Medicare lost nearly $57 billion to improper payments last year. That figure exceeds the estimated annual earnings of roughly 214,000 primary care doctors, according to the latest report from the Centers for Medicare & Medicaid Services (CMS). The agency is fighting back with a war room approach that targets fraud before the money changes hands, and the results are starting to show.
In March 2025, CMS launched its Medicare “Fraud War Room,” bringing data analysts, investigators, lawyers, and law enforcement together to coordinate against suspicious billing. The shift moves Medicare from a “pay and chase” model to a “caught and stopped” one. The difference is simple: instead of paying claims and then chasing down the people who filed them, the agency now stops payments it suspects are fraudulent before they reach anyone.
The strategy is working. Program-integrity savings rose 59% year-over-year, and the return on investment rose from $14.60 to $22.30 per dollar spent. The improper-payment rate for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) was almost four times the average across traditional Medicare.
The Scale of the Problem
The $57 billion figure is the total estimated improper payments for Medicare last year. The breakdown:
- $57 billion in improper payments
- 214,000 primary care doctors’ estimated annual earnings
- 11 DMEPOS companies flagged for attempted fraud
- $3.4 billion in attempted fraud over two years
- Nearly $24 million in payments suspended to two DMEPOS suppliers
- 90% of first-year suspensions involved DMEPOS billing
The structure of the federal administrative apparatus costs taxpayers a quarter to half a trillion dollars in fraud annually, according to estimates. That is a staggering number, and it shows why the war room approach matters: the faster CMS can stop a bad payment, the less money the government loses.
The DMEPOS Suspects
CMS identified 11 DMEPOS companies attempting to bill for equipment for deceased beneficiaries or those who never requested or received it. These 11 companies attempted to siphon off as much as $3.4 billion over the past two years. None of the 11 suppliers had submitted Medicare claims before 2025, yet their suspected fraudulent billing reached $3.4 billion in two years.
One Florida DMEPOS supplier billed $6.1 million for catheters for about 500 beneficiaries in one day. Another billed $12.3 million for 777 beneficiaries the following day. Those numbers are not small. They are the kind of figures that catch the attention of anyone watching the Medicare system.
How the War Room Works
The Fraud War Room brings together data analysts, investigators, lawyers, and law enforcement to coordinate against suspicious billing. The idea is to spot patterns before they become payments. When the team sees a pattern of claims that look suspicious — such as equipment billed for beneficiaries who have died — the agency can suspend those payments immediately.
The suspension process is the heart of the caught-and-stopped model. Instead of waiting for the payment to clear and then trying to recover the money, the agency stops it at the source. That means the fraudster never gets the cash.
The war room approach is also changing how Medicare handles new entrants. A nationwide enrollment moratorium was imposed on new entrants in hospice and home-health categories. That means those categories are closed to new businesses until the moratorium is lifted.
The Numbers Behind the Savings
The savings come from two directions. First, the payment suspensions themselves save money by stopping fraud before it happens. Second, the improved targeting means investigators spend their time on the cases most likely to produce results.
The return on investment jumped from $14.60 to $22.30 per dollar spent. That is a strong return.
The improper-payment rate for DMEPOS was almost four times the average across traditional Medicare. That gap is significant, and it points to where the agency should focus its efforts. By targeting DMEPOS billing, CMS is hitting the category with the highest improper-payment rate.
| Category | Improper-Payment Rate |
|---|---|
| DMEPOS | Almost four times the average |
| Traditional Medicare | Average |
The Hospice and Home-Health Target
The war room’s work extends beyond DMEPOS. Suspicious payments were suspended to roughly 800 Los Angeles-area hospices and home-health agencies. That is a wide net, and it shows the scale of the problem in those categories.
The nationwide enrollment moratorium on new entrants in these categories is a blunt instrument, but it is effective. It stops new fraudsters from entering the system in the first place, which removes the need to chase them down later.
Nearly $24 million in payments to two DMEPOS suppliers were suspended before the money reached them.
What the War Room Achieved
The Fraud War Room’s first year produced a clear set of results. The improper-payment rate for DMEPOS was almost four times the average across traditional Medicare, and 90% of the first-year payment suspensions involved DMEPOS billing. That tells us where the fraud is concentrated and where the agency’s resources are best deployed.
The $3.4 billion in attempted fraud over two years is a warning sign. It shows that the fraudsters are still out there, and they are still trying to game the system. The war room is catching some of them, but the numbers suggest there is more work to be done.
The $57 billion in improper payments last year is a sobering figure. It shows how much money the Medicare system loses to fraud, and it underscores the importance of catching it before it happens.
The Case for Better Design
Brian Blase at the Paragon Health Institute argues that more vigilance and stronger enforcement are imperative, but lasting reform requires better program design so that states, insurers, providers, and beneficiaries have incentives to maximize value. That is a fair point. The war room can catch fraud, but it cannot eliminate the incentives that drive it.
The fraudsters are looking for weak spots in the system. They find them, exploit them, and move on. The war room catches some of them, but it cannot change the underlying structure that rewards fraud. That is where the design question comes in.
Blase’s argument is that the incentives matter. He does not say fraudsters have fewer places to hide, nor does he claim the war room creates a system where no one benefits from committing fraud.
Why the War Room Matters
The Fraud War Room is a model for program integrity because it catches fraud before it happens. That is a better model than the pay-and-chase approach, which lets fraud happen and then tries to recover the money. The war room stops the fraud at the source.
The war room is a model for program integrity because it targets the categories with the highest improper-payment rates. DMEPOS is where the fraud is concentrated, and the war room is focusing its efforts there. That is efficient use of resources.
The war room is a model for program integrity because it uses data to identify suspicious patterns. The analysts look for signals, and when they see them, the investigators act. That is a coordinated approach that is harder for fraudsters to beat than a scattered one.
The Road Ahead
The war room is not a cure-all. It catches fraud, but it does not eliminate the incentives that drive it. Blase is right that lasting reform requires better program design. The war room can catch the fraudsters, but it cannot change the system that rewards them.
The fraudsters are still out there, and they are still trying to game the system. The war room is catching some of them, but the numbers suggest there is more work to be done. The $3.4 billion in attempted fraud over two years is a warning sign, and the $57 billion in improper payments last year is a sobering figure.
The war room is a step in the right direction, but it is not the end of the journey. The path forward involves better design, stronger enforcement, and a relentless focus on the categories where the fraud is concentrated. The war room has shown what is possible, and the numbers back it up.
The war room is a model for program integrity because it works. The numbers are clear, the results are real, and the direction is positive. The fraudsters are still out there, but the war room is catching more of them, and that is a victory worth noting.
Where the paper stands
The paper backs the deal over the standoff, so it backs the Fraud War Room’s coordinated approach against improper payments, even as it keeps an eye on whether the war room’s reach grows beyond its proper bounds. The $57 billion figure shows the scale of the problem, and the 59% jump in program-integrity savings shows the approach is working. The war room catches fraud before it happens, which is a better model than the old pay-and-chase method.
The DMEPOS figures — $3.4 billion in attempted fraud, $24 million in suspended payments, 90% of first-year suspensions involving DMEPOS billing — show where the fraud is concentrated. The paper supports targeting those categories, but it wants to watch the war room’s scope carefully.
The nationwide enrollment moratorium on new entrants in hospice and home-health categories is a blunt instrument, and the paper notes it is effective. But the paper would prefer reform that changes the incentives driving fraud rather than just closing doors to new businesses.
Source material: “Medicare’s new fraud strategy is a model for program integrity,” the Washington Examiner.
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