The Crackdown on Health Care Fraud Is Reshaping Medicine. It Is Also Reshaping Politics.

On Oct. 1, the prosecutor who now runs the Justice Department’s campaign against fraud sent a five-page memo to his staff.  Health care, Colin M. McDonald wrote, comes first.  His prosecutors were to take an “aggressive, all-tools approach,” and in deciding whether to charge a company, they were to give “great weight” to whether its managers knew about a scheme and whether anyone had tried to hide it.

The memo was the latest marker in a campaign that has, in the past 18 months, charged a record 455 defendants in a single sweep, produced the largest False Claims Act recoveries in the law’s modern history, reorganized the Justice Department around fraud, and begun withholding Medicaid money from states the administration accuses of lax controls.  By nearly every measure the government reports, federal health care fraud enforcement is larger today than at any point since Congress rewrote the whistleblower law in 1986.

The campaign is built on real scandals, some of them staggering.  It also carries a political charge that is hard to miss.  The states under the harshest scrutiny are led by Democrats.  The fraud narrative underwrites Medicaid changes that the Congressional Budget Office projects will leave millions more people uninsured.  And President Trump has granted clemency to more than a dozen health care executives and practitioners convicted of fraud and related crimes, even as his Justice Department vows to prosecute all of it.

What follows is a look at how the country got here, what the administration is doing and why, how the politics cut, and what the next few years hold for the hospitals, physician groups, and other providers who will live with the consequences.

The Scandals That Set the Stage

The catheter scheme.  In June 2025, the Justice Department unsealed charges in what it called Operation Gold Rush, a $10.6 billion scheme in which a transnational network allegedly acquired dozens of medical equipment companies, used the stolen identities of more than a million Medicare beneficiaries, and billed for urinary catheters and other supplies that patients never requested.  It accounted for most of the record $14.6 billion in alleged losses announced that year.  Prosecutors say the network kept going after the arrests: in June, one member was charged with an additional $3.7 billion in false claims and arrested in Kyrenia, in northern Cyprus, and two others were extradited from Estonia.

Minnesota.  Federal prosecutors have estimated that fraud across Minnesota’s social-service programs, including Medicaid housing stabilization and autism services, could exceed $9 billion, an estimate the state disputes.  The state shut down its housing stabilization program on Oct. 31, 2025, and in January froze new provider enrollment in 13 “high-risk” service types, according to a timeline kept by Georgetown University’s Center for Children and Families.  On Jan. 5, Gov. Tim Walz announced that he would not seek a third term, saying the fraud had happened on his watch and accusing political opponents of exploiting it.  The Trump administration then found the state out of compliance with federal fraud-control rules, proposed withholding about $2 billion a year, and has deferred roughly $550 million in matching funds in three rounds.  Minnesota is fighting the deferrals in court; a federal judge denied its request for a preliminary injunction in April.

Medicare Advantage.  Medicare pays the private insurers that run Medicare Advantage plans more for sicker patients, a system known as risk adjustment that gives plans, and the doctors who work with them, an incentive to record more diagnoses.  In January, Kaiser Permanente affiliates paid $556 million to resolve allegations that they pressed physicians to add diagnoses after the fact, the largest settlement of its kind; Kaiser said the dispute was about documentation requirements, not quality of care.  In August, The Villages Health System, a provider group in Florida’s largest retirement community, agreed to pay $541.5 million to resolve allegations that it submitted unsupported diagnosis codes to Humana, UnitedHealthcare, and Florida Blue plans from 2020 through 2024; the case began with the company’s own disclosure to federal investigators and ended in bankruptcy and a sale to Humana’s CenterWell unit.  UnitedHealth Group, the nation’s largest Medicare Advantage insurer, has acknowledged criminal and civil Justice Department investigations into its billing; the company says independent audits show its coding to be among the most accurate in the industry.  A Senate Judiciary Committee report released in January concluded that the company had made risk adjustment a profit strategy.

Wound care.  Spending on skin substitutes, the allografts applied to chronic wounds, surged after 2021.  In one Arizona case charged in June, prosecutors say a company bought grafts from tissue banks, relabeled them at a 2,000 percent markup, charged up to $1,450 per square centimeter, and paid about 40 percent of that back in kickbacks; providers billed Medicare more than $4 billion for the company’s products in two and a half years.  Medicare cut its payment to $127 per square centimeter on Jan. 1, and the Justice Department says the allograft spending would otherwise have added $11 a month to every Medicare beneficiary’s Part B premium.

Hospice, home care, and recovery housing.  In Los Angeles, where state and federal officials have for years flagged hospices that exist mainly on paper, a hospice owner was charged in June with a $27.7 million scheme that allegedly included buying the identities of recently deceased people from a funeral home employee so that his patient-death rate would look normal to Medicare’s fraud algorithms.  Arizona spent years unwinding a sober-living scheme that drained its Medicaid program, and this year’s charges reached the founders of a West Virginia recovery program.  The cases share a profile: vulnerable patients, services that are hard to verify after the fact, and billing that outruns any plausible capacity to deliver care.

How Fraud Became a Governing Priority

The administration’s anti-fraud program rests on three pillars: a White House command structure, a rebuilt Justice Department, and a far more assertive Medicare and Medicaid agency.  Congress added a fourth in statute.

The White House.  On Jan. 8, the White House announced a new National Fraud Enforcement Division at the Justice Department.  On March 16, Mr. Trump signed Executive Order 14395, creating a Task Force to Eliminate Fraud chaired by Vice President JD Vance, with Andrew Ferguson, the chairman of the Federal Trade Commission, as vice chair and the heads of the Departments of Health and Human Services, Treasury, Labor, Housing and Urban Development, and Veterans Affairs among its members.  The order gave agencies 30, 60, and 90 days to identify vulnerabilities, impose minimum anti-fraud controls, and expand eligibility verification and data sharing, and it directed the Justice Department to expedite False Claims Act cases, including whistleblower suits.  It aimed squarely at programs run jointly with the states, asserting that some had refused basic controls and that ineligible people and providers were exploiting the programs as a result.

The Justice Department.  On April 7, Todd Blanche, then the acting attorney general, formally created the division and moved the Criminal Division’s Health Care Fraud Unit, most of its government and consumer fraud prosecutors, and its criminal tax lawyers under Mr. McDonald, a former career prosecutor in San Diego.  Every United States attorney’s office was told to detail a prosecutor to the division, and the department was told to draw up a hiring plan for a rapid expansion.  In August, the department opened a National Fraud Detection Center, a permanent, prosecutor-led analytics unit, and Mr. McDonald issued a restructuring memo that, according to Law360, moves roughly 500 attorneys and staff into the division.  His Oct. 1 directive lists 10 factors that get “great weight” in corporate charging decisions, among them management knowledge, concealment, schemes lasting three years or more, harm to taxpayer-funded programs, $25 million or more in losses, money flowing to foreign adversaries, and immigration offenses.  It also orders new incentives for whistleblowers, including those who took part in the fraud.

Medicare and Medicaid.  Dr. Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, has made Medicaid program integrity a personal cause.  His agency found Minnesota in significant noncompliance in January, announced the first deferral alongside Mr. Vance on Feb. 25, and on July 21 deferred $867.5 million from California and $199 million from Minnesota in a single action, which Robert F. Kennedy Jr., the health secretary, framed as a condition of federal funding.  The agency has also sent warning letters to New York and Maine, imposed prior authorization on 17 categories of traditional Medicare services in six states under a six-year pilot that began in January, opened a portal for providers to report Medicare Advantage plan practices, and stripped 1,403 providers of billing privileges in the June takedown alone.  Deferrals, the department notes, are holds pending documentation, not permanent cuts.

Congress.  The 2025 reconciliation law, which Republicans named the One Big Beautiful Bill Act, carried the fraud rationale into statute.  Adults covered through the Affordable Care Act’s Medicaid expansion face work requirements and six-month eligibility checks beginning Jan. 1, 2027, in most states; Nebraska began enforcing in May.  The House Oversight Committee opened the year with a hearing on Minnesota, and Senator Charles E. Grassley, Republican of Iowa, extended a bipartisan line of inquiry into Medicare Advantage with his report on UnitedHealth.

Why now?  Part of the answer is arithmetic.  Medicare and Medicaid together spend well over a trillion dollars a year, and the government’s own estimates put improper payments in the two programs in the tens of billions annually.  Part of it is political.  Fraud unites the Republican coalition’s fiscal hawks and populists, and it supplies a defensible frame for benefit restrictions that would otherwise be unpopular.  And part of it is institutional.  The vice president now owns a portfolio with visible wins, and a Justice Department under pressure to show results has built an infrastructure to produce them.

Some of this is less new than it looks.  The record False Claims Act recoveries reflect cases filed over many years, under both parties, and the whistleblower pipeline that produced them predates this administration.  The Medicare Fraud Strike Force dates to 2007 and had charged more than 6,200 defendants before this year’s sweep.  What is new is the scale, the centralization, and the willingness to use federal payment leverage against states.

The Politics of Prosecuting Fraud

Nobody runs for office in favor of fraud, which is why the issue is so useful, and so contested.  Four fault lines stand out.

Who gets targeted.  The states singled out for deferrals and warning letters, Minnesota, California, New York, and Maine, are all led by Democrats.  The administration says it is following the data, and Minnesota’s own officials concede that fraud there was real and extensive.  Andy Schneider, a research professor at Georgetown’s Center for Children and Families, has called withholding $2 billion a year from a state’s Medicaid program “the nuclear option,” and Minnesotans with disabilities have reported interruptions in care as payments slowed.  Mr. Walz has called the deferrals a campaign of retribution.  The executive order’s own language, which blames program exploitation on “illegal aliens, criminals, foreign gangs” and state officials, and the administration’s focus on Minnesota’s Somali community have made the immigration politics explicit.  Whether federal officials may withhold Medicaid funds this way is now before the courts, with the Supreme Court’s 2012 ruling in National Federation of Independent Business v. Sebelius, which limited Washington’s power to coerce states through Medicaid funding, in the background.

Who does the overseeing.  Mr. Trump dismissed 17 inspectors general on Jan. 24, 2025, including Christi Grimm, the inspector general for health and human services, and her office lost its chief counsel, chief medical officer, and other senior leaders over the following months.  Her successor, Thomas March Bell, was not confirmed until December.  Supporters say the office is being refocused; Ms. Grimm, who sued over her removal, has argued that independent oversight is giving way to loyalty.  The administration has also pointed the False Claims Act at policy goals, creating a Civil Rights Fraud Initiative in May 2025 to pursue federal grantees over diversity programs and a task force to pursue tariff evasion.  Those uses stretch a statute written for defense contractors and Medicare billers, and they raise a question that will shadow the campaign: whether “fraud” is being defined by the conduct or by the identity of the target.

Who gets mercy.  Mr. Trump has used his clemency power on behalf of people convicted in health care fraud cases.  Protect Our Care, a Democratic-aligned advocacy group, counted 15 such pardons or commutations in his second term by April, involving more than $2 billion in fraud, among them a Florida mental health executive convicted in a $205 million Medicare scheme whose 50-year sentence was commuted with no further restitution owed.  The White House has described such grants as second chances and corrections of prosecutorial overreach, and KFF Health News documented a similar pattern in Mr. Trump’s first term.  House Democrats have made the contrast a talking point, and it is a fair one: an enforcement program that promises “full-spectrum accountability” is undercut when prominent defendants are released by executive grace.

Who gets to sue.  The administration depends on whistleblowers.  Suits filed by private citizens under the False Claims Act, who keep a share of what they recover, produced $5.3 billion of last year’s total, and in health care cases the settlements and judgments in suits the government declined to join exceeded those in suits it did join, a figure that includes a $1.6 billion jury verdict still on appeal.  Yet the conservative legal movement has mounted the most serious constitutional attack on those suits in the statute’s modern history, arguing that private relators wield executive power without being appointed to it.  A federal judge in Tampa agreed in 2024.  On Sept. 1, the Court of Appeals for the Eleventh Circuit unanimously reversed, holding that relators are not officers of the United States while leaving other constitutional arguments for the trial court.  Three Supreme Court justices have signaled interest in the question.  The administration thus finds itself defending, in court and in its own directives, a mechanism that many of its allies would like to see struck down.

The state politics are their own story.  Minnesota’s scandal ended a governor’s career, produced a new independent state inspector general, and became a national Republican talking point; other governors have tightened controls preemptively.  Expect fraud oversight to feature in gubernatorial and legislative races this November and in 2028, and expect the state Medicaid fraud units, 50 of which joined the June takedown, to keep growing.

What the Next Few Years Look Like for Providers

Whatever happens in November’s midterm elections, the enforcement infrastructure built in 2025 and 2026 will outlast the news cycle.  Divisions, detection centers, and data pipelines do not disband quickly, and False Claims Act cases filed in 2025 will still be resolving in 2028 and 2029.  Here is what I expect.

Data will find you first.  The Health Care Fraud Unit’s Data Fusion Center and the new National Fraud Detection Center exist to identify billing outliers before anyone files a complaint, and the Justice Department now has computing space inside Medicare’s own claims data warehouse to run its algorithms.  Providers whose utilization diverges from their peers should expect targeted records requests, prepayment review, and payment suspensions, and they should expect the government to arrive with its analysis already done.

Prevention will crowd out pay-and-chase.  The prior-authorization pilot in traditional Medicare runs through 2031 and may expand beyond six states.  Payment deferrals to states will ripple down to providers in flagged service categories, whether or not those providers did anything wrong.  Cash-flow planning has become a compliance function.

Medicare Advantage will stay at the center.  Risk adjustment is where the money is, and the Kaiser and Villages settlements show that both insurers and the provider groups that feed them diagnoses are in scope; a second provider group, Complete Health Partners, settled similar allegations for $14.1 million in September.  How the UnitedHealth investigations end will set the ceiling for what the government believes it can prove against a national insurer.  Medicare’s own audit ambitions suffered a setback when a federal judge in Texas vacated the rule that let the agency extrapolate audit findings across entire contracts, which leaves the False Claims Act as the government’s sharpest Medicare Advantage tool.

Medicaid will be turbulent.  Work requirements and six-month eligibility checks arrive on Jan. 1, 2027, in most expansion states, and the resulting churn will generate coverage gaps and denied claims.  Providers of home- and community-based services, behavioral health, autism therapy, and personal care should expect documentation audits modeled on the Minnesota and California reviews.

Individuals will be charged, and management will be questioned.  Ninety licensed professionals were charged in June alone.  The Oct. 1 directive makes management knowledge and concealment the first two factors in corporate charging decisions and promises rewards for insiders who come forward.  Boards and executives who cannot show what they knew, when they asked, and what they did will be at a disadvantage.

Whistleblowers will keep coming.  Nearly 1,300 whistleblower suits were filed in fiscal year 2025, most of them still under seal.  Unless the Supreme Court intervenes, that pipeline will drive civil enforcement for the rest of the decade, and the new division is building criminal whistleblower incentives to match.

The politics may shift; the posture should not.  A Democratic House could redirect oversight toward pardons and inspector-general independence, and a future administration may dial back the confrontation with states.  But no recent administration has reduced health care fraud enforcement, and the appetite for Medicare Advantage accountability runs in both parties.  For providers, the practical conclusion is the same under any scenario: assume your data is being watched, and make sure it tells a story you can defend.

A Machine Built to Outlast Its Builders

Health care fraud is real, large, and worth prosecuting, and the administration has built a machine capable of finding it at a scale its predecessors never managed.  The same machine is being used in ways that raise fair questions about targeting, oversight, and consistency, and those questions will be settled in courtrooms and at the ballot box.  Providers do not get to wait for the answers.  The safest course is to run an organization whose billing, documentation, and arrangements would look the same to a skeptical analyst as they do to the people who run it.

Bradley S. Byars is a health law attorney in Southwest Florida whose practice focuses on federal health care regulatory compliance and enforcement, including the False Claims Act, the Anti-Kickback Statute, and the Stark Law.  He practices through The Law Office of Bradley S. Byars, LLC.  The views expressed are his own.