Payment Prevention is becoming the defining principle of modern Medicaid program integrity. Federal agencies have intensified efforts to combat Medicaid fraud, highlighted by the March 2026 announcement of a new Task Force to Eliminate Fraud. At the same time, Congress has taken another significant step through the One Big Beautiful Bill Act (H.R. 1), which increases financial accountability for Medicaid erroneous payments. Together, these initiatives reflect a broader trend toward placing greater emphasis on preventing improper payments before they occur while maintaining strong post-payment oversight. H.R. 1 does not use the term “payment prevention,” but its heightened focus on payment accuracy and erroneous payments creates stronger incentives for states to improve administrative accuracy before claims are paid.
Most Improper Payments Are Not Fraud
Fraud remains an important concern, but it is not the primary driver of Medicaid improper payments.
Federal Payment Error Rate Measurement (PERM) Program findings consistently show that more than three-quarters of Medicaid improper payments stem from insufficient documentation or administrative deficiencies rather than confirmed fraud or abuse. While intentional fraud certainly occurs, most payment errors result from incomplete, inconsistent, or unverifiable information used to support eligibility and payment decisions. CMS has repeatedly emphasized that the improper payment rate is not a fraud rate.
That distinction is significant because it changes where the greatest opportunity for improvement exists.
For more than two decades, Medicaid has remained on the Government Accountability Office’s High-Risk List because of persistent improper payment concerns. During that time, oversight has expanded, audits have increased, and enforcement has become more sophisticated. Yet improper payment rates remain a challenge because many errors originate long before investigators become involved.
Why H.R. 1 Raises the Stakes
H.R. 1 fundamentally changes how states are held financially accountable for Medicaid payment accuracy.
Historically, states have devoted substantial resources to identifying and recovering improper payments after they occurred. Beginning in fiscal year 2030, H.R. 1 limits HHS’ ability to waive repayments for certain excess erroneous Medicaid payments and expands the circumstances under which some payments may be classified as erroneous, increasing the financial consequences for states with elevated payment error rates.
A helpful overview of these changes is available from the Bipartisan Policy Center’s analysis of PERM and H.R.1.
This places renewed focus on the quality of the data used to make Medicaid payment decisions.
Because Medicaid is the payer of last resort, agencies and managed care organizations must identify commercial insurance, Medicare, employer-sponsored coverage, TRICARE, and other liable third-party coverage before Medicaid pays a claim. When that information is incomplete, outdated, or unavailable, Medicaid may incorrectly pay claims that should have been billed to another insurer first.
Although those payments may later be recovered, PERM evaluates whether Medicaid made the correct payment at the time the claim was adjudicated. Recovering the payment afterward generally does not eliminate the original improper payment finding.
As a result, accurate eligibility information, high-quality third-party liability (TPL) data, and effective coordination of benefits (COB) processes have become increasingly important components of payment integrity.
Recovery Alone Cannot Solve the Problem
Medicaid Fraud Control Units continue to deliver meaningful results, recovering billions of dollars while protecting taxpayer resources. Their work remains an essential component of program integrity.
However, fraud investigations and recovery efforts are inherently reactive and resource-intensive. They occur only after payments have already been made.
As Medicaid programs become larger and more complex, preventing payment errors before claims are paid is often more efficient than identifying and recovering them months or years later. Every improper payment avoided reduces administrative burden, improves payment accuracy, and minimizes the resources required for audits and recovery activities.
Prevention Starts With Better Data
Reducing improper payments begins with improving the quality of the information entering Medicaid systems. As H.R. 1 increases accountability for payment accuracy, investments in data quality, automation, and pre-payment verification are becoming operational priorities for state Medicaid agencies and managed care organizations.
Many traditional third-party liability programs rely on monthly or quarterly eligibility files to identify other insurance coverage. While these approaches remain valuable, they can miss coverage changes that occur between data exchanges, leaving Medicaid at risk of paying claims that should have been billed to another payer. This is why many organizations are moving toward cost avoidance rather than traditional pay-and-chase recovery as a more effective long-term strategy.
To address this challenge, many organizations are adopting advanced technologies that continuously validate eligibility information, identify liable third-party coverage, and strengthen coordination of benefits before claims are adjudicated.
For example, Automated Algorithmic Analysis and Insurance Discovery Engines (AAAIDE) such as those developed by Syrtis Solutions, continuously analyze eligibility and coverage data to identify active commercial insurance, Medicare, TRICARE, and other liable third-party coverage that may not appear in traditional eligibility files. By providing more complete and timely coverage information before claims are processed, these technologies support compliance with Medicaid’s payer-of-last-resort requirements while helping prevent avoidable improper payments.
Additional modernization efforts include:
- Automated verification against authoritative federal, state, and commercial data sources.
- Continuous TPL and COB validation rather than relying solely on periodic eligibility matching.
- Real-time identification of newly discovered, updated, or previously unknown insurance coverage before claim adjudication.
- Greater interoperability between Medicaid, Medicare, commercial insurers, and other trusted data sources.
Together, these capabilities help shift the focus from traditional pay-and-chase recovery toward proactive payment prevention. Better data at the point of adjudication leads to more accurate payment decisions, fewer improper payments, and stronger audit performance.
A New Era of Medicaid Program Integrity
The combination of increased fraud enforcement and H.R. 1’s heightened focus on payment accuracy reflects a broader transformation in Medicaid administration.
Program integrity can no longer depend solely on audits, investigations, and post-payment recovery. It also requires modern systems capable of producing accurate, timely, and verifiable eligibility and coverage information before claims are paid.
States that invest in stronger data quality, automated verification, continuous insurance discovery, and more accurate TPL and COB processes will be better positioned to improve payment accuracy under H.R. 1 while strengthening Medicaid’s longstanding payer-of-last-resort requirements.
Payment Prevention is no longer simply a best practice—it is becoming a strategic imperative for Medicaid agencies and managed care organizations. Fraud enforcement will always remain essential, but as H.R. 1 increases accountability for payment accuracy, organizations that invest in technologies that improve data quality, automate verification, continuously identify liable third-party coverage, and strengthen TPL and COB processes will be better positioned to reduce improper payments, support compliance with Medicaid’s payer-of-last-resort requirements, protect taxpayer dollars, and improve the long-term sustainability of the Medicaid program.
