What DOGE’s actions mean for U.S. healthcare

The federal government’s perennial search for fraud, waste and abuse (FWA) in its healthcare spending has become a key focus of the Trump administration and could presage deeper financial changes.

The gathering storm has left health systems scrambling to prepare for the major financial headwinds that could come from the initiatives.

President Donald Trump has said he wants to preserve Medicare and Medicaid, but administration officials also said they plan to target FWA within both programs and undertake reforms to “increase efficiency and improve care for beneficiaries.”^a Proposals to reduce the projected $1.6 trillion in Medicaid spending growth by as much as $880 billion over the next 10 years also are advancing in Congress, which Trump has not opposed.

The administration’s widely reported new approach to FWA, called the Department of Government Efficiency (DOGE), is unleashing technology-driven audits of government spending. In February, after DOGE conducted highly critical reviews of agencies, like the U.S. Agency for International Development, its staff reportedly began reviewing payment systems at CMS.

It’s unclear whether any eventual DOGE-led cuts in healthcare will withstand legal scrutiny, since courts have reversed some of its cuts. But even temporary payment disruptions will have ramifications for health systems.

Although it was not yet known what DOGE’s CMS reviews will produce, Republicans said the effort will expand on long-standing work of the non-partisan Government Accountability Office (GAO).  

“GAO’s extensive reports and recommendations to the executive branch have given DOGE a strong starting point as it takes on the federal bureaucracy,” said Rep. James Comer (R-Ky.), chairman of the House Oversight Committee, whose comments were published in a Feb. 25 press release issued by the committee.^b

Comer cited previous GAO findings, such as FY23 findings of improper payments, which include FWA, of $51 billion in Medicare and $50 billion in Medicaid. Other GAO reports estimated cumulative federal government-wide improper payments since FY03 of $2.7 trillion and annual federal government-wide fraud as high as $521 billion.^c

“DOGE has taken note of GAO’s critical work in identifying trillions of dollars lost to improper payments made by programs like Medicaid and Unemployment Insurance,” Comer said, quoted in the Feb. 25, U.S. House Oversight Committee press release. “And now DOGE is taking action to address the root causes of improper payments.”

Adam Anolik, CFO of the University of Rochester Medical Center, said he understood the desire to ensure the integrity of federal healthcare spending.

“But the way it’s being done, which is somewhat clandestine in nature, is problematic,” Anolik said about DOGE. “If people feel we want to cut $100 billion from Medicaid, let’s have a congressional hearing. Let’s talk about it. Let’s go through it and talk to people who are experts at this. I worry the people who are making decisions are not really knowledgeable of what they are doing.”

Round 1: DOGE push

The initial scrutiny from the Trump administration was expected to focus on finding FWA in healthcare spending.

Linda Miller, founder and CEO of Audient Group, a consulting firm that focuses on fraud prevention and risk management, said estimates for healthcare fraud, specifically, likely understate the problem.

“Healthcare is very ripe for fraud; they’re such gigantic programs, Medicare and Medicaid,” Miller said. “And there are so many moving parts. It’s fairly easy to overwhelm a system like that with billing padding.”

Miller said CMS has long tried to shift from “pay and chase” to fraud prevention but ultimately has not done so.

A high-profile $3 billion Medicare fraud scheme involving low-cost catheters uncovered in 2024 should anger members of Congress, said Jeff Leston, founder of Castlestone Advisors, a fraud risk assessment company. And they have more reason to be angry, he said, because massive frauds keep happening, despite the extensive existing federal anti-fraud efforts.  

“Pay and chase has been proven to be a losing proposition,” Leston said. “You never catch up.”

Instead, front-end prevention is needed to stop improper payments at scale, Leston said. That would include new systems, new personnel and removal of legal barriers preventing ineligible enrollments — the source of an estimated 80% of improper payments in Medicaid, witnesses said at a Feb. 12 congressional hearing.

However, at least some of those changes would require congressional approval.

On its own, DOGE was likely to use generative AI, machine learning and advanced analytics capabilities to uncover FWA areas in CMS data, said Doug Ramsey, CEO and founder of Previsant Insights, a payment integrity consulting firm. The approach could allow it to move beyond traditional federal audit tactics to find patterns and predict fraud schemes.

“They’re going to find a lot of money,” Ramsey said. “We hope it doesn’t stop with that. We’re hoping for real change, real addressing of root causes.”

Some media analyses have concluded DOGE’s public lists of savings it has identified, so far — such as from canceled contracts — include inaccuracies and double-counting.

For health systems, issues around billing are among the biggest risk areas from a DOGE-driven FWA push, said Kimberly Hodgkinson, former CFO of Hospital Sisters Health System. Hodgkinson, a certified chief AI officer, said that providers have adopted AI processes and automation in billing, but they may not monitor and audit those systems regularly to find inadvertent overbilling and over-coding.

“We’re trying to do things more efficiently, so we have more resources at the bedside,” Hodgkinson said. “[But] unintentionally, optimizing coding beyond the guidelines could trigger investigations.”

Round 2: Unleashing OIG

A stepped-up focus on FWA by the Trump administration also may include driving increased action by the HHS Office of Inspector General (OIG).

In 2023, CMS said OIG will begin extrapolating findings from risk adjustment data validation audits of Medicare Advantage (MA) plans. If such extrapolation had been aggressively used in findings from two recent years, it would have cost MA plans 5% of their gross revenue, said Jason Jobes, senior vice president of solutions for Norwood, a revenue cycle consulting firm.

Jobes expected CMS to begin this process aggressively after HHS Secretary Robert F. Kennedy Jr. highlighted FWA among MA plans during his confirmation hearings.

An administration push to extrapolate MA audit findings could quickly trickle down to providers, as MA plans hit by recoupments in turn seek to recoup payments from contracted providers they believe over-coded their patients, Jobes said.

“The plans are going to go back to the individual providers and say, ‘By the way, your submissions were not correct and therefore we will want to right-size this,’” Jobes said.

Brian Blase, PhD, president of the conservative think tank Paragon Health Institute and a former Trump adviser, agreed Kennedy was likely to more aggressively pursue
MA risk-adjustment problems stemming from coding intensity.

The administration also may go after enrollment fraud in the Affordable Care Act marketplace, Blase said. Paragon research estimated that about 5 million ineligible people enrolled in fully subsidized marketplace plans in 2024, which cost the federal government at least $20 billion.^d

“There’s just so much federal money right now flowing to insurers and hospitals, and they’re powerful,” Blase said. “But at some point, you have to go where the money is if you want to get serious about the deficit.”

Another area where the Trump administration may double down is on FWA in value-based payment (VBP). Payment integrity experts said existing federal programs are mainly designed to seek volume-based FWA that occurs in fee-for-service programs and have little view into it occurring under VBP. Jobes said federal offices, like the CMS Center for Program Integrity, have extensive technological capabilities to better scrutinize VBP but may lack the right personnel to do so.

Jobes urged all accountable care organizations, in particular, to think through their compliance and risk score strategies.

Round 3: Fueling congressional action

The administration’s initiatives and findings on healthcare FWA were expected to inform and drive related legislative changes by the Republican-led Congress. A common example raised by anti-fraud professionals is the potential for changes to a 1974 federal privacy law, which prevents income verification by federal healthcare programs.

“If say, you make $25,000 and that you qualify for these programs, they have to take your word for it. That’s insane,” said Miller, the fraud prevention contractor. “The reality is someone should be getting access to that data to make a decision about a payment before giving people” coverage.

Without congressional action to eliminate existing statutory barriers to slashing healthcare FWA, Miller expects lawsuits to bog down DOGE’s efforts and for its patron, Elon Musk, to give up within a few months.

“If that happens [and barriers come down], at least maybe some people will see, ‘Oh look, we could have done this all along,’” Miller said.

The push on FWA also may spur Congress to reintroduce legislation to create machine-readable cards for Medicare enrollees, Leston said. That would allow enrollee verification at the point of service — before payment — and tracking of provider payments after the transaction.

“In this case it needs to happen. The question is always, ‘Whose ox gets gored?’” Leston said.

Such legislation may have a better chance amid Republicans’ current fervor on FWA, he said. He blamed senior Democrats in Congress for scuttling previous versions of such bills.

Among legislative changes Blase saw as most likely this year in the wake of any healthcare-related DOGE findings were moving to site-neutral payments in Medicare, instituting Medicaid work requirements and reducing the use of provider taxes to fund the state share of Medicaid.

In response, health system leaders need to prepare financial forecasts for any such policy changes, communicate with their boards, look for contingencies and identify blind spots to unexpected changes, said Hodgkinson.

“Usually what happens in healthcare policy is the things they do are revenue reductions,” said Hodgkinson. “And then we have to figure out how to react to it.” 

Footnotes

a. Cirruzzo, C., and Hooper, K., “Trump’s mixed Medicaid messaging,” Politico, Feb. 20, 2025.
b. U.S. House of Representatives Committee on Accountability and Oversight, “Comer: DOGE targets billions in government waste identified by GAO,” press release, Feb. 25, 2025.
c. GAO, Fraud risk management: 2018-2022 data show federal government loses an estimated $233 billion to $521 billion annually to fraud, based on various risk environments, Report to Congressional Committees, April 16, 2024.
d. Blase, B., and Gonshorowski, D., The great Obamacare enrollment fraud, Paragon Health Institute, June 2024.