⚡️ NIMITZ HEALTH NEWS FLASH ⚡️ 

“Common Schemes, Real Harm: Examining Fraud in Medicare and Medicaid”

House Energy & Commerce Oversight & Investigations Subcommittee

February 3rd, 2026 (recording linked here)

WITNESS

• Jessica Gay, CPC, AHFI, CFE: Vice President and Co-Founder, Integrity Advantage

• Kaye Lynn Wootton, J.D.: President, National Association of State Medicaid Fraud Control Units

• Stephen W. Nuckolls: Chief Executive Officer, Coastal Carolina Health Care, P.A. and Treasurer and former Board Chair, National Association of Accountable Care
  Organizations (NAACOs)

• Jessica Tillipman, J.D.: Government Contracts Advisory Council Distinguished
  Professorial Lecturer in Government Contracts Law, Practice & Policy, George
  Washington University Law School

QUICK SUMMARY

• Fraud in Medicare and Medicaid is widespread, costly, and increasingly sophisticated, but witnesses repeatedly said prevention and early detection matter more than punitive after-the-fact enforcement.

• Experts warned that fraud directly harms patients and providers, delaying or denying care, distorting medical records, and pushing high-performing providers out of value-based models.

• Both parties agreed fraud exists nationwide, but sharply disagreed on whether the current administration is strengthening or undermining fraud enforcement capacity.

• Data fragmentation, weak provider credentialing, limited beneficiary visibility, and outdated systems were repeatedly cited as structural vulnerabilities fraudsters exploit.

PARTY MESSAGING

🐘 Republicans

• Fraud is real, intentional, and often criminal, not merely paperwork error, and involves identity theft, sham providers, and organized schemes that steal billions from taxpayers and seniors.

• Overcorrection risks exist, but failure to act decisively allows fraud to drain resources from legitimate patients and destabilize delivery models like ACOs and fee-for-service Medicare.

• Structural reforms are needed, including better eligibility verification, stronger provider screening, improved data sharing, and program integrity changes targeting high-risk providers and services (e.g., DME, skin substitutes, hospice).

🫏 Democrats

• Fraud is being overstated and weaponized, particularly against Democratic-led states, to justify aggressive enforcement actions, funding freezes, and cuts that harm beneficiaries.

• Undermining oversight capacity makes fraud worse, not better, pointing to inspector general firings, staffing losses, and prosecutor resignations as weakening enforcement.

• Effective anti-fraud policy requires precision, distinguishing fraud from improper payments, protecting whistleblowers, investing in data and oversight, and avoiding broad actions that punish eligible patients and states.

MEMBER OPENING STATEMENTS

• Chair Joyce (R-PA) said recent prosecutions, especially in Minnesota, showed how vulnerable these programs were to waste, fraud, and abuse. He said fraud was widespread nationwide, cited long-standing warnings from GAO and HHS OIG, and referenced estimates that losses could reach $100 billion annually. He listed examples of large fraud schemes across multiple states and warned that patients were harmed through unnecessary care, identity theft, and predatory practices, including by overseas criminal networks. He said Congress had a duty to protect taxpayers and vulnerable beneficiaries by strengthening prevention and detection, and he thanked witnesses while noting increased attention from CMS Administrator Dr. Oz.

• Ranking Member Clarke (D-NY) argued that if the government truly wanted to address fraud, the administration needed to stop what she described as terrorizing communities through federal law enforcement actions. She cited multiple incidents in which people were killed, arrested, or harmed in connection with federal operations and said officials had allegedly mischaracterized victims and misrepresented events. She said the administration had used fraud allegations in Minnesota as a pretext for punitive actions and described a letter from Attorney General Bondi as an attempt to pressure the state for sensitive data. She concluded that Democrats would resist what she portrayed as constitutional abuses and promised continued support for communities living in fear.

• Full Committee Chair Guthrie (R-KY) stated that Medicare and Medicaid covered more than 140 million Americans and said fraud undermined access to care, raised costs, and eroded confidence in these programs. He pointed to a large DOJ enforcement action called “Operation Gold Rush,” describing it as the biggest health care fraud takedown, involving hundreds of defendants and billions in intended losses, including transnational criminal organizations using stolen identities. He said the conduct amounted to organized crime targeting public programs and argued Congress needed to continue efforts to protect Medicare and Medicaid for those who depended on them.

• Full Committee Ranking Member Pallone (D-NJ) said fraud was real and persistent but argued Republicans had used fraud claims as a convenient justification for policy choices that reduced coverage and redirected funds to contractors. He criticized what he described as large cuts to the health care system and said fraud allegations were being invoked to justify aggressive federal deployments in Minneapolis that harmed communities rather than targeting bad actors. He cited deaths and alleged misconduct connected to federal operations and said the administration had tried to pressure Minnesota for sensitive health and voter data. He also argued that Republicans had not taken productive anti-fraud steps, citing a lack of hearings on inspector general firings and criticizing actions he said weakened oversight while fraudsters were pardoned.

WITNESS OPENING STATEMENTS

• Ms. Gay introduced herself as a fraud examiner and investigator who had worked with dozens of payers and said the scale and complexity of the health care claims ecosystem made strong oversight essential. She estimated health care spending at about $5.3 trillion in 2024 and said fraud, waste, and abuse could be as high as $500 billion, emphasizing that these losses were not victimless because patients faced medical risk and reduced access to care. She described common schemes involving behavioral analysis services, non-emergency medical transportation, home and community-based services, laboratory and genetic testing, skin substitutes, and durable medical equipment. She said these problems were national rather than isolated to one state and argued that better policy design, stronger and clearer coverage rules, more resources, and greater cross-sector collaboration were needed. She concluded that improved data quality and visibility into provider credentialing and sanctions would help reduce harm and protect system integrity.

• Ms. Wootton said Medicaid Fraud Control Units were state-based law enforcement agencies created to investigate and prosecute provider fraud and patient abuse, neglect, and misappropriation of funds. She described partnering with federal agencies and noted that MFCU attorneys could be cross-designated to prosecute in federal court, emphasizing coordination as critical to effective enforcement. She said investigations increasingly involved complex cases where higher-level actors benefited from understaffing and profit-driven schemes that harmed residents in care settings. She explained that modern fraud was often intentional from inception, with companies created specifically to commit fraud, and she described a multi-state substance use disorder fraud pattern that moved across states and required more open collaboration among units. She cited results reported by HHS OIG, including convictions, exclusions, and civil recoveries, and said the return on investment from coordinated enforcement was substantial.

• Mr. Nuckolls said he viewed fraud, waste, and abuse through the lens of a rural medical practice and as an ACO leader responsible for both cost and quality. He described how “Operation Gold Rush” involved a transnational scheme using stolen identities and DME companies to submit massive fraudulent claims, and he said beneficiary protections and coordination fell short even when Medicare did not pay. He said fraudulent claims could pollute beneficiary records and delay or deny legitimate care, and he gave an example where a patient had to pay out of pocket for diabetic shoes because records falsely showed they had already been provided. He argued fraud also raised systemwide costs and undermined value-based care participation, and he recommended closing reporting feedback loops, speeding record correction, strengthening DME supplier integrity (including surety bonds), and holding ACOs harmless for fraud outside their control.

• Ms. Tillipman said large, complex programs like Medicare and Medicaid were inherently vulnerable to misconduct and were intentionally built with overlapping oversight mechanisms such as IGs, GAO, DOJ, whistleblowers, and state fraud control units. She argued that redundancy deterred fraud only when oversight bodies coordinated, had stable capacity, and remained credibly independent, and she warned that breakdowns in any of those conditions made the system easier to exploit. She cited major enforcement recoveries and takedowns as evidence the system could work but said high-profile surges were not a substitute for routine controls like strong data infrastructure, risk-based screening, and implementing GAO and IG recommendations. She identified vulnerabilities in enrollment and prepayment verification, fraud in harder-to-validate settings like telehealth, home health, and DME, and accountability gaps in managed care due to diffuse responsibility and weak referral feedback loops. She concluded that fraud, waste, and error required different remedies and said mislabeling every improper payment as fraud risked applying the wrong solutions.

QUESTION AND ANSWER SUMMARY

• Chair Joyce (R-PA) asked why skin substitutes were vulnerable to fraud. Mr. Nuckolls said high margins, Medicare’s lack of set pricing, and the FDA clearance pathway had made them attractive for abusive billing, but he believed CMS’s January 1 shift to a flat rate would reduce and likely eliminate excess and fraudulent claims.

  Chair Joyce then asked about Medicaid fraud risks tied to self-attestation and hourly services like personal care and adult day care. Ms. Gay said those designs increased risk and needed stronger oversight. She explained that personal care models often lacked individual provider identifiers and that fragmented, plan-specific data prevented detection of individuals billing across multiple payers.

  Chair Joyce also asked about non-emergency medical transportation. Ms. Wootton said weak on-site oversight made the benefit prone to ghost trips, inflated mileage, and improper group-vs-individual billing.

• Ranking Member Clarke (D-NY) argued that the administration had used “fraud” as a pretext for immigration enforcement that frightened families and discouraged normal life activities, and she entered several public statements into the record. She asked why whistleblowers needed confidence that allegations would be used to stop fraud rather than advance politics, and Ms. Tillipman said credible whistleblower systems depended on confidentiality, safety, and trust that reports would be handled appropriately.

  Ranking Member Clarke asked what happened when that trust was lost, and Ms. Wootton said whistleblowers were vital sources of insider evidence and would be less likely to come forward if they felt unsafe or distracted by “side issues.”

• Rep. Fulcher (R-ID) asked whether fraud tended to target certain states or regions perceived as lightly audited. Ms. Gay said schemes often began in one area and spread to places with weaker controls.

  Rep. Fulcher asked about foreign perpetrators, and Ms. Wootton said MFCUs pursued cases based on evidence, recoverability, and legal tools, using state laws where they had jurisdiction.

  Rep. Fulcher asked for common schemes and warning signs, and Ms. Gay cited applied behavioral analysis, transportation, labs, and home- and community-based services, with “impossible days” and outlier patterns as major red flags.

  Rep. Fulcher asked how schemes were changing, and Ms. Wootton said fraud was increasingly intentional, multi-state, and harder to validate because electronic records could make fabricated services look legitimate.

• Rep. DeGette (D-CO) pressed that fraud was often framed as beneficiary-driven and asked for a comparison of provider versus patient fraud. Ms. Wootton said provider fraud drove far larger losses and that big-dollar cases typically involved larger provider entities.

  Rep. DeGette pointed to Colorado transportation fraud examples and then questioned about whether strong anti-fraud work required federal coordination. Ms. Tillipman agreed.

  Rep. DeGette criticized reductions in federal oversight capacity, including staffing losses at HHS OIG, and asked whether states were better positioned when HHS OIG was fully resourced. Ms. Wootton said strong federal staffing improved joint efforts.

• Rep. Harshbarger (R-TN) questioned whether existing civil and criminal penalties were sufficient to deter Medicaid fraud and prevent repeat offenders. Ms. Wootton said penalties were effective when the full scope of fraud was uncovered and emphasized that HHS OIG exclusions were often more powerful than fines, though non-public resolutions could allow bad actors to reappear. She said MFCUs regularly shared intelligence with one another and federal partners to identify repeat offenders and emerging schemes.

  Rep. Harshbarger asked whether physicians always knowingly participated in fraud and whether telehealth created new vulnerabilities. Ms. Gay and Ms. Wootton said fraud often occurred when controls were bypassed, that some providers were unaware their credentials were being misused, and that telehealth expansions reduced barriers to care but enabled cross-state fraud and misuse of provider identifiers with limited feedback to clinicians.

• Rep. Tonko (D-NY) argued that Republicans had conflated fraud with administrative error to justify broader enforcement actions. He asked how to distinguish fraud from improper payments. Ms. Tillipman said most improper payments were administrative errors rather than intentional fraud and warned that mislabeling them distorted reality.

  Rep. Tonko asked why the distinction mattered. Ms. Tillipman said labels drove remedies, that treating errors as fraud misdirected enforcement resources, and that overstating fraud undermined public confidence in federal health programs and weakened durable oversight.

• Rep. Guthrie (R-KY) rejected claims that fraud was being overstated and argued that large-scale identity theft and sham provider schemes clearly constituted intentional fraud. He pressed witnesses on whether schemes in Minnesota and Los Angeles involved deliberate misconduct rather than paperwork errors. Ms. Gay said intent was often evident but difficult to prove legally, while Ms. Wootton said MFCUs pursued only credible fraud cases and frequently encountered companies created solely to defraud Medicaid, including substance use disorder and behavioral health providers without qualified staff.

  Rep. Guthrie emphasized that deliberate identity theft and fake billing harmed beneficiaries and taxpayers and said fraud occurred across both fee-for-service and managed care systems.

• Rep. Pallone (D-NJ) warned that exaggerated fraud claims were being used to justify funding cuts and federal actions that harmed beneficiaries rather than fraudsters. He asked about the risks of overstating fraud. Ms. Tillipman said mislabeling conduct could stigmatize program participants, trigger inappropriate criminal remedies, and divert scarce enforcement resources.

  Rep. Pallone asked how fraud could be addressed without punishing states or beneficiaries. Ms. Tillipman said prevention required system-wide, risk-based approaches applied consistently across all states.

  Rep. Pallone asked about collaboration, and Ms. Wootton said federal-state partnerships were essential because fraud crossed state lines and joint efforts improved both enforcement and patient protection.

• Rep. Allen (R-GA) asked how fraudulent claims affected ACOs’ ability to lower Medicare costs. Mr. Nuckolls said ACOs under full risk could be held financially responsible for fraud they could not control, which could push high-performing groups to exit value-based models and raise overall program costs.

  Rep. Allen asked how Medicaid fraud harmed vulnerable populations like people experiencing homelessness or substance use disorders. Ms. Wootton said fraud often meant patients did not receive needed treatment even while Medicaid paid, which left people untreated and worsened outcomes.

  Rep. Allen asked whether lowering information barriers and increasing provider scrutiny could prevent fraud. Ms. Gay said provider credentialing and rescreening were too infrequent in many systems and needed to happen far more often than every three years.

• Rep. Crenshaw (R-TX) asked why Medicare and Medicaid were more fraud-prone than private insurance and emphasized beneficiary harm. Ms. Gay said Medicaid’s fragmented state-by-state rules increased complexity and exploitation risk, and many beneficiaries did not receive or review EOBs, especially in transient or vulnerable populations.

  Rep. Crenshaw asked what happened when fraud was not controlled and what solutions could help. Ms. Gay said fraud could delay care, create inaccurate records and stigma, and saddle plans with major costs before verification. Ms. Wootton cited hospice fraud as especially harmful because patients could be enrolled without knowing it and have care shifted away from needed treatment, and she said improving beneficiary visibility into billing (including EOB access) would help detection.

• Rep. Fletcher (D-TX) argued fraud claims were being used to justify overreach while actual oversight capacity was being weakened. She asked how poor data and inflated fraud narratives misdirected resources. Ms. Tillipman said oversight worked best when independent, well-resourced, coordinated, and grounded in reliable data, and she pointed to the backlog of unimplemented GAO/IG recommendations as an immediate roadmap for Congress.

  Rep. Fletcher asked how that work could happen amid staffing cuts. Ms. Tillipman said broad, non-targeted reductions risked degrading oversight rather than improving efficiency.

• Rep. Palmer (R-AL) emphasized the fiscal scale of improper payments and argued eligibility verification failures drove fraud and waste. Ms. Wootton said MFCUs mainly pursued provider fraud but supported efforts to prevent terminated providers from re-enrolling across state lines and noted state program integrity units played a key referral role.

  Rep. Palmer asked about duplication detection and antiquated data systems. Ms. Wootton said better cross-system and cross-payer data access would make “impossible day” billing easier to spot and supported greater access, training, and interoperable tools, including potentially using prepayment resources like Treasury’s “Do Not Pay.”

• Rep. Trahan (D-MA) asked what message presidential pardons of major health care fraudsters sent. Ms. Tillipman said deterrence depended on credible enforcement and that perceived inconsistency could affect bad actors’ calculations.

  Rep. Trahan criticized Medicaid work requirements as costly administrative systems that did not reduce fraud and asked about contractor oversight risks. Ms. Tillipman said reforms should be risk-based and focus enforcement and oversight on the highest-risk areas, and she again pointed to implementing GAO/IG recommendations and strengthening weak referral and feedback loops.

• Rep. Balderson (R-OH) asked whether beneficiaries got actionable guidance to detect and report fraud. Mr. Nuckolls said information existed online, but he questioned whether follow-up after reporting was adequate.

  Rep. Balderson asked about detection timelines and recovery. Ms. Gay said post-payment identification often took 9–12 months, while Ms. Wootton said simple cases could move quickly but complex network cases took longer and recoveries were harder once money was spent, though payment suspensions could help.

  Rep. Balderson asked about AI-driven fraud. Ms. Wootton said AI was increasingly used to alter records and images, and MFCUs were training to detect patterned “cookie-cutter” documentation but needed more tools and resources.

• Rep. Schrier (D-WA) argued fraud enforcement was being politicized while oversight capacity was being undermined and urged focus on Medicare Advantage overpayments tied to unsupported diagnoses. She asked what HHS could do to strengthen managed care accountability. Ms. Tillipman pointed to unimplemented GAO/IG recommendations and noted that False Claims Act enforcement had targeted managed care, warning that a pending court challenge to qui tam provisions could reduce whistleblower-driven enforcement if successful.

• Rep. Carter (R-GA) asked whether fraud schemes spread through copycats, citing hospice proliferation. Ms. Wootton said schemes replicated across states and flagged hospice/home health risks including enrolling non-terminal patients, enrolling patients without their knowledge, and curtailing needed treatment. She said NAMFCU enabled multi-state sharing and training.

  Rep. Carter asked whether low skin-substitute reimbursement risked limiting legitimate access. Mr. Nuckolls said current payment changes would largely halt skin substitute use, risking overcorrection and access problems.

• Rep. Mullin (D-CA) argued fraud allegations were being weaponized to justify aggressive actions and broad funding freezes. He asked whether collaboration improved fraud outcomes. Ms. Wootton said state–federal–local coordination was essential because fraud crossed state lines and federal partners provided jurisdiction and resources.

  Rep. Mullin asked whether blanket funding freezes were appropriate anti-fraud tools. Ms. Tillipman said broad shutdowns could harm innocent beneficiaries and should be proportional, favoring targeted “scalpel” approaches over “sledgehammer” actions.