Red Tape vs. Real Crime: Why Centene Says Rules Are Helping Fraudsters

IMC Board
Mar 2
6 min read

Is the government accidentally helping criminals? The country's biggest Medicaid carrier thinks so, and they’ve just issued a high-stakes demand for a regulatory overhaul.

Key Takeaways

Centene's seven-point reform push—The Medicaid market leader sent the U.S. Centers for Medicare and Medicaid Services (CMS) a formal letter urging the agency to overhaul what it calls a "complex web of regulations" that slow fraud investigations.
Payment suspension delays are a core complaint—Centene wants managed care organizations (MCOs) to suspend suspect payments to providers without waiting for government approval, a power they currently don't have.
Network adequacy rules create a catch-22—Insurers risk penalties for inadequate provider networks even when they've terminated a provider for fraud, creating a perverse incentive to look the other way.
Prepayment reviews are overdue for reform—Centene wants time limits and other hurdles eliminated before auditors can conduct prepayment reviews, a change the U.S. Government Accountability Office has also recommended.
Political tailwinds are strong—The Trump administration has made Medicaid antifraud enforcement a top priority in 2025 and 2026, signaling that Centene's push has a real chance of gaining traction.

Centene Speaks Up: The Case for Regulatory Overhaul

Centene's letter to CMS Administrator Dr. Mehmet Oz is a rare public display of frustration from an industry that usually works these issues behind closed doors. The company is asking regulators to move faster, share more data, and get out of the way.

Centene holds approximately 17.7 percent of the national Medicaid managed care market. When a company that size says the rules are broken, the industry should take notice.

The letter, sent in late February 2026, lays out seven concrete reforms. Taken together, they paint a picture of an insurer that has identified real fraud but can't act on it quickly enough because of regulatory friction.

Seven Reforms: A Closer Look

Centene's proposals address systemic inefficiencies that insurers across the industry have quietly griped about for years. Here's what they're asking for.

Let insurers suspend payments without preapproval—Right now, an MCO that spots suspicious billing activity can't simply stop paying that provider. It has to navigate a government approval process first. That delay gives bad actors time to collect more payments, move money, or disappear entirely.
Waive network adequacy penalties during fraud investigations—This one is particularly maddening for compliance teams. When a plan terminates a provider for fraud, it may temporarily fall below required network coverage thresholds. Regulators can then penalize the plan for the very network gap the fraudster created. Centene wants short-term waivers in these situations.
Expand audit capabilities—Plans need broader authority to dig into provider billing patterns before red flags escalate into confirmed fraud. Current restrictions limit how deep and how early auditors can go.
Eliminate prepayment review time limits—Prepayment reviews, which screen claims before payment rather than chasing money after the fact, are widely considered the most cost-effective antifraud tool available. Yet outdated rules impose timing restrictions that blunt their effectiveness.
Standardize terminology across state programs—Medicaid operates differently in every state. When fraud investigators have to translate concepts and definitions state by state, they lose time that should be spent on actual investigations. Standardization would let compliance resources go further.
Increase data-sharing between federal, state, and insurer systems—Fraud patterns don't stop at state lines, but data often does. Centene wants more real-time sharing of claims and provider data so that schemes identified in one state can be flagged and acted upon in others.
Reform expense-reporting rules to encourage antifraud investment—Outdated rules around how antifraud expenses are reported can actually discourage insurers from investing in preventive technology and staffing. Centene wants those rules updated to reflect modern fraud-prevention approaches.

Why This Matters

The scale of the problem is huge.

The Medicaid improper payment rate for fiscal year 2025 was 6.12 percent, representing approximately $37.4 billion. That's up from 5.09 percent in fiscal year 2024. To be fair, not all improper payments are fraud.

CMS consistently notes that the majority stem from missing or insufficient documentation, rather than intentional wrongdoing. Still, the numbers are large enough that even a modest improvement in fraud detection would save billions.

State-level Medicaid Fraud Control Units recovered $1.4 billion in fiscal year 2024, returning $3.46 for every dollar spent on enforcement. Criminal recoveries alone hit $961 million, the highest total in a decade.

Medicare and Medicaid combined produced over $100 billion in improper payments in fiscal year 2023. The Government Accountability Office has flagged both programs as high-risk for over two decades.

These figures tell insurers, agents, and marketers one thing clearly: There is an enormous amount of money at stake, and regulators and carriers alike are under intense pressure to demonstrate they're doing something about it.

What the Trump Administration Has Done So Far

Centene's push comes as the Trump administration has made health care fraud enforcement a consistent theme since taking office for a second term.

In late February 2026, the White House announced it would temporarily withhold $259 million in Medicaid funding from Minnesota and pause durable medical equipment supplier enrollments as part of a broader fraud crackdown. Earlier, the administration published six years of Medicaid spending data online with an explicit invitation for the public to flag potential fraud.

The Department of Government Efficiency, the so-called DOGE, has made health care spending a central target. That political pressure creates an opening for the kind of structural reforms Centene is proposing. If CMS is looking for ways to show results, empowering MCOs to act faster and with fewer regulatory barriers is a relatively low-cost way to do it.

What This Means for Insurers, Agents, and Marketers

For large insurance carriers, the Centene letter is a signal that the regulatory conversation around fraud is shifting. If CMS adopts even a few of these changes, it could reshape how compliance and special investigations units are staffed and resourced.

Here's what to watch:

Payment suspension authority would require carriers to build clearer internal escalation pathways so that suspension decisions are made quickly and defensibly.
Expanded prepayment review would likely increase short-term claim processing friction but reduce long-term losses from fraud.
Data-sharing expansion opens the door to more sophisticated cross-carrier and cross-state analytics, which could be a significant investment opportunity for compliance technology vendors.
Standardized terminology would simplify multistate compliance operations and reduce the overhead of maintaining state-specific fraud detection playbooks.

For agents working in Medicaid-adjacent lines, understanding how fraud enforcement shapes network adequacy, provider rosters, and plan stability is increasingly essential. Plans that lose providers to fraud investigations can experience coverage disruptions that affect member retention and satisfaction scores.

For digital marketers, the political climate around Medicaid fraud is shaping how carriers talk about program integrity in public-facing materials. Being able to credibly communicate antifraud efforts is becoming part of the brand proposition for Medicaid plans, rather than simply a compliance checkbox.

A Catch-22 Nobody Talks About

There's a structural tension buried in the current regulatory framework that Centene's letter brings into sharp relief.

MCOs are paid capitation rates based on the expected cost of covering a population. When fraud inflates utilization data or distorts risk scores, it corrupts the actuarial foundation of those rates. That means carriers may be receiving payments that don't reflect real costs, or, just as problematically, failing to receive adequate rates because fraudulent activity was underreported.

Centene's complaint about outdated expense-reporting rules is particularly pointed here. If an insurer invests in fraud prevention technology and staffing, those costs may not be recognized in ways that justify the investment under current accounting rules. The result is a system that inadvertently penalizes carriers for doing the right thing.

This is a classic regulatory design failure. The incentives don't align with the intended outcomes. Fixing it won't just help catch fraudsters. It would also produce better actuarial data, more accurate rate-setting, and ultimately a more financially stable Medicaid managed care market.

Sources:

Further Thoughts

Centene's push to CMS reflects a broader industry reckoning with the limits of a regulatory framework built for a different era, when the speed and sophistication of modern health care fraud couldn't have been anticipated.

For the insurance industry, the question isn't whether these reforms are needed. Most compliance professionals would agree they are. The question is whether the political will exists to implement them in a meaningful way, and whether CMS will treat Centene's proposals as a starting point for genuine reform or file them away as another comment letter.

Given the current administration's stated priorities and the sheer scale of documented fraud and improper payments, the conditions for real change may be better right now than they've been in years. That's worth watching closely.