Oz Says California’s Not Fighting Health Care Fraud, but Data Shows It’s Part of a Larger Battle

However, CMS clarified that not all billing activities referenced by Oz were alleged to be improper. And a review of the most recent available data shows that there are hotbeds of health care fraud across the country and in all areas of practice, most of them allegedly perpetrated by health insurers and other national actors, and that California outperforms most other states in recovering fraudulent dollars.

As temperatures rise in the Trump administration’s conflict with California, a handful of Republican lawmakers have entered the fray, accusing Gov. Gavin Newsom in a March letter of enabling “widespread fraud.” Democratic state officials insist they are aggressively fighting fraud, and Newsom has filed a civil rights lawsuit against Oz, calling the language used in the allegations “baseless and racially motivated.”

“The Trump administration is attempting to take the problem of fraud – a very real and national problem – and use it as a weapon against Democratic states,” California Attorney General Rob Bonta said in a statement in early February.

Oz said on a podcast that he would stop “hundreds of millions of dollars” in payments to California if he didn’t get satisfactory answers from state officials. He and Vice President JD Vance announced in late February that they would delay about $260 million in Medicaid payments to Minnesota, another Democratic-led state, because of allegations of fraud there, and the state has now filed a lawsuit.

Oz also launched social media campaigns alleging fraud on high-value public benefits in Democratic-run Maine and New York. On March 17, he added a Republican-led state to his target list: Florida.

Andy Schneider, a professor at Georgetown University who served as a senior advisor primarily on Medicaid integrity issues during the Obama administration, said fraud has always been a problem in every state, going back decades. About $3.4 billion in Medicare and Medicaid fraud across the country was recovered in fiscal year 2023, according to the most recent report available. Insurers have paid the highest settlements in alleged health care fraud schemes.

“Bad actors trying to steal public health care funds have been around for a long time,” Schneider said.

How California Stands

The federal government is responsible for Medicare, which primarily benefits older adults, while Medicaid, which primarily serves low-income individuals, is a joint federal-state program. Melissa Rumley, a spokeswoman for the Department of Health and Human Services’ Office of Inspector General, said the office cannot make state-by-state data on Medicare fraud available because federal investigations often cross jurisdictions.

States file annual reports on the actions of Medicaid fraud units that are jointly funded with the federal government and managed by state attorneys general. They investigate fraud and abuse and neglect of Medicaid patients.

These reports provide an idea of ​​the extent of Medicaid fraud in all states. In fiscal year 2024, states recovered about $1.4 billion in fraud, compared to $949 billion in total Medicaid spending, according to a report from the HHS Office of Inspector General. California recovered an outsized share, recovering more than 50% of all criminal recoveries made by fraud units nationwide in fiscal year 2024, even though the state accounted for only about 17% of registrations.

California ranked fourth in the United States in 2024 in dollars recovered per Medicaid enrollee in civil and criminal investigations, behind the District of Columbia, Montana and Delaware. It tops all the most populous states, followed in order by Texas, Florida and New York. (California and federal officials have noted that state recovery data varies widely from year to year, often due to the length of investigations.)

Vulnerability of palliative care

One aspect of health care fraud that has been the focus of Oz’s attack on California is hospice fraud, which has plagued both Republican and Democratic administrations.

The use of hospice care, intended to provide care for patients expected to die within six months, increased by more than 8% between fiscal 2020 and 2024, to approximately 1.84 million Medicare beneficiaries, significantly increasing costs.

To combat fraud, the Biden administration in 2023 strengthened oversight of hospices in California, Arizona, Nevada and Texas. Last year, the Trump administration added Ohio and Georgia.

CMS spokesman Chris Krepich did not specify what criteria were used to choose which states to monitor, but only said the decision was based on “activity typically indicative of hospice fraud.” By June, the agency had revoked the Medicare enrollment of 122 hospices in the original four states, but Krepich said a state breakdown was not available.

While Oz said there is about $3.5 billion in fraud in the hospice and home care industry in Los Angeles County alone, his agency clarified that figure is the overall Medicare billing related to hospice and home care services. Krepich said “not all billing activities mentioned in the remarks are alleged to be improper” and added that the agency could not identify the amount of fraudulent activity until an “evidence-based” investigation was completed.

This is not to say that there is no truth to the allegations of hospice fraud.

A state audit released in 2022 found “numerous indicators” of large-scale fraud in Los Angeles County, and a CBS News investigation found nearly 500 hospices within a 3-mile radius, including 89 businesses registered in a single building in Van Nuys. Bonta acknowledged that “hospice fraud has become an epidemic in California.” He noted that state officials have been aggressively combating the phenomenon for years, including passing new laws.

In January, the state charged several people in Monterey County with hospice fraud. This follows cases of hospice fraud in Los Angeles and San Bernardino counties.

However, California public health officials were slow to adopt emergency regulations that were supposed to be in place by this year. The state Department of Public Health is currently reviewing the regulations, according to spokesman Mark Smith.

Meanwhile, the state has revoked the licenses of more than 280 hospices in the past two years and is currently evaluating 300 additional hospices, according to the governor’s office. California had more than 2,800 licensed hospice agencies in 2022, according to the state audit.

Civil rights complaint

Meanwhile, Newsom pushes back against Oz. The governor filed his discrimination complaint with the HHS Office for Civil Rights, which oversees CMS. The office said it would first decide whether it has the authority to investigate and then, if so, gather information through interviews and documents. However, the process appears designed to help people who have lost their jobs due to discrimination or to correct a specific policy, and it is unclear whether there could be any real-world consequences.

The governor wants the agency to address “systematic bias on the part of its leadership,” Newsom spokeswoman Marissa Saldivar said.

Krepich said CMS “does not target communities, ethnic groups, or states” and bases its decisions on “confirmed survey results.” The allegations of organized fraud refer to “documented criminal cases,” Krepich said, providing a link to a hospice fraud case in which California residents were convicted of using the identities of foreign nationals to steal nearly $16 million from Medicare.

It is unclear exactly which cases Oz was referring to when talking about the Russian and Armenian mafia.

Ciaran McEvoy, a spokesman for the U.S. Attorney’s Office for the Central District of California, which includes Los Angeles County, said he was not verifying whether the hospice fraud defendants would be foreign nationals, but he pointed to the office’s online prosecution announcements. None have alleged involvement in foreign influence or organized crime.

The state audit references allegations made in 2010 by the U.S. Department of Justice under President Barack Obama that an “Armenian-American organized crime enterprise” was behind a national health care scam.

Federal officials at the time described an “international organized crime enterprise” based in Los Angeles and New York but with roots in Russia and Armenia. The scheme involved billing for unnecessary medical treatments, not hospice fraud.

A 2020 Los Angeles Times investigation revealed fraudulent schemes in which hospice operators recruited patients who were not actually terminally ill and then paid bribes to doctors who falsely certified that those patients were dying so that hospices could bill Medicare. There is no mention of foreign involvement.