07 Aug H.R. 1 DRIVES GREATER EMPHASIS ON PAYMENT PREVENTION IN MEDICAID
Payment Prevention is increasingly shaping the future of Medicaid program integrity. While fraud detection and post-payment recovery remain critical, federal policy is placing greater emphasis on preventing erroneous payments before they occur. The March 2026 launch of the federal Task Force to Eliminate Fraud and the enactment of the One Big Beautiful Bill Act (H.R. 1) illustrate this evolving approach. Although H.R. 1 never explicitly references “payment prevention,” its enhanced focus on payment accuracy and erroneous payments creates stronger incentives for states and managed care organizations to ensure claims are paid the first time correctly.
The Largest Source of Improper Payments Is Not Fraud
Fraud continues to be an important area of enforcement, but it represents only part of Medicaid’s improper payment challenge.
The Centers for Medicare & Medicaid Services’ (CMS) Payment Error Rate Measurement (PERM) Program has consistently found that most Medicaid improper payments result from missing documentation, administrative deficiencies, or eligibility verification issues rather than confirmed fraud or abuse. CMS has repeatedly clarified that the improper payment rate is not intended to measure fraud.
Understanding this distinction changes how organizations approach payment integrity.
For more than two decades, the Government Accountability Office has designated Medicaid as a High-Risk program because of continuing improper payment concerns. During that time, oversight has expanded through audits, compliance reviews, and enforcement initiatives. Yet payment errors remain persistent because many begin with incomplete or inaccurate information used during claims processing rather than intentional misconduct.
H.R. 1 Raises Expectations for Payment Accuracy
The One Big Beautiful Bill Act significantly increases financial accountability for Medicaid payment errors.
Beginning in federal fiscal year 2030, H.R. 1 limits the Department of Health and Human Services’ ability to waive repayments for certain excessive erroneous Medicaid payments while broadening the circumstances under which payments may be classified as erroneous. These provisions increase the financial consequences associated with elevated payment error rates and encourage states to strengthen front-end payment accuracy.
The Bipartisan Policy Center offers a helpful explanation of how H.R. 1 affects PERM accountability.
The legislation also reinforces the importance of making payment decisions using complete and accurate coverage information.
As Medicaid’s payer-of-last-resort requirements make clear, agencies and managed care organizations must identify other available coverage before Medicaid pays a claim. Commercial insurance, Medicare, employer-sponsored health plans, TRICARE, and other liable third-party coverage all influence whether Medicaid should pay or defer payment.
When that information is unavailable or outdated, Medicaid may pay claims that another insurer should have covered. Although those payments may later be recovered, PERM evaluates whether the original adjudication decision was correct. Recovering funds afterward generally does not eliminate the improper payment determination.
That reality makes accurate eligibility information, comprehensive third-party liability (TPL) data, and effective coordination of benefits (COB) processes increasingly valuable.
Prevention Creates Better Outcomes Than Correction
Post-payment recovery remains an essential component of Medicaid program integrity.
Medicaid Fraud Control Units continue to investigate fraud and recover substantial taxpayer dollars each year. Those efforts protect program resources and remain an indispensable part of the integrity framework.
However, recovery occurs after an incorrect payment has already been made.
Preventing payment errors before claims are processed is typically more efficient than recovering funds later. Correct payments reduce administrative burden, minimize recovery efforts, strengthen audit performance, and allow agencies to focus resources on program administration rather than correcting preventable mistakes.
Better Information Leads to Better Decisions
Accurate payment decisions depend on accurate and timely data.
Many Medicaid organizations continue to rely on monthly or quarterly eligibility files to identify other insurance coverage. While those files remain valuable, they may not reflect coverage changes that occur between reporting periods. This creates opportunities for Medicaid to pay claims that should have been billed to another payer.
To reduce those risks, agencies and managed care organizations are increasingly implementing technologies that continuously verify eligibility and identify liable third-party coverage before claims are adjudicated.
Automated Algorithmic Analysis and Insurance Discovery Engines (AAAIDE), including technology developed by Syrtis Solutions, continuously evaluate 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. Delivering more complete coverage information before payment strengthens payer-of-last-resort compliance while helping organizations prevent avoidable improper payments.
Other modernization initiatives include:
- Automated verification using authoritative federal, state, and commercial data sources.
- Continuous validation of TPL and COB information instead of relying solely on periodic eligibility updates.
- Real-time identification of newly discovered, updated, or previously unknown insurance coverage before claim adjudication.
- Greater interoperability among Medicaid, Medicare, commercial insurers, and other trusted data sources.
Medicaid Program Integrity Is Evolving
Payment Prevention is becoming the defining strategy for the next generation of Medicaid program integrity. As H.R. 1 increases accountability for erroneous payments, organizations that invest in better data, automated verification, continuous insurance discovery, and proactive payment accuracy will be better positioned to reduce improper payments, strengthen compliance with Medicaid’s payer-of-last-resort requirements, improve audit performance, protect taxpayer resources, and promote the long-term sustainability of the Medicaid program.