The buck stops here. We’ve got to clean up the system. With these words, Dr. Mehmet Oz, now at the helm of the Centers for Medicare and Medicaid Services (CMS), signaled a pivotal moment for Medicaid oversight and reform. In 2023 alone, erroneous Medicaid payments rose to more than $50 billion, a total that not only surpasses the budgets of numerous federal agencies but also triggers alarms about what could be a $500 billion hemorrhage over the next ten years.
Behind the news, the origins of this problem are deeply technical. Medicaid, which covers about 79 million Americans, is a large, complicated ecosystem where fraud, waste, and abuse flourish amidst antiquated processes and scattered information. As the authors at the University of Virginia’s Darden School of Business observe, the “unholy trinity” of economic incentives, information asymmetry, and agency conflict provides rich soil for abuse. “If only a small fraction of people commit fraud, the resulting numbers will immediately shoot up into the billions of dollars,” asserts Christoph Herpfer, Darden assistant professor of finance.
The magnitude of the issue is overwhelming. Scams in the U.S. healthcare system are sucking $100 billion a year from an already overburdened system, with Medicaid and Medicare being the focal points of the losses. However, as clarified by the KFF Medicaid Program Integrity Brief, not all improper payments are scams—most result from lack of documentation or from administrative errors. In 2024, 79.1% of improper Medicaid payments were from a lack of documentation or missing administrative procedures, not even necessarily payments to ineligible beneficiaries or for services.
Oz’s administration is responding with a suite of reforms. Federal funding will be halted for non-essential Medicaid services, and claims for illegal immigrants will be blocked. “We’re not going to pay for illegal immigrants in states that are submitting those claims,” Oz stated, underscoring a shift toward stricter eligibility enforcement and a focus on core healthcare services for low-income Americans.
But the argument over Medicaid’s future is anything but over. House Minority Leader Hakeem Jeffries has forcefully denounced Republican plans for work requirements, vowing they would “enact the largest Medicaid cut in American history.” The politics are deep, but the consensus below the hype is that both parties believe there must be more accountability and sustainability.
Technology is fast transforming the program integrity toolkit. Artificial intelligence (AI) and sophisticated analytics are becoming force multipliers for fraud detection. In its case study, AI-based models deployed to CMS have detected over $1 billion in suspect claims every year with over 90% accuracy and compressing months to develop fraud models into minutes. These systems sort through millions of claims, highlighting intricate patterns that would go unnoticed under manual review.
But AI is no magic solution. As ICF’s study highlights, AI cannot issue final enforcement decisions or substitute for the chain of custody for legal action. Rather, AI speeds up investigations, freeing up human experts to work on complex cases. In 2022, the Center for Program Integrity’s operations returned over $8 for each $1 invested, a return that can potentially increase further as AI instruments develop.
Modernization goes beyond fraud prevention. Electronic health records (EHRs) interoperability is becoming key to Medicaid’s evolution. As Innovaccer experts observe, seamless data transfer allows for a 360-degree beneficiary view, facilitates real-time eligibility checks, and decreases administrative workload. States are employing platforms that aggregate clinical, claims, and social determinants data, silo-busting and enabling sophisticated analytics for population health management.
The effect of EHRs is most significant in high Medicaid nursing homes. A recent national study discovered that every unit increase in the EHR implementation score was coupled with a 0.12% improvement in total margin, which indicates that even resource-limited facilities can perform better economically through investments in digital technology. However, just 44% of high Medicaid nursing homes are fully using EHRs, making targeted incentives and assistance necessary.
Telehealth, also, is redefining the Medicaid landscape. Users of telehealth during the COVID-19 pandemic reduced their monthly healthcare costs by 61%, a recent study has found. The Centers for Medicare and Medicaid Services project that telemedicine may save Medicare patients as much as $540 million by 2029. Telehealth not only lowers emergency room utilization and treatment adherence but also solves access barriers for rural and disadvantaged communities.
But suggested Medicaid reductions could undo these gains. As experts warn, transferring the financial burden to states could prompt telehealth reimbursement cuts, defeating the very innovations that have been shown to work in cost savings and health equity. “Cutting Medicaid would shift more of the financial burden to states, forcing difficult decisions about who and what gets covered,” an expert told The Hill.
Workforce shortages and digital divides are still ongoing challenges. A study conducted by Columbia University identified low Medicaid telehealth reimbursement as a cause of staffing emergencies in Federally Qualified Health Centers, especially among mental health professionals. Digital inequities in access to the internet and digital literacy still confine telehealth among the most vulnerable populations.
For Medicaid administrators and policy experts, the future is bright but not easy. AI, EHR interoperability, and telehealth are not niceties anymore—they are central to program integrity and cost management. As states and the federal government struggle with the dual mandates of fiscal stewardship and access equity, the combination of advanced technology, strong oversight, and sustainable financing will determine the next generation of Medicaid reform.
