Steve Hilton Joint Announcement: Cracking Down on Medi-Cal Fraud

The California State Auditor has warned that weak oversight has opened the door to organized healthcare fraud. Criminals can bill for care that never happened, including by using stolen patient information. Taxpayers lose the money, and the elderly and disabled people these programs are supposed to help can be left without the care they need. Stopping that waste is money the state can save.

Steve Hilton and citizen investigator Eric Nissen went to a listed home-health agency in Hollywood and found a locked building, no entry listing for the agency, and a published telephone number that could not be reached. They found those red flags in minutes. State regulators need to check that agency’s records and establish whether it has billed taxpayers and whether patients received care. It should not take a citizen knocking on the door to get those questions asked.

In 2022, the California State Auditor identified signs of large-scale, organized hospice fraud in Los Angeles County. One building in Van Nuys housed more than 150 licensed hospice and home-health agencies, more than the building could hold. The auditor found inadequate checks on licenses and staff credentials, slow investigations, and failures to coordinate between state departments. Those licensing failures sit with the California Department of Public Health. Medicare billing oversight sits with the federal Centers for Medicare & Medicaid Services. The officials who ran those systems owe taxpayers an explanation.

Herb Morgan, who is running for State Controller, estimates billions of dollars in potential fraud, waste, and improper payments in Medi-Cal and In-Home Supportive Services, or IHSS. In his white paper, the Medi-Cal figure uses a roughly 10 percent improper-payment band drawn from federal CMS Payment Error Rate Measurement ranges. The IHSS figure uses 12 to 15 percent, reflecting self-reported hours and limited verification. Those are exposure estimates, not a count of proven fraud, and they are the starting point for where to look. California already has provider screening and electronic visit verification. Steve will require the agencies to use those records to check the care being billed and stop fraudulent payments.

On Day One, as part of Operation Zero Waste, Steve will direct the Departments of Health Care Services and Public Health to review high-risk home-health and hospice agencies together. Investigators will check the owners and staff credentials, make unannounced visits to suspect offices, and match billing records to actual patients and services. Agencies must be able to show who delivered the care. When the evidence supports it, the state will suspend Medi-Cal payments, revoke licenses, and refer cases for prosecution. Investigators will trace connected companies so an excluded operator cannot simply reopen under another name, and send evidence of Medicare fraud to federal authorities.

For IHSS and home-health visits, Steve will require closer checks of the hours claimed against authorized care and existing visit records. Repeated manual changes, impossible hours, and overlapping claims will trigger review and direct confirmation with the patient or an authorized representative. Live-in caregiver exemptions will be checked in suspicious cases. State agencies will match claims against death records, hospital stays, and excluded-provider lists, blocking clearly invalid claims such as services dated after a patient’s death. Families providing genuine care will keep getting paid, with a prompt way to correct errors that could interrupt necessary care.

Steve will require additional review before payment for providers with serious billing red flags, then extend those checks to medical transport, equipment, and behavioral-health services. His administration will pursue repayment from fraudulent providers and work with state and federal prosecutors on organized schemes. Medi-Cal health plans will have to account for recovered overpayments, with sustained reductions in improper spending reflected in future payments to plans. Otherwise, taxpayers could keep paying the same amount while the plans pocket the savings.

Steve will work with Herb Morgan to check the financial results. If elected Controller, Herb will use the office’s independent audit authority to examine high-risk payments and review the savings. He will publish the results under a radical-transparency standard: provider payments, recovery amounts, and exception patterns available to the public, with patient and caregiver identities fully protected. Steve is aiming for $5 billion a year in net savings to California’s budget once the changes are in place. Public reports will show the California savings after enforcement costs, with federal savings and one-time recoveries listed separately. Only money California can save every year will be counted as ongoing savings.

Within the first 100 days, inspections of suspect agencies and tighter checks on their claims will be underway. Over the following nine months, the administration will strengthen IHSS verification and connect the records needed to catch bad claims before payment. Within 18 months, the controls will extend across the targeted services. Steve will seek any legislation or federal approvals needed to finish the job, and publish the results as the work proceeds.

Families looking for home care should be able to reach the provider and trust that someone will turn up. Taxpayers should be able to see what they are paying for, without seeing anyone’s medical record. Steve’s administration will make providers and the departments overseeing them answer for that money. Radical transparency will put the financial results in public, and the savings will be reported in public.