or use data services from other state agencies to detect fraudulent billing.
Once identified, investigators must prioritize which cases to pursue due to limited resources. Some cases are pursued as civil cases either by the Medicaid Fraud Control Units or other state agencies. That may result in overpayment recovery but does not include criminal charges.
The prosecution of fraud cases is often hampered by a lack of resources, insiders told The Epoch Times. Medicaid Fraud Control Units and district attorneys have limited resources and the cases, whether civil or criminal, are complex. Large for-profit companies are often able to outspend the government when defending charges.
The complexity of the system is also a barrier to detecting fraud.
“Healthcare is so huge, and billing for it is such a labyrinthine nightmare, that finding the bad guys is kind of like finding a needle in a haystack,” Neal K. Shah, CEO of Counterforce Health, a company specializing in health insurance claims resolution, told The Epoch Times.
Investigators describe catching fraudsters as a game of Whac-a-Mole. When they shut down one fraud scheme, another takes its place.
Most improper Medicaid payments—those not necessarily triggered by fraud or abuse—result from an error by a state employee or contractor. These errors typically result from high turnover of state employees, lack of training, or insufficient computer system edits to deleted eligibility, according to CMS. State investigators also say outdated computer systems used in making health payments make it more difficult to make correct payments and analyze data.
All of that creates a vulnerability, according to insiders, who say their efforts at deterring fraud will only be as successful as the system itself. When fraudulent billing appears to be easy, providers are tempted to abuse the system in search of a payday.
The Medicaid program suffers from fraud and waste, but the real victims are the beneficiaries.
Insiders told The Epoch Times stories of elderly people living in pain after having their medications stolen, homeless people housed in squalid conditions billed to Medicaid as medical treatment, and elderly people having their identities stolen for the submission of fraudulent claims.
“You’re protecting government funds, but you’re also protecting the people who rely on the care to be provided,” an attorney working for a state Medicaid Fraud Control Unit told The Epoch Times.
Regardless of any congressional action, the president intends to improve the program, according to White House deputy press secretary Kush Desai.
“The Trump administration is committed to protecting Medicaid while slashing the waste, fraud, and abuse within the program—reforms that will increase efficiency and improve care for beneficiaries,” Desai told The Epoch Times by email.
The Epoch Times requested comments from the OIG and OMB but none were received by the time of publication.
