Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services, as well as long-term services and supports (LTSS). Each state designs and administers its own Medicaid program within federal parameters. In FY2024, Medicaid covered health care services for an estimated 85 million individuals at an estimated cost of $949 billion.
At the federal level, the Centers for Medicare & Medicaid Services (CMS) approves Medicaid state plan amendments and waivers. Both the states and the federal government are responsible for Medicaid program integrity activities to ensure that all federal and state Medicaid rules are followed. For further background on Medicaid, see CRS In Focus IF10322, Medicaid Primer, and CRS Report R43357, Medicaid: An Overview.
This In Focus provides background information on key questions about Medicaid program integrity and identifies selected supplemental federal resources.
Medicaid program integrity activities are those administrative activities that ensure that the state Medicaid programs, Medicaid providers, and Medicaid enrollees operate in accordance with the federal and state Medicaid laws.
Often, Medicaid program integrity activities are associated with the identification and prevention of fraud, waste, and abuse. While these are core program integrity activities, program integrity also encompasses additional components, such as oversight of the Medicaid program and identifying improper payments and overpayments.
Program integrity activities also include measuring improper payments through the Payment Error Rate Measurement (PERM) program. An improper payment is "any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements" (42 C.F.R. §431.958). CMS estimates that most improper payments (77% in FY2025) are the result of insufficient documentation (e.g., failing to submit documentation for a Medicaid enrollee who is eligible for the medical service) rather than fraud or abuse.
Additional program integrity activities include oversight of state Medicaid agencies, managed care entities, health care providers, and Medicaid enrollees to ensure that federal and state Medicaid laws are being followed.
The total amount of Medicaid fraud is unknown. State Medicaid Fraud Control Units (MFCUs) reported recovering $2 billion from criminal and civil cases in FY2025. CMS reported that program integrity activities for Medicaid and the Children's Health Insurance Program (CHIP) saved the federal government $1.5 billion in FY2024.
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Definitions of Fraud, Waste, and Abuse The words fraud, waste, and abuse are often connected in one phrase, but these are three distinct concepts. According to CMS, "The difference depends on circumstances, intent, and knowledge":
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Medicaid program integrity activities involve a multifaceted approach including multiple federal and state agencies.
The federal agencies involved in Medicaid program integrity include CMS, the Department of Health and Human Services' Office of the Inspector General (HHS OIG), and the Department of Justice (DOJ). The federal government oversees states' administration of their Medicaid programs, audits Medicaid programs, administers the PERM program, and investigates and prosecutes cases of Medicaid fraud. CMS administers the Medicaid Integrity Program, which audits and monitors state Medicaid programs and supports state program integrity efforts. HHS OIG has broad program integrity enforcement, audit, and evaluation authority for HHS programs, including Medicaid. DOJ investigates and prosecutes Medicaid fraud cases and coordinates federal, state, and local law enforcement.
State Medicaid programs are also required to conduct several program integrity activities. States' program integrity responsibilities include screening providers and suppliers before they enroll in state Medicaid programs. States are also required to operate MFCUs, generally through state attorney general offices. MFCUs are responsible for investigating fraud as well as patient abuse and neglect in facilities that receive state Medicaid payments. States are also required to contract with recovery audit contractors (RACs) "for the purpose of identifying underpayments and overpayments and recouping overpayments." In addition, states with Medicaid managed care are required to conduct independent audits of the managed care financial and encounter data.
Below are selected federal resources that provide information about Medicaid program integrity. State Medicaid websites may have additional resources.
CMS has multiple initiatives that provide information on program integrity efforts.
Among its program integrity responsibilities, HHS OIG conducts Medicaid audits, excludes providers from the Medicaid program, and exercises oversight of Medicaid, including state MFCUs.
MACPAC is a nonpartisan legislative branch agency that provides policy and data analysis. Resources include:
Among its program integrity responsibilities, DOJ investigates and prosecutes Medicaid fraud cases and coordinates federal, state, and local law enforcement.
Jointly directed by the Attorney General and the HHS Secretary, HCFAC coordinates federal, state, and local health care law enforcement activities.
GAO is a nonpartisan legislative branch agency that examines federal programs.