State and Territory Medicaid Programs Share the Federal Government’s Interest and Urgency around Medicaid Program Integrity

Over 2026, Medicaid leaders across the country will be staging a complex portfolio of work with important implications for the federal/state-territory partnership on which the program is premised. This portfolio includes implementation of Medicaid provisions of H.R. 1, the One Big Beautiful Bill Act (OBBBA, also referred to as the Working Families Tax Cut legislation) as well as responding to priorities billboarded by the Center for Medicare & Medicaid Services (CMS) leadership; notably, a program-wide focus on strengthening efforts to address Medicaid fraud, waste and abuse (FWA).

State and territory Medicaid teams have strong common interest with the federal government in ensuring that the program is as lean, efficient and accountable as possible. That said, achieving that goal will not be possible without differentiating among the three components of FWA and identifying the best available means of addressing each of them. And while fraud – intentional gaming of the program by health care providers for their own financial benefit – is justifiably top of mind, federal and state/territory Medicaid officials could also be focusing more actively on abuse, where services beyond what is medically necessary may have been provided, as well as waste of Medicaid resources that results from not addressing leading cost drivers in the program.

While state and territory programs are actively combating FWA through a range of tools and strategies, they could use more help from CMS. Specifically, CMS can help states/territories to:

• prevent and remedy fraud by 1) using Transformed Medicaid Statistical Information System (T-MSIS) data to perform predictive data analytics and identify key areas of concern on which programs should be focusing; 2) accelerating the time frames in which CMS is responding to reports of fraud raised by state attorneys general and Medicaid Fraud Control Units (MFCUs); and 3) continuing to use corrective action plans (CAPs) that are mutually agreed to and acted on by states and the federal government to investigate, remedy and prevent further instances of fraud;
• avoid abuse by partnering with states to create national toolkits around assessment, utilization management and quality standards for Medicaid-covered services that have rapidly arisen out of advocacy by families and provider organizations, CMS guidance, and coverage mandates enacted by state legislatures, all focused on addressing the needs of historically underserved people – two leading examples of this are services for people with autism spectrum disorder (ASD) and people with mental health conditions or substance use disorder (MH/SUD); and
• reduce waste by:
  • avoiding the historical phenomenon of “first dollar” spending on eligibility and payment processing systems in each individual Medicaid program, as CMS’ recent announcement around partnerships with tech vendors has helpfully begun to address, with an immediate focus on equipping states to implement systems-related aspects of the OBBBA as cost-effectively as possible and avoiding expensive future re-work;
  • continuing to bring the influence and purchasing power of the federal government to bear on controlling the cost and rate of growth of Medicaid covered prescription drugs, as the administration and the Centers for Medicare and Medicaid Innovation (CMMI) have proposed to do with several new demonstrations (Cell and Gene Therapy Access Model, GENEROUS and BALANCE); and
  • supporting state Medicaid programs in “rebalancing” long-term services and supports (LTSS) for older adults and people with disabilities from more costly institutional settings to home and community-based settings.

In this watershed year of OBBBA/WFTC implementation, as well as renewed focus on program accountability, state and territory Medicaid programs will benefit from guidance and support from CMS in the mutual aim of continuing to enable access to high quality health services for all people who are eligible for the program, while exerting every possible lever to control costs and ensure adherence to all standards around beneficiary eligibility as well as proper provision of services by health care providers who are enrolled in the program. CMS has important opportunities to use its influence, partnerships with federal agency peers, and purchasing power to support programs in their efforts to control costs and to ensure program integrity.

Continue reading the second part in this series, “Why and How States and Territories are Addressing Fraud, Waste and Abuse.”