Hawaii’s Medicaid Fraud Unit Faces Scrutiny Over Lack of Convictions
TL/DR –
The US Department of Health and Human Services (HHS) has issued a letter stating that it will not recertify and will effectively defund Hawaii’s anti-fraud unit, known as the Medicaid Fraud Control Unit (MFCU), for leniency on Medicaid fraud. The MFCU had reported only $14 million in settlements, with $13 million of that stemming from a single incident, and no fraud convictions in four years. HHS Inspector General T. March Bell’s decision could mean a loss of nearly $3 million a year and pose a major threat to the state’s entire low-income medical insurance program.
Hawaiʻi’s response to charges of Medicaid fraud
In a heated exchange in mid-May, Attorney General Anne Lopez highlighted the $14 million in settlements Hawaiʻi’s anti-fraud unit secured in response to accusations of laxity on Medicaid fraud. Vice President JD Vance had criticized the state’s zero Medicaid fraud convictions over the past four years, but Lopez rejected any suggestions of inaction in the matter.
Notably, however, $13 million out of the $14 million recovered was from a single case that start over a decade ago. This revelation has prompted questions about the effectiveness of the state’s fraud control unit.
The Inspector General of the U.S. Department of Health and Human Services, T. March Bell, has indicated dissatisfaction with the unit’s efforts, leading to the withdrawal of near $3 million a year in funding, which threatens Hawaiʻi’s medical insurance program for low-income residents.
The pivotal $13 million settlement
The major recovery was from a case against Liberty Dialysis, a company that continued to submit ineligible Medicaid claims despite having been informed of earlier errors. Initiated in the 2010s, the case led to a state lawsuit in 2015 and eventually, a settlement three years ago.
Despite this success, Hawaiʻi’s recoveries still account for less than 1% of its Medicaid expenditures from 2022 to 2025. Further, the total amount recovered appears to be closer to $13 million, not the $14 million cited by Lopez.
The troubling lack of convictions
Nationally, Hawaiʻi’s record of convictions is alarming. From 2022 to 2025, the US’s 53 Medicaid fraud units achieved over 3,400 fraud convictions and recovered $5 billion. Over the same period, Hawaiʻi reported an average of 440 open investigations a year, but achieved no convictions.
States like Delaware and Rhode Island, similar to Hawaiʻi in terms of population and Medicaid enrolment, managed to record 16 and five fraud convictions respectively — a stark contrast to Hawaiʻi’s zero.
The federal government has cautioned states that enforcement failures could risk Medicaid funding. So far, attempts to freeze Medicaid reimbursements have been made in Minnesota and New York, and Florida has been identified as a fraud hotspot.
The future of Medicaid funding in Hawaiʻi
With Medicaid insuring almost a third of Hawaiʻi’s 1.4 million residents, loss of federal funding could strike a heavy blow. In response to the de-certification of the Medicaid Fraud Control Unit, the state has launched a “Medicaid strike force” to support and improve the unit’s work, and is appealing the de-certification decision.
The state argues that Hawaiʻi’s legal landscape complicates Medicaid fraud conviction efforts, with stringent state laws and high standards for evidence and proof of intent. It believes civil settlements are often more effective in recouping Medicaid fraud losses.
However, this argument lacks weight when considering that Hawaiʻi saw 12 Medicaid fraud convictions and 34 settlements with a recovery of $4.5 million in the five years before 2021.
This article was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.
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