Health Care Fraud Is Wasting Billions. Texas Can Strengthen Tools to Stop It.

By: TAHP | Tuesday, April 7, 2026

Part of TAHP's Affordability Series: What's Driving Up the Cost of Coverage

What's new: Health care fraud is under a national spotlight. In the past year, the federal government has charged 324 defendants in the largest health care fraud takedown in U.S. history, and CMS launched a new initiative to stop fraudulent billing before it happens.

• This week, TAHP CEO Jamie Dudensing testifies before the Texas Senate HHS Committee on how Medicaid managed care has protected Texas taxpayers and what more can be done.
• But fraud, waste, and abuse doesn't stop at Medicaid and Medicare. The same schemes are driving up costs for Texas employers and families in the private market.

Why it matters: Every dollar lost to fraud shows up somewhere. It shows up in higher Medicaid costs for taxpayers, higher premiums for employers, and higher out-of-pocket costs for families. At a time when health care costs are already rising faster than inflation, Texas can't afford to leave money on the table for bad actors.

Fraud, waste, and abuse is getting serious attention:

• $14.6 billion in fraud charges: DOJ's June 2025 takedown charged 324 defendants across the country. 48 of them were from Texas.
• $6.8 billion recovered: False Claims Act recoveries hit an all-time record in 2025, with $5.7 billion from health care alone.
• CMS is going on offense: Dr. Oz launched the CRUSH anti-fraud initiative in February 2026, including a moratorium on new Medicare DME suppliers and launching an AI-powered prior authorization pilot running in Texas and five other states.
• Governor Abbott ordered action: In January, the Governor directed HHSC and OIG to launch new Medicaid fraud investigations, ensure health plan investigative units are fully staffed, and complete a targeted review of autism services by June.
• Texas AG recovered $125 million from health care fraudsters in 2025 alone, with 123 arrests and 180 indictments.

Texas Medicaid managed care has been doing this work for decades: Texas moved away from the old fee-for-service "pay and chase" model in the 1990s for a reason. Under fee-for-service, waste ran as high as 10% of total spending. Medicaid managed care changed that.

• $13.9 billion saved: An independent study directed by HHSC found that Medicaid managed care organizations saved Texas $13.9 billion from 2009 to 2017, an 11.7% reduction in total program costs.
• Dental managed care cut costs 20% in two years: Before dental managed care, Medicaid dental costs had surged 250% in five years. DMOs reduced inappropriate orthodontia billing by 72% within six months.
• Foster care kids got safer: Before STAR Health, children in foster care were routinely overmedicated. Managed care used prior authorizations and care coordination to cut the use of psychotropic drugs by 71% and reduce psychiatric hospital readmissions by 66%.

Health plans still need better tools to fight back: Whether it's Medicaid managed care or employer coverage, health plans are on the front lines of catching fraud. But bad actors adapt fast. When they find a billing code that isn't closely monitored, utilization spikes overnight. And in the private market, the enforcement tools and penalties are even weaker than in Medicaid.

• The pay-and-chase model still dominates: In both Medicaid and employer coverage, most fraud is caught after the claim has already been paid. By then, the money is often gone. Other states allow health plans to place payment holds or to pause prompt-pay requirements when they suspect fraud.
• Fraud hits the private market too: The same upcoding, phantom billing, and overbilling schemes putting Medicaid and Medicare at risk are also hitting employer health plans. Employers cover more than half of all Texans, and they are escalating their fight against fraudulent provider bills. But the Texas commercial market has fewer enforcement tools and weaker penalties than Medicaid.
• AI is on both sides of this fight: Hospitals are using AI to upcode bills. Health plans need the flexibility to use AI, data analytics, and other technology to catch it. As we covered earlier in this series, AI-assisted upcoding may already account for over $2 billion in inflated claims.
• Private equity is part of the problem: Private equity firms are buying into high-margin health care services and building business models around billing as aggressively as possible. In states without strong guardrails, PE-backed autism therapy providers have billed Medicaid as much as $340,000 per child. The playbook is the same: find a weakness in the payment system and scale it.

What Texas should do:

1. Expand fraud protections to the private market: The same fraud protections and penalties that exist in Medicaid should apply to the commercial market. Employers and families deserve the same level of protection as taxpayers.
2. Move from pay-and-chase to prevention: Texas should study and adopt Medicaid fraud prevention strategies, including prepayment reviews for high-risk services, payment holds when fraud is suspected, and pausing prompt pay deadlines during active investigations.
3. Start managed care on day one of Medicaid enrollment: Right now, there can be gaps between when someone enrolls in Medicaid and when they are assigned to a managed care plan. During that window, fee-for-service lacks the tools managed care uses to coordinate care, prevent waste, and hold providers accountable.
4. Don't make it harder to catch bad actors: Legislation that restricts prior authorization, data analysis, overpayment recovery, or fraud investigations makes it harder to hold bad actors accountable and shifts costs onto taxpayers, employers, and families.
5. Create a task force to examine and expand Medicaid fraud tools: Review the tools and flexibility MCOs currently have to manage utilization, detect fraud, design benefits, and manage their networks. Recommend where MCOs need more flexibility and where new tools like AI, data analytics, and electronic visit verification should be adopted.

What's next: TAHP CEO Jamie Dudensing testifies before the Senate Health and Human Services Committee on Wednesday with specific recommendations for strengthening Texas Medicaid program integrity.

• At the federal level, CMS is accepting public comment on its CRUSH anti-fraud framework, and the administration's interagency fraud task force has 90-day deadlines to identify vulnerable programs and implement minimum anti-fraud requirements.

The bottom line: Fraud, waste, and abuse make health care more expensive for everyone. Texas Medicaid MCOs have saved taxpayers billions by catching bad billing and managing costs. But bad actors move fast. Giving Medicaid managed care and health plans the flexibility to prevent fraud before it happens protects taxpayers, employers, and every Texas family paying for coverage.

Keep up with TAHP's health care affordability series:

• April 2nd: The No Surprises Act is protecting patients, but private equity is creating a new affordability crisis.
• March 30th: Hospitals are using AI to charge more.
• Series Opener: Why is health insurance getting more expensive?