“Fraud Pays”: Congressional Hearing Exposes Deep Cracks in Medicare’s Defenses

Witnesses before the House Ways and Means Committee delivered a stark assessment of Medicare fraud at a Congressional hearing stretching well beyond 4 hours.¹ The system, as currently designed, rewards criminals and punishes honest providers, speakers said. Testimony from hospice industry representatives, private insurance executives, and fraud victims painted a picture of a federal bureaucracy outmaneuvered by sophisticated criminal networks.

One number from a CBS investigation set the table for the hearing: a single doctor billing through 126 different hospice providers across Los Angeles County. Investigators called it a hallmark of systematic fraud.²

“Fraud Pays” and the System Enables It

The phrase that cut through the hearing most sharply came from David Klebonis, CEO of Palm Beach Accountable Care Organization: Right now, fraud pays.¹ He described how sham agencies can become enrolled Medicare providers and bill for services without ever providing a single legitimate claim—his organization alone had submitted 289 such agencies to law enforcement. Rep Ron Estes (R, Kansas) appeared to agree, saying the phrase might as well be the title of the hearing.

Sheila Clark, president and CEO of California Hospice and Palliative Care Association, described conditions that bordered on the surreal. Fraudulent hospice providers had been licensed and certified despite operating out of vacant storefronts, tire shops, and burrito stands. "You'd be amazed at how many hospices you can walk up to in California, and there is nobody there," she testified.

The human cost was made concrete when Clark described an elderly woman unknowingly enrolled in a fraudulent hospice who was denied cataract surgery she needed. Unable to see at night, she fell, broke her hip, and died 2 months later in a nursing home. "She just needed her cataract surgery," Clark said. "That did not need to happen."

A Broken Enrollment System

A recurring theme was how little scrutiny CMS applies before issuing Medicare billing numbers. Rep Aaron Bean (R, Florida) described the bar as requiring applicants to "fog a mirror," then acknowledged even that was too high, since providers don't need to show up in person at all. Doctors whose licenses had been revoked years earlier were still actively billing Medicare, and identity theft of physician credentials was enabling fraud rings to bill under stolen names.

Bean announced 2 legislative responses: the PROMPT Act, which would send beneficiaries a monthly statement of Medicare claims filed in their name, like a credit card bill, and the Medical License Verification Act, requiring CMS to confirm that providers hold valid licenses before billing.

The Pay-and-Chase Problem

Private sector witnesses drew a stark contrast between how commercial insurers and the federal government handle fraud prevention. Christopher Deery, director of corporate and financial investigations at Independence Blue Cross, described his organization's use of artificial intelligence (AI) analytics and clinical review teams to stop suspicious payments before they go out. When asked how long a private insurer would survive operating on Medicare's "pay and chase" model, paying all claims first and investigating later, his answer was "Not long."

"Stopping a claim or a payment is something we take seriously," Deery said. "We do have trained professionals looking at it across both clinical and investigative ways."

While Rep Mike Carey (R, Ohio) shared that CMS' newly launched Fraud Detection Operations Center has shown early promise, witnesses noted that data-sharing constraints between federal agencies, commercial insurers, and state authorities continue to limit what's possible.

The hearing's findings echoed warnings raised at the National Association of Accountable Care Organizations (NAACOS) Spring 2025 conference, where speakers described how fraudulent billing patterns shift targets as each wave gets addressed.³ After anomalous catheter billing drew CMS scrutiny in 2024, skin substitutes emerged as the next flashpoint—spending on the tissue-based products ballooned from 0.4% to 4.5% of one ACO's total expenditures between 2022 and 2025, with payment rates ranging from $11 to $5770 per square centimeter before CMS moved to cap them.

ACO leaders at that conference argued their organizations are uniquely positioned as an early-warning system. "ACOs really are that frontline defense," Jake Woods, of PSW and NW Momentum Health Partners ACO, said. "We can move a lot quicker than CMS to be able to address these kinds of challenges." However, Gabe Orthous, MBA, director of value-based services and analytics, Health Choice Care, cautioned that many organizations audit their systems only every 6 months to a year—"well, that's too late when it comes to fraud detection."

That burden falls unevenly on ACOs, according to Aisha Pittman, NAACOS senior vice president of government affairs. "Providers in accountable care are left responsible for the costs of fraud when spending exceeds benchmarks," Pittman said in a statement to The American Journal of Managed Care^®. "This level of engagement adds tremendous administrative burden to ACOs, but it's necessary." She acknowledged that ACOs play an active role—supporting patients, alerting government agencies, identifying clinical interventions, and advocating for financial protections—but argued that more must be done to safeguard them from the financial fallout of fraud they did not commit.

The policy gap is particularly acute in the Medicare Shared Savings Program (MSSP). While CMS recently moved to protect ACO REACH participants by removing 90% of skin-substitute spending from financial calculations, MSSP participants received no equivalent relief. NAACOS is now urging CMS to proactively support ACOs in pursuing reopening determinations for skin substitute spending, consider removing egregious skin substitute costs from MSSP financial calculations entirely, and fix the Accountable Care Prospective Trend by reweighting to zero in 2025, establishing guardrails against unpredictable spending tied to fraudulent or abusive billing in future years. "More must be done to support ACOs' role as stewards of Medicare," Pittman said.

Fighting Fraud With One Hand, Pardoning It With the Other

Democratic members drew pointed contrasts between the hearing’s stated purpose and the Trump administration's decision to pardon more than 20 people convicted of health care fraud. Rep Terri Sewell (D, Alabama) asked all witnesses to raise their hands if they opposed those pardons; most did, while 2 declined, citing unfamiliarity with the cases.

Sewell named specific pardoned individuals, including a Florida nursing home owner sentenced to 20 years for a $1.3 billion fraud described by the Justice Department as the largest single criminal health care fraud case ever brought against an individual, and a mental health company operator who had been midway through a 35-year sentence for $205 million in fraudulent Medicare claims.

Republican members countered by raising the pardon of Hunter Biden and arguing that Democratic opposition to Medicaid eligibility verification provisions undermined their fraud-fighting credibility. Despite the exchanges, several members—including former federal prosecutor Rep Jimmy Panetta (D, California)—insisted the issue was fundamentally bipartisan. "It's not about blue states or red states,” Panetta said. “Unfortunately, it happens in all states. That means all of our constituents can be victims. As a former prosecutor, it didn't matter to me whether or not you're a Republican or Democrat; it mattered whether or not you are a criminal."

The hearing closed with broad agreement that reform is overdue: stronger provider vetting, better beneficiary education, real-time fraud analytics, and tighter coordination between federal and state agencies. Whether that consensus translates into legislation remains to be seen.

References

1. Hearing before the US House Committee on Ways & Means; Full Committee Hearing on Protecting Patients and Taxpayers: Cracking Down on Medicare Fraud. April 22, 2026. Accessed April 22, 2026. https://waysandmeans.house.gov/event/full-committee-hearing-on-protecting-patients-and-taxpayers-cracking-down-on-medicare-fraud/
2. Gold R, Geller L, Yamaguchi A, Kates G. We visited “ground zero” for hospice fraud: Los Angeles, California. CBS. March 10, 2026. Accessed April 22, 2026. https://www.cbsnews.com/projects/2026/hospice-fraud/
3. Mattina C. ACOs’ focus on rooting out fraud aligns with CMS vision under Oz. Am J Manag Care. 2025;31(Spec. No. 6):SP382-SP383. doi:10.37765/ajmc.2025.89761