Medicaid Fraud Risks Are Changing. Are Programs Ready?
Insights by Kim Nguyen, CPC, CPIP, former FWA Division Deputy Director for the Colorado Medicaid program, leading fraud, waste, and abuse program integrity operations, personnel, and oversight.
Stories of fraud schemes discovered and billions of Medicaid dollars lost in alleged false claims have been capturing local and national headlines at an increasing rate. This is not surprising, as the federal government continues its crackdown on fraud, waste and abuse occurring against Medicaid programs, including in the following areas:
- Non-Emergent Medical Transportation
- Applied Behavior Analysis Therapy
- Housing Services
- Home Health and Home Care Services
The U.S. Government Accountability Office does not provide an estimate on how much Medicaid funds have been lost to fraud, but it has indicated that approximately $31.1 billion was improperly paid in Federal Fiscal Year 2024, the second most among 68 federal programs reported. Crime unfortunately knows no borders, so the likelihood that similar bad actors are lurking in other states is possible, and therefore all Medicaid programs should remain vigilant.
Medicaid programs and state rules vary, however, agencies can employ common strategies and practices to determine if they are experiencing the similar fraud schemes, including:
Reviewing Medicaid Claims Data for Fraud Indicators
An obvious place for any agency to start is to look at data, but where would be the best place to start? Consider tagging in your “boots on the ground”—data experts, reviewers, and contractors—those who frequently work with your agency’s data, rules and policies to determine the most effective approach or method to find evidence of suspicious activity. In my experience of collaborating with these individuals, I discovered new ideas and fresh perspectives that improved old techniques and allowed me to leverage newer technologies to quickly detect fraud, waste and abuse: developing new dashboards offered more dynamic information and leads on certain providers, and new algorithms caught unique billing behaviors that are new to a fraud scheme.
Collaborate and Communicate Internally and Externally
No agency should feel isolated in safeguarding its programs. Open communication and strong internal partnerships are essential for effective program integrity. Collaborating internally with units—especially with policy teams who regularly engage with providers, clients, and stakeholders—helps surface early warnings, such as concerning provider behavior, complaints, or sudden spending shifts. Outside of the agency, establishing dialogue with other states and law enforcement agencies (either directly, or through CMS Regional TAGs, NAMPI Forums, conferences, training events, task groups, etc.) allows you to compare notes to quickly assess if the same fraud scheme has arrived in your state and also identify best practices that are critical to curbing bad behavior already encountered by other organizations.
Consider Leveraging Front-End Program Integrity Controls
The saying “an ounce of prevention is worth a pound of cure” is especially true for provider enrollment and claims processing. Reviewing enrollment rules, claims workflows, program policies, and fee schedules can reveal vulnerabilities and loopholes that allow improper payments or runaway expenditures. For my former agency, reviewing program rules and policies was necessary to determine our ability to defend program integrity findings and actions taken upon providers if challenges wound up in court.
While agencies may be tempted to address pay-and-chase challenges by adding staff, improper payments often continue during lengthy onboarding and training. A more effective approach is to strengthen front-end controls by leveraging technology, automation, and—where permissible—artificial intelligence and machine learning.
Shifting from labor-intensive post-payment reviews to targeted pre-payment reviews can reduce workloads, improve provider compliance, and prevent losses before they occur. For me, our fraud, waste and abuse staff applied a mix of these strategies based on risk level and provider cooperation and willingness to make improvements in their billing practices.
Planning for Future Needs to Take Your Agency to the Next Level
Fraud schemes are ever-evolving and growing, and it is imperative that agency managers and leaders maintain a 30,000-foot view of their program integrity and compliance teams to ensure they have the right resources and tools now, and in the future. Techniques and technology to help combat fraud, waste and abuse are advancing, especially with innovations surrounding artificial intelligence. Agencies should be open and curious to see if these new technologies and methods would not only help detect and identify fraud, waste and abuse, but also ease staff burden and empower them with better tools to do their jobs.
Source: U.S. Government Accountability Office (GAO), Fraud and Improper Payments, Federal Fiscal Year 2024.
Commonly Asked Questions
Why is Medicaid fraud gaining more attention now?
Federal enforcement efforts are intensifying, and high-profile cases involving billions of dollars in alleged false claims have drawn national attention. In FFY 2024 alone, approximately $31.1 billion in Medicaid payments were classified as improper, placing Medicaid among the highest federal programs for improper payments.
Why should agencies review their program rules and policies?
Weaknesses in enrollment criteria, claims workflows, fee schedules, or policy language can create loopholes that fraudsters exploit. Regular policy reviews not only reduce vulnerabilities but also strengthen the agency’s ability to defend enforcement actions if challenged in court.
Which Medicaid service areas are currently most vulnerable to fraud?
The article highlights increased scrutiny and risk in areas such as:
• Non-Emergent Medical
• Transportation (NEMT)
• Applied Behavior Analysis (ABA) Therapy
• Housing Services
• Home Health and Home Care Services
These service lines often involve high utilization, complex billing structures, or emerging regulatory frameworks, making them attractive targets for fraud schemes.
Why isn’t adding more staff always the best solution?
Hiring additional staff to address fraud challenges can take months due to onboarding and training. During that time, improper payments may continue. Technology-driven solutions—such as automation, predictive analytics, AI, and machine learning—can scale more quickly and reduce reliance on labor-intensive post-payment reviews.
What is the difference between post-payment and pre-payment review strategies?
• Post-payment review (“pay-and-chase”) involves identifying and recovering improper payments after claims are paid.
• Pre-payment review uses risk indicators and analytics to flag suspicious claims before payment is issued.
Shifting toward targeted pre-payment controls can significantly reduce financial losses and improve provider compliance.
How can artificial intelligence support Medicaid program integrity?
AI and machine learning can:
• Detect emerging billing patterns
• Identify anomalies not captured by traditional rules
• Continuously adapt to evolving fraud schemes
• Reduce manual review workloads
Provide real-time alerts and dashboards
When implemented responsibly and in compliance with regulatory guidelines, these tools enhance both detection capabilities and operational efficiency.