Fighting Fraud with Dr. Oz — Recapping Paragon’s Event at the National Press Club

On Tuesday morning, the House Ways and Means Committee held an important hearing on rising costs with health system CEOs. In the afternoon, Paragon was honored to host Dr. Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, at the National Press Club as well as Sen. Ron Johnson and Rep. John Joyce to discuss their efforts to combat waste, fraud, and abuse.

My note today recaps the event, which you can watch in its entirety here:

Dr. Oz on the Scale of the Fraud Problem

Dr. Oz pegged the amount of fraud at about $100 billion a year and noted that reducing fraud in Medicare could double the time until the Part A trust fund is bankrupt.

He posed the question: “Is it really a flaw that we have this much fraud in health care? Or is it a feature for some people?” He said that fraud has enabled political patronage, union organizing, and organized crime to embed themselves in federal health programs.

He added that “COVID taught a lot of bad people that you can steal from the federal government, and you can get away with it.” The loosening of oversight during the Biden administration, he argued, normalized large-scale theft from federal health programs and set the stage for the fraud explosion that the Trump administration is now working to reverse. Dr. Oz disclosed that CMS’s Medicaid fraud team had been reduced from 80 people to just six. He said that this was no accident as the Biden administration prioritized enrollment over program integrity.

Fraud in Practice: Hospice, Home Care, and the ACA

Dr. Oz described several concrete fraud ecosystems his team has uncovered. In Los Angeles, one-third of all hospice facilities in the country are concentrated in a single city—a statistical impossibility driven by fraudulent enrollment schemes in which patients are falsely certified as terminally ill. Some physicians lend their licenses to these operations.

In New York, Medicaid-funded home-based care services—designed to help seniors remain in their homes—have been exploited through networks of fictitious caregivers, with beneficiary numbers being bought and sold to enable fraudulent billing for unnecessary medications, procedures, and equipment. Dr. Oz described schemes connected to adult day care centers in Flushing, Queens, allegedly linked to the Chinese mafia.

On the Affordable Care Act, Dr. Oz noted that enrollment surged under the prior administration without corresponding program integrity oversight, resulting in an estimated 1.6 million people simultaneously enrolled in both a subsidized ACA plan and Medicaid. More than a third of ACA enrollees in 2024 never filed a single claim—a hallmark of phantom enrollment fraud.

Dr. Oz mentioned the importance of Paragon’s work estimating improper enrollment in the exchanges—which new data show is even higher than we originally estimated.

Legalized Money Laundering: Medicaid Provider Taxes and State-Directed Payments

Beyond outright fraud, Dr. Oz devoted significant attention to “legal money laundering”—the use of provider taxes and other mechanisms to extract additional federal Medicaid dollars through accounting gimmicks. In these schemes, a state taxes a hospital, then immediately spends that money back on the same hospital. The state then invoices the inflated spending amount to the federal government, generating federal funds for the provider with no real state contribution.

Dr. Oz was blunt about the incentive structure this creates: “If you don’t [money launder], and the other states do, your taxpayers are paying money to the other states.”

He noted that states like California, New York, and Massachusetts are the “varsity team” when it comes to fleecing federal taxpayers. Left unchecked, Dr. Oz noted, state-directed payments, which are effectively payoffs for the money laundering schemes, were on track to cost federal taxpayers an additional $5.4 trillion in expenditures over 10 years.

I cited the reforms included in the One Big Beautiful Bill as a major step toward reining in this abuse, crediting Dr. Oz with his role in educating members of Congress about the necessary reforms.

Dr. Oz and the CMS Team Actions

The administration has already taken significant actions to fight fraud. CMS has already shut down 450 fraudulent hospices in California—most of them in Los Angeles. This action alone saved approximately $600 million this year.

We discussed the importance of CMS actions to reprice skin-substitute products, which Dr. Oz described as a “cautionary tale.” The price point grew out of control—and CMS’s commonsense actions, which overcome massive special interest lobbying pressure, will save Medicare $250 billion over a decade, translating to more than $100 in annual Part B premium savings for seniors.

Dr. Oz admitted that fighting fraud can be challenging, but he does have a tool: stopping payment.

“It’s our obligation, we feel, to not only audit what’s happening, but stop paying if we think it’s fraudulent,” he said, adding that “if the money leaves the building, we don’t get it back…. You get these convictions, but whatever money left the door before you got the conviction, it’s off in the Cayman Islands or back in Russia.” He described one case in which a group of Russian fraudsters bilked taxpayers for $2.9 billion and escaped the country.

Dr. Oz closed by encouraging legitimate providers to come forward and expose fraud when they see it. He also called for Congress to provide CMS with faster enforcement tools, greater pricing transparency, and a supportive legal framework for AI adoption. He argued that AI will be indispensable both for detecting fraudulent billing patterns at scale and for expanding access to care in rural and underserved communities.

Addressing the Incentives that Lead to Massive Fraud

The Paragon event did not end with Dr. Oz. In the second panel, I spoke with Paragon’s Medicare Reform Initiative Director Demetrios Kouzoukas. Demetrios served as the deputy administrator for Medicare at CMS. He emphasized that leadership is essential to translating reform priorities into day-to-day CMS operations.

To meaningfully reduce waste, fraud, and abuse in our health programs, we must address incentives at their core. “The lesson for us from the focus on the state efforts is that these kinds of incentives are built into the system across the board,” Demetrios said. “We also [need] to start to have a bigger conversation … about how we create a wholly different structure—a structure that doesn’t have as much of this incredible magnet of this pot of money that is literally bottomless that draws every kind of creative way to maximize payment.”

Fighting Waste, Fraud, and Abuse from Congress

In the third panel, Paragon’s director of congressional relations, Ryan Long, sat down with Sen. Ron Johnson and Rep. John Joyce. Johnson and Joyce both chair subcommittees investigating waste, fraud, and abuse, and they stressed that now is the time for action.

“Why should Americans care about fraud in our government programs and what are the real-world impacts and harms that come from this type of fraud? We’re currently over $39 trillion in debt,” said Sen. Johnson. “When I entered Congress in 2011, we were $14.7 trillion. …We’re on a path over the next 10 years to increase that to $62 trillion. It’s completely unsustainable.”

He highlighted the importance of financial transparency, noting that federal agencies currently cannot answer basic questions about how much money flows through grants or non-governmental organizations—a management failure he is working to address through the Office of Management and Budget with $100 million in new resources, including AI-powered financial systems.

Rep. Joyce agreed the time for action has come.

“If you talk about fraud in Medicaid, individuals think you’re looking to diminish the amount of availability to Medicaid. Well exactly the converse is true,” he said. “[T]his is an opportunity to make sure that those Medicaid funds are available for those who deserve it. And that is so important.”

A Moral as Much as a Fiscal Issue

One theme throughout the whole afternoon was that waste, fraud, and abuse are not just fiscal issues. Every dollar lost to a fraudulent claim or improper payment is a dollar that cannot go to a patient who truly needs care. This means that restoring program integrity to Medicare, Medicaid, and the ACA is not simply a budget exercise—it is a moral obligation to the tens of millions of Americans who depend on these programs and the workers who fund them.