Should We Do More To Police Medicaid Fraud? Evidence on the Intended and Unintended Consequences of Expanded Enforcement

Abstract

Medicaid Fraud Control Units (MFCUs) are state agencies that investigate and prosecute health care provider fraud, using billing data to decide who to investigate. In particular, providers that submit a large number of claims for a set of fraud prone services are more likely to be investigated. We study the effect of within-state changes in MFCU spending on enforcement outcomes and hospital treatment intensity for fraud prone health conditions in the Medicaid population. We find that increases in MFCU spending substantially increase fraud enforcement actions (investigations, convictions, recoveries). In contrast, MFCU spending increases do not generate substantial changes in treatment intensity for fraud prone health conditions. We find no evidence that MFCUs with expanded budgets investigate less severe cases on the margin.