Medicaid paid more than $207 million for dead people. A new law could help fix that

Medicaid programs made over $200 million in improper payments to healthcare providers for deceased individuals between 2021 and 2022, according to a new report from the Department of Health and Human Services’ independent watchdog.

The Office of Inspector General, which released the report on Tuesday, highlighted that these erroneous payments remain a persistent issue affecting multiple states. The findings revealed that more than $207.5 million in managed care payments were made on behalf of enrollees who had already died during the one-year period examined.

“This issue is not unique to one state, and the problem continues to be persistent,” said Aner Sanchez, assistant regional inspector general in the Office of Audit Services, who has studied this matter for a decade.

This nationwide analysis builds upon previous work by the inspector general’s office, which has conducted 18 audits on selected state programs since 2016. Those earlier investigations identified approximately $289 million in improper Medicaid payments made on behalf of deceased enrollees.

The report comes as a new provision in the recently passed Republican legislation, known informally as the “One Big Beautiful Bill,” may help address the problem. The law will require states to conduct quarterly audits of their Medicaid provider and beneficiary lists beginning in 2027, with the aim of stopping payments to deceased individuals and improving overall accuracy.

A key recommendation from the watchdog is for the federal government to share more information with states to help recover incorrect payments. Specifically, the report suggests providing access to the Social Security Administration’s Full Death Master File, which contains more than 142 million death records dating back to 1899.

Access to this comprehensive database has been historically restricted due to privacy laws designed to prevent identity theft and fraud. However, the report argues that broader access could significantly reduce improper payments.

Recent evidence suggests that using the Full Death Master File can be effective in preventing such wasteful spending. In January, the Treasury Department reported recovering more than $31 million in federal payments that had inappropriately gone to deceased individuals during a five-month pilot program. This initiative was made possible after Congress granted Treasury temporary access to the file for three years as part of the 2021 appropriations legislation.

The Full Death Master File itself has been subject to unusual updates recently, complicating its use as a verification tool. In April, the Trump administration moved to classify thousands of living immigrants as deceased and cancel their Social Security numbers, as part of efforts to restrict immigrants temporarily allowed to live in the United States under Biden administration programs.

Healthcare policy experts note that improper payments represent a significant drain on Medicaid resources at a time when many states are struggling with budget constraints. Medicaid, which provides health coverage for low-income Americans, is jointly funded by federal and state governments, making fiscal accountability a shared responsibility.

The findings highlight ongoing challenges in program integrity within the Medicaid system, which serves approximately 90 million Americans. As healthcare costs continue to rise, eliminating wasteful spending has become increasingly important for sustaining the program.

State Medicaid officials across the country will likely face increased pressure to implement more rigorous verification systems following this report, even before the 2027 mandatory audit requirement takes effect.

The Department of Health and Human Services is expected to work with Congress and state agencies to implement the inspector general’s recommendations and strengthen safeguards against improper payments, potentially saving taxpayers hundreds of millions of dollars in the coming years.