How California Safeguards Taxpayer Dollars

DHCS is the largest Medicaid agency in the United States, serving 14 million Californians through a network of more than 300,000 providers, delivering 4.5 million services on average every single day. Protecting Medi-Cal from fraud, waste, and abuse takes serious dedication, investment, and relentless oversight. Here’s what it looks like in practice.

A Dedicated Army Fighting Fraud

Program integrity is a core mission with real resources behind it:

• 1 in 5 DHCS employees (more than 20% of the entire department) works exclusively on program integrity.
• A&I’s nearly $100 million annual budget funds more than 700 positions across nine field offices statewide, conducting audits, investigations, provider oversight, compliance reviews, and other program integrity activities.

Scale

• 26,000+ audits and investigations completed in the past five years alone.
• 1,700+ tips and referrals pour in every single month, each one screened against credibility, dollar impact, and potential harm to members.
• 700+ Credible Allegations of Fraud referred to the Department of Justice’s Medi-Cal Fraud Control Unit since 2021.
• More than 5,000 providers suspended for suspected fraud over five years.

Billions Protected

California runs the largest Medicaid Fraud Control Unit in the country by both budget and staffing, a reflection of the scale needed to protect the nation’s largest Medicaid program. Medicaid Fraud Control Units (MFCUs) are specialized state law enforcement agencies, certified and overseen by the U.S. Department of Health and Human Services Office of Inspector General, responsible for investigating and prosecuting Medicaid provider fraud as well as patient abuse and neglect. In California, this unit is the Division of Medi-Cal Fraud and Elder Abuse (DMFEA), housed within the California Department of Justice. In Fiscal Year (FY) 2025, the OIG reported the following for California.

• Largest MFCU operating budget of any state: $74.4 million in combined state and federal funding.
• Largest MFCU workforce of any state: 290 staff.
• One of the nation’s largest investigative caseloads: 1,052 investigations open at the end of FY 2025, the second-highest total among all MFCUs.
• More than $102 million in gross recoveries: California’s MFCU reported $102.1 million in total recoveries in FY 2025, including $70.9 million in criminal recoveries and $31.2 million in civil recoveries. This ranked California seventh nationally in gross total recoveries and fifth in gross criminal recoveries among 53 MFCUs.
• Significant enforcement outcomes: 43 convictions (33 for fraud and 10 for patient abuse or neglect) and 25 civil settlements and judgments. California ranked seventh nationally in total convictions and sixth in civil settlements and judgments.

DHCS Reports:

• Total program integrity savings over five years: Over $2 billion, including sanctions, rate impacts, and cost avoidance from preventing bad actors from enrolling.
• Total collected over the five years: Over $4 billion.
• Managed care plan fraud recovery rate: $1.22 per-member-per-month, nearly 3x the national average of $0.45.

Catching More, Faster

Cases referred to law enforcement for criminal investigation have grown substantially, reflecting stronger detection and oversight across Medi-Cal. DHCS uses data analytics to identify suspicious billing patterns, reviews tips submitted through the 24/7 Medi-Cal Fraud Hotline and partner agencies, screens providers before they enroll in Medi-Cal, and investigates credible allegations of fraud. When evidence meets the required legal threshold, DHCS refers the case to the DMFEA for potential criminal investigation and prosecution.

• FY 2023-24: 36 credible allegations of fraud referred for criminal investigation, naming 87 individuals.
• FY 2024-25: 66 referrals, naming 237 individuals (a 172 percent increase).
• FY 2025-26: 111 referrals, flagging 317 individuals — a further 34 percent increase.

Beating the National Benchmark on Accuracy

The federal government requires every state to undergo an independent accuracy audit of its Medicaid program once every three years, called Payment Error Rate Measurement (PERM). Auditors review a sample of case files to check whether members were correctly determined eligible and whether payments were processed accurately. This can include paperwork or documentation issues, such as a missing signature or incomplete file, as well as fraud. California’s most recent PERM review found:

• Member eligibility accuracy: California correctly verified Medi-Cal eligibility 94.1 percent of the time (a 5.9 percent improper payment rate) beating the national average of 6.2 percent.
• Overall payment accuracy: Looking at all Medi-Cal payments combined, California’s error rate was 8.1 percent, lower than national average of 8.9 percent.

Using Data to Combat Fraud

DHCS leverages advanced analytics to detect and address threats to Medi-Cal program integrity. Those tools helped uncover a transnational criminal network that used stolen identities to bill Medi-Cal for hospice services that were never delivered. The investigation resulted in:

• Charges against 14 fraudulent hospice providers.
• Identification of $267 million in improper state and federal payments.
• Provider suspensions and disenrollments.
• License revocations in partnership with the California Department of Public Health.
• Criminal referrals to the California Department of Justice.
• New safeguards to strengthen oversight and prevent future fraud.

This example reflects DHCS’ broader commitment to protecting public resources and ensuring members receive appropriate care. Over the past two years, statewide enforcement efforts have resulted in more than 280 hospice license revocations, more than 300 active investigations, and more than 100 individuals referred for criminal charges.

Building a Stronger System

Fraud prevention is not a one-time effort. Every investigation, audit, and enforcement action gives DHCS new information about how bad actors operate. DHCS uses those lessons to continuously strengthen Medi-Cal through better screening, stronger verification, smarter analytics, tighter payment controls, and faster enforcement. Recent improvements include:

• Enhanced provider screening and ownership verification, including stronger validation of ownership, business operations, credentials, and organizational relationships before providers can participate in Medi-Cal.
• Advanced fraud analytics and AI-driven monitoring help detect unusual billing patterns, suspicious networks, identity theft schemes, and emerging fraud risks earlier than traditional oversight methods.
• Improved member identity and residency verification, including stronger enrollment safeguards and enhanced residency reviews designed to prevent fraudulent or out-of-state enrollments using stolen identities.
• New pre-payment controls that stop suspicious claims before funds are released, including verification requirements and automated claim edits for high-risk services.
• Digital verification tools that use real-time validation, secure electronic submissions, and enhanced documentation review to improve program oversight.
• Expanded utilization management and medical-necessity review processes to ensure services remain appropriate throughout the course of care, not just at enrollment or authorization.
• Stronger coordination among DHCS, managed care plans, law enforcement, and state and federal partners to accelerate investigations, share intelligence, and respond more quickly when fraud is identified.

Whether the issue involves hospice fraud, pharmacy schemes, transportation abuse, identity theft, or other emerging threats, DHCS continues to strengthen the systems that protect Medi-Cal. The goal is simple: stop fraud earlier, protect taxpayer dollars, and ensure resources reach the Californians who depend on them.