Protecting patients and taxpayers from health care fraud

Fraud is a persistent threat to the integrity of America’s health care system, siphoning billions of dollars from public and private payers while undermining patient trust and quality of care. Recent high-profile cases—such as the $10.6 billion “Operation Gold Rush” scheme and allegations against UnitedHealth Group—highlight the scale and sophistication of these crimes. As policymakers and stakeholders work to ensure affordable, accessible health care, combating fraud must be a priority to protect taxpayers, preserve program sustainability, and safeguard patient outcomes.

Major cases expose systemic vulnerabilities

Recent enforcement actions underscore the audacity and massive scope of health care fraud in the United States. In June, the Department of Justice’s (DOJ) National Health Care Fraud Takedown charged 324 defendants with schemes totaling $14.6 billion in false claims, marking the largest such operation in U.S. history. A standout case, dubbed “Operation Gold Rush,” involved a transnational criminal organization based in Russia and Eastern Europe that allegedly defrauded Medicare of $10.6 billion. The scheme used stolen identities of over one million Americans to submit fraudulent claims for durable medical equipment, such as urinary catheters, through dozens of nominee-owned companies. Medicare paid out nearly $900 million to supplemental insurers and $41 million directly, although the Centers for Medicare and Medicaid Services (CMS) was able to prevent most of the intended payments through rapid intervention. Despite this, over 400,000 beneficiaries lodged complaints, reflecting the scheme’s widespread disruption on unsuspecting Americans.

Another significant case involves UnitedHealth Group, currently under DOJ investigation for alleged Medicare Advantage (MA) fraud. A 2024 Wall Street Journal report revealed that UnitedHealth secured $8.7 billion in extra MA payments by recording allegedly unsupported diagnoses, contributing to an estimated $83 billion in MA overpayments in 2024. These practices—known as upcoding—inflate risk scores to boost reimbursements, raising premiums and straining Medicare’s budget, a cost that is often passed-on to consumers. A related 2023 lawsuit against UnitedHealth alleged that its AI-driven claims evaluation led to wrongful denials, ultimately denying necessary and appropriate care to premium-paying customers.

In Arizona, a recent case exposed an alleged $650 million Medicaid fraud scheme to bill for fictitious addiction treatment services targeting vulnerable populations, including Native Americans and the homeless. The operation purportedly enrolled 41 addiction clinics in Arizona’s Medicaid system, billing for services that were apparently never provided or medically unnecessary, netting a five percent cut of payouts. Such a scheme not only defrauds taxpayers, but also exploits marginalized and poor communities. Cracking down on Medicaid fraud will improve health care for the most vulnerable Americans. 

Finally, another case in Arizona involved two wound care company owners who were charged with inciting over $1.2 billion in unnecessary claims for wound grafts applied to elderly and hospice patients, some of whom died shortly after treatment. Although certain wounds at certain times require grafts to heal, applying amniotic wound grafts to a wound in an unsuspecting elderly person and giving kickbacks to the companies supplying and applying said grafts is gross negligence that should have been caught long before it reached $1.2 billion in claims. Apart from the financial implications, fraud can have dire, life-threatening consequences for Americans. 

The stakes: cost, quality, and trust

Health care fraud inflates costs across the system. The National Health Care Anti-Fraud Association estimates fraud accounts for 3-10 percent of U.S. health care spending, potentially costing $135–$450 billion annually. Fraudulent billing, like upcoding in MA or billing for unprovided services in Operation Gold Rush, drives up insurance premiums, increases out-of-pocket costs, and diverts funds from legitimate care.

Fraud also degrades quality of care. Schemes involving unnecessary procedures—such as the Arizona wound graft case—exposes patients to infection and delays appropriate treatments. The Operation Gold Rush scheme compromised patient records, leading to incorrect medical histories that will trigger inappropriate care for years to come. UnitedHealth’s alleged AI-driven denials illustrate how fraud can lead to inappropriately withheld services and delay necessary care for every-day Americans. Those responsible for fraud should be held accountable for the consequences of their actions, regardless of who they are.

Practical solutions to combat fraud

Properly addressing health care fraud requires a multifaceted legislative approach. Recent efforts provide a foundation, but bolder action is needed. Here are three relatively simple strategies that will meaningfully reduce fraud:

1. Enhance data analytics and real-time monitoring: The success of CMS in preventing the majority of payments from the Operation Gold Rush scam highlights the power of advanced analytics. The changes proposed in the Strengthening Medicare and Reducing Taxpayer Costs Act in 2023 would bolster CMS’s ability to detect fraud through real-time data monitoring and AI-driven anomaly detection. Congress should expand funding for the multi-institutional Health Care Fraud Data Fusion Center, established in 2025, to scale these capabilities across Medicare and Medicaid. 
2. Strengthen penalties and enforcement: The Health Care Fraud Prevention and Enforcement Action Act of 2022 increased penalties and expanded the Health Care Fraud Strike Force Program to 27 districts, resulting in criminal charges for over 5,400 defendants. Thus far, the program has discovered $27 billion in fraudulent claims since its inception in 2007, which is a sure success but falls far short of the full amount of fraud. Amending the law to mandate automatic provider suspensions for suspicious billing patterns and increasing fines for corporate offenders could deter large-scale fraud. Using artificial intelligence to identify suspicious billing patterns and funding data analytics experts to personally examine these patterns would serve as a reasonable start to increasing enforcement of fraud. Ideally, these measures would increase the likelihood of being caught, with stricter enforcement laws deterring bad actors in the future.
3. Reform Medicare Advantage payment structures: UnitedHealth’s case underscores how MA’s risk-adjustment model incentivizes upcoding. Moving forward, payment formulas should be refined to reduce bad incentives and should instead pay for patient risk-adjusted outcomes—e.g., achieving certain A1c goals among diabetics—and enhance transparency in diagnosis coding. Congress should mandate independent audits of MA risk scores and cap payment increases tied to unsupported diagnoses, ensuring payments reflect actual patient needs.

Health care fraud is a drain on resources and a betrayal of patient trust. Cases like Operation Gold Rush, UnitedHealth’s alleged upcoding, and the Arizona Medicaid schemes reveal the urgency of reform. If up to 10 percent of our nation’s $4 trillion healthcare budget is going to fraudulent care, reducing fraud must be one of the most reasonable and effective means of curbing health care costs in America that should garner bipartisan support. Combating fraud is not just a policy priority—it’s a moral imperative to ensure a sustainable, patient-centered system.