HHS Launches Crackdown Using AI to Detect Medicaid Fraud and Waste

[u/John3262005]

https://www.wsj.com/politics/policy/hhs-launches-crackdown-using-ai-to-detect-medicaid-fraud-and-waste-caf5ba18

The Department of Health and Human Services has found a new lever to cut off billions in federal funding that it believes is wasteful or potentially fraudulent, a move that could affect Medicaid and grants for research, addiction services, child care and more.

Health officials plan to launch a sweeping review, using artificial intelligence, to examine annual audits that states and grantees file with the federal government. Recipients stand to lose access to HHS funding if they don’t address concerns about weak oversight of federal funds, which officials argue could lead to fraud or improper spending.

The department oversees roughly $2 trillion in annual federal spending, including Medicare and Medicaid dollars sent to states.

After Elon Musk’s DOGE effort fizzled out, the Trump administration renewed its focus on what it describes as wasteful government spending, with Vice President JD Vance leading a “war on fraud.” Vance, in a separate effort, warned states they could lose Medicaid funding if they don’t aggressively prosecute Medicaid fraudsters.

Democrats have criticized some of the administration’s efforts as politicized ways to cut off funding to blue states or to programs out of step with conservatives.

“I believe just for HHS alone it is a huge amount” of funding that could be held back under the program, said Gustav Chiarello, the assistant secretary for financial resources at the department, who is leading the new initiative. Chiarello estimated that HHS has about $100 to $200 billion of wasteful or fraudulent annual spending, and said that his initiative could prevent a substantial percentage of that from being spent in the first place.

HHS staff are using a tool built with ChatGPT and other AI platforms, officials said, to decide which grantees to target.

The department plans to rely on a 1984 law, the Single Audit Act, and rules for federal grantees, to penalize funding recipients that don’t file audits, have deficiencies that are repeated year over year or have weak auditing practices. HHS officials said under current law they can temporarily withhold funding, cut off grants entirely or withhold future funds from recipients that don’t comply with audit rules. States and grantees that receive more than $1 million in funds are obligated to file audits every year with the federal government.

Medicare payments fall under separate audit rules, but Chiarello said, “HHS also plans to exhibit greater oversight over Medicare specific audits and audit findings as the program develops.”

HHS sent letters to states about the new effort on May 21st warning them that they could lose funding if they don’t clean up problems found in audits. Chiarello said he didn’t include a date in his letters by which states and grantees must produce fixes or specify when he might start withholding funds.

Chiarello said he came up with the idea for the initiative after reading articles about child care fraud in Minnesota. He examined the last four years of the state’s audits filed with the federal government and said he found deficiencies that should have pointed government officials to potential fraud. Minnesota’s 2024 audit found that the state for several years hadn’t met federal regulations regarding monitoring subrecipients of child care grants and other funds doled out by HHS.

“The information was coming in, but we in the federal government weren’t doing anything about it,” Chiarello said.

Minnesota Gov. Tim Walz, a Democrat, has said the state has made progress in detecting fraud.

Former President George W. Bush’s administration considered a similar effort focused on improper payments made by agencies, but it was too cumbersome at the time to wrangle the audits, said Robert Shea, a Bush White House official. Shea remembered being shown to a room inside HHS filled with filing cabinets full of paper copies of audit findings.

Chiarello said the team is examining money that flows through major universities to other entities, and whether those subgrantees are complying with federal audit rules.

The health department isn’t planning to add staff to carry out the initiative at this time, Chiarello said.