HR-5364-119
Referred to the House Committee on Energy and Commerce.
Sponsored by Derek Schmidt (R-KS)
What it does
This bill would amend title XIX of the Social Security Act to expand the mandate of State Medicaid Fraud Control Units (MFCUs) — which currently focus on investigating and prosecuting healthcare providers — to also cover fraud committed by individuals who apply for or receive Medicaid benefits. The change would take effect 180 days after enactment. It does not create new penalties; it directs existing state enforcement units to pursue a broader category of fraud cases.
Who benefits
Taxpayers broadly, who fund Medicaid and may benefit from reduced fraudulent expenditures. State and federal governments, which share Medicaid costs and could recover improperly paid funds. Legitimate Medicaid applicants and enrollees, who may benefit if fraud-driven program costs are reduced. Law enforcement agencies that gain clearer statutory authority to pursue beneficiary fraud cases. Competing applicants who were denied or delayed coverage while fraudulent enrollees occupied program capacity.
Who is hurt
Medicaid beneficiaries broadly, who may face increased scrutiny of their applications and enrollment status, potentially including erroneous investigations of legitimate enrollees. Low-income individuals and families who rely on Medicaid and could face administrative burdens or wrongful disenrollment as a result of expanded investigations. State MFCUs, which would absorb new investigative responsibilities without any new funding authorized by this bill. Civil liberties and legal aid organizations that represent low-income clients, who may see increased caseloads from beneficiary investigations. Individuals with limited English proficiency or disabilities who may be more vulnerable to being flagged for inadvertent errors in applications.
Supporters argue
Supporters argue that the current MFCU mandate creates a structural gap by focusing exclusively on provider fraud while leaving beneficiary fraud — such as falsifying income, residency, or household composition to obtain coverage — largely uninvestigated. They contend that Medicaid, which covers over 90 million Americans at a cost exceeding $800 billion annually, is one of the federal government's largest programs and that even a small percentage of beneficiary fraud represents billions in improper payments. Directing existing state units to investigate this category of fraud, they argue, is a targeted, low-cost step toward program integrity that uses established enforcement infrastructure.
Opponents argue
Opponents argue that beneficiary fraud is a small fraction of total Medicaid improper payments — the vast majority of which, according to HHS data, stem from provider billing errors and provider fraud — and that redirecting MFCU resources toward beneficiaries risks diverting enforcement capacity away from higher-dollar fraud. They contend that expanding investigations to low-income applicants without additional funding or due process protections could result in wrongful disenrollment of eligible individuals, particularly those who make inadvertent errors on complex applications, and that the bill's lack of any appropriation leaves states to absorb new mandates with existing resources.
Constitutional context
Congress has broad authority to set conditions on federal Medicaid funding under the Taxing and Spending Clause (Art. I, §8, cl. 1). Under NFIB v. Sebelius (2012), such conditions are permissible as long as they do not become so coercive that states have no genuine choice — a threshold this bill, which modifies existing MFCU duties rather than imposing a new program, is unlikely to approach.
Checks and balances
Congress gains authority by expanding the statutory mandate of state MFCUs; states retain operational control over their units, and existing federal oversight of MFCU grants through HHS/OIG provides an ongoing check on implementation.
Historical precedent
State Medicaid Fraud Control Units were established by the Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977, which have been periodically amended to adjust their scope, but prior expansions have focused on provider fraud rather than beneficiary fraud.