ICYMI: JEC Holds Hearing on Protecting Patients and Taxpayers by Combating Healthcare Fraud

WASHINGTON, DC – On Wednesday, June 24, the Joint Economic Committee held a hearing entitled Protecting Patients and Taxpayers: Combating Healthcare Fraud and Leakage to Strengthen Program Integrity.  Led by Committee Chairman Rep. David Schweikert (R-AZ) and Ranking Member Senator Maggie Hassan (D-NH), the hearing addressed both explicit fraud such as home health fraud as well as “leakage” in which healthcare programs are not being used as intended, for example, Medicare Advantage overpayments.

“We talk about waste, fraud, and abuse, but we should be talking just as much about misaligned incentives that invite it,” said Chairman Schweikert. “The data is there. The patterns are obvious. But instead of fixing the architecture, my colleagues in Congress prefer soundbites to solutions. Real reform is complex and that’s exactly why it gets ignored. If we actually want to stop the leakage, and stop wasting taxpayer dollars, we need structural fixes that align incentives.”

The panel of witnesses included: Dr. Brian Blase, Founder and President, Paragon Health Institute; Dr. David Meyers, Associate Professor of Health Services, Policy and Practice, Associate Director of the Center for Advancing Health Policy through Research, Vice Department Chair, Brown University; Dr. Chris Pope, Senior Fellow, Manhattan Institute; and Jessica Tillipman, J.D., Associate Dean for Government Procurement Law Studies, Government Contracts Advisory Council Distinguished Professorial Lecturer in Law. 

Chairman David Schweikert (R-AZ-01) 

Chairman Schweikert Closing Remarks

Chairman Schweikert kicked things off by asking a big-picture question: are policymakers thinking too small when it comes to healthcare reform? Instead of minor tweaks, he wondered if it’s time for more structural changes, such as reinsurance-style models or longer enrollment periods in Medicare Advantage, to better align incentives.

Dr. Meyers agreed, saying the current system encourages short-term thinking. Since enrollees can switch plans frequently, insurers don’t have much reason to invest in long-term health outcomes. If enrollment periods were longer, plans would have more incentive to keep people healthy over time. Though he noted there should still be a way out if a plan isn’t working for someone.

Chairman Schweikert then pushed the conversation further, asking if there’s some kind of universal fix, something scalable across Medicare, Medicaid, and beyond, possibly driven by technology.

Dr. Blase responded that while technology like AI and data analytics can help detect suspicious payments early, the real issue is incentives. Right now, the system is structured in a way that encourages higher spending, and until that’s fixed, tech solutions will only have a limited impact.

Dr. Meyers echoed that point, adding that tools like AI-driven risk adjustment or better plan selection can help, but they don’t solve the core problem. In fact, the same technologies can also be used by insurers and providers to increase payments within the system.

Chairman Schweikert then asked whether capitation—paying providers a fixed amount per patient—might be a cleaner, more universal solution.

Dr. Blase said it has potential because it better aligns incentives, but it’s not a cure-all. It still requires strong oversight and safeguards to make sure it’s not abused.

Shifting gears, Chairman Schweikert asked how much of the problem comes down to simply not knowing what the government is paying for, especially in Medicaid.

Dr. Pope said that’s a major issue. Medicaid is incredibly fragmented, essentially functioning as 50 different programs with varying rules and structures. There’s limited visibility into how money is spent, and better data could help policymakers make smarter decisions and avoid unintended consequences.

Chairman Schweikert then raised concerns about oversight, noting how fragmented it seems.

Ms. Tillipman agreed, explaining that many systems don’t communicate with each other, which creates vulnerabilities. She emphasized the importance of better data sharing and also pointed out that whistleblowers remain one of the most effective ways to uncover fraud. She added that there are already detailed recommendations from oversight bodies that could help, if they were implemented.

Chairman Schweikert followed up by asking why waste, fraud, and abuse persist, especially in Medicaid. He specifically asked about the New York’s home health aide program.

Dr. Blase touched on the high costs of that program which grew from a $1 billion program to an $11 billion program within a few years. He outlined how there are more home health aides per capita in New York than in National Average, by a factor of three. He added that the New York Medicaid program is roughly $110-120 billion per year and that improper payments, waste, fraud and abuse easily make up a quarter of that spending.

Dr. Blase went on to explain that the incentives are largely to blame. States are encouraged to maximize federal matching funds, sometimes through complex financing arrangements. From a policymaker’s perspective, it can be easier to pull in more federal dollars than to make tough budget decisions, which ends up reinforcing the problem.

Chairman Schweikert returned to the idea of prevention, questioning why the system still relies on a “pay and chase” model, where money goes out first and fraud is dealt with later. He compared it to banking systems that stop bad transactions before they happen.

The witnesses generally agreed that this is the direction things need to move towards. Using data-driven systems to flag or block suspicious transactions before funds are released is a major opportunity. That said, it must be combined with better incentives, stronger coordination, and improved data infrastructure.

In closing, Chairman Schweikert emphasized that the core issue is getting the incentives right from the start. As long as the system is designed in a way that allows problems to occur, policymakers will keep reacting to the same issues instead of preventing them.

 

Rep. Victoria Spartz (R-IN-05)

Rep. Spartz opened her questioning by stressing that healthcare spending is a major driver of financial strain for both the federal government and American families. She argued that costs have surged dramatically, rising from about $4.5 trillion pre-COVID to roughly $7 trillion annually. She noted much of this increase is tied to healthcare, despite poor health outcomes compared to other developed countries. She also criticized the fact that most healthcare spending is mandatory, meaning Congress rarely votes on it, which she believes reduces oversight and creates opportunities for waste, fraud, and abuse. She asked whether Congress should take a more active role in reviewing and voting on this spending.

Dr. Blase responded that the current system is unsustainable and noted that Medicare’s hospital trust fund is expected to become insolvent within about five years. He explained that this will force Congress to act, likely requiring payment cuts or reforms. He also highlighted rapid growth in Medicaid and Affordable Care Act spending, emphasizing that healthcare is one of the fastest-growing parts of the federal budget.

Rep. Spartz then shifted to accountability, arguing that Congress often ignores findings from oversight bodies like the Government Accountability Office. She criticized lawmakers for holding hearings without taking meaningful action and placed responsibility squarely on Congress for failing to address known problems.

Turning to market structure, Rep. Spartz raised concerns about consolidation and the emergence of oligopolies in healthcare, asking Dr. Meyers to elaborate on the issue and potential solutions.

Dr. Meyers explained that both horizontal consolidation (a few large insurers dominating programs like Medicare Advantage) and vertical integration (insurers owning physician practices) are significant concerns. While integration can improve care coordination, he noted it can also be used to increase payments artificially. For example, when physicians join vertically integrated systems, patient risk scores, and therefore payments, often rise sharply without actual changes in patient health. He also described how these structures can be used to shift profits and bypass regulatory requirements, such as medical loss ratio rules.

Dr. Meyers emphasized that a major challenge is the lack of transparency in ownership and financial flows within the healthcare system. He suggested that improving visibility into who owns what and how money moves through the system is a necessary first step before effective policy solutions can be implemented.

Overall, the discussion focused on the rapid growth of healthcare spending, the lack of congressional oversight, and the increasing consolidation of the healthcare industry, all of which contribute to higher costs and systemic inefficiencies.

###