Medicare and Medicaid Services Seeks to Shift Fraud Prevention Strategy Through Contractor Restructuring
The Centers for Medicare and Medicaid Services is proposing a new contractor operating model that would give the agency greater oversight and direction of fraud investigations rather than relying primarily on private contractors. The shift aims to prevent fraudulent activity before funds are disbursed rather than pursuing recovery after payments have been made to bad actors. The proposal reflects the Trump administration's broader initiative to reduce fraud, waste, and abuse across federal health programs.
CMS is requesting information from potential contractors about how to restructure fraud oversight responsibilities. Rather than relying on private firms to independently investigate and pursue recovery actions, the agency would maintain direct control over investigation priorities, methodologies, and approval processes. Contractors would operate under CMS supervision, documenting their work in agency systems while maintaining flexibility to identify leads from authorized data sources.
The initiative reflects evolving views on program integrity management. CMS established a Fraud Defense Operations Center in early 2025 to monitor claims in real time, suggesting a shift toward upstream prevention rather than post-payment recovery. The agency is specifically exploring which technologies—including artificial intelligence, data analytics, and SQL methods—could enhance its ability to identify suspicious activity before funds are disbursed to providers.
This restructuring could affect Medicare and Medicaid beneficiaries, taxpayers, and healthcare providers. Tighter fraud prevention may theoretically improve program finances and reduce improper payments, though enhanced oversight could also alter contractor operations and potentially affect claims processing timelines. Healthcare providers may face more intensive scrutiny during payment cycles. The success of this model depends on whether centralized CMS direction improves detection accuracy without creating administrative bottlenecks or burdening legitimate providers with excessive verification requirements.