Enforcement Intensifies as Medicaid Cuts Take Hold

Transcript

The following transcript of this discussion was edited for clarity.

In January, the Trump administration announced the formation of the new National Fraud Enforcement Division at the Department of Justice (DOJ).

The division will focus on fraud involving federal programs and dollars — and it will coordinate enforcement across agencies, with particular attention to healthcare.

Last fall, Congress approved roughly $700 billion in Medicaid cuts over the next decade. Those cuts could squeeze revenues and disrupt operations across healthcare and life sciences at a time when enforcement is intensifying.

I’m Bob Mertz, and I’m here with Goodwin partner Ilene Albala, one of the authors of a recent article on this topic in our Forces of Law series.

Bob Mertz: Ilene, welcome.

Ilene Albala: Thanks for having me.

What is the new National Fraud Enforcement Division?

The announcement came out on January 8, 2026, so it’s very new, and we have yet to see what it will look like, who will run it, and how it will integrate with the existing components of the DOJ since the department already has several sections dedicated entirely to fraud.

The administration has said the new division will use federal, criminal, and civil laws against fraud targeting federal government programs, federally funded benefits, businesses, nonprofits, and private citizens nationwide.

Vice President Vance also explained that there will be a new assistant attorney general (AAG) who will run the division out of the White House under his and President Trump’s supervision. This AAG for the National Fraud Enforcement Division will oversee multi-district, multiagency fraud investigations.

The new division will advise and assist the US attorney’s offices on fraud-related issues and identify, disrupt, and dismantle organized, sophisticated fraud schemes across various jurisdictions, alongside federal agencies and DOJ components, with a focus and an immediate concern linked to high-profile allegations in particular states.

Historically, combating fraud, waste, and abuse was a fairly straightforward bipartisan agenda item. This announcement is nationwide in scope but also focused on specific states — in this instance, Minnesota, with California and Ohio likely next on the list, according to the vice president. Other recent announcements by the administration — including freezing funding for certain programs, like childcare programs — focus on specific states like California, Colorado, Illinois, Minnesota, and New York.

Whatever the motivation is for creating this new division, it will likely result in the heightened scrutiny of organizations and individuals engaging with federal programs by both federal and state actors. Even blue states that have publicly denounced allegations of state-based fraud have vowed to police their own states. This is evidence that the new division will strengthen enforcement efforts across the board.

The administration calls this new division “a very broad interagency” effort involving the departments of Health and Human Services (HHS), Treasury, and Homeland Security and other agencies. Is that kind of coordination new?

We’ve absolutely seen interagency cooperation before. The HHS-OIG (Office of Inspector General) and the DOJ frequently collaborate, for example. But this does appear to include a broader group of federal players that don’t usually coordinate together on a daily basis. It should be interesting to watch how this works in practice, because it is a big effort, and it does involve a significant amount of coordination.

You’ve written about the False Claims Act (FCA) Working Group that was formed in July. That’s also a joint effort involving the DOJ and HHS. How does that relate to this new division?

That’s a great question. It is unclear whether the two are related. The FCA Working Group announced in July 2025 appears to be a continuation of a working group that was formed during the first Trump administration in the middle of the COVID-19 pandemic.

It seems to have been revived recently, with likely more fulsome support. It’s my understanding that this group meets monthly and is really focused on getting into untapped areas of fraud, and it’s really using data analytics to try to fuel the effort.

And do we know how they are using data analytics?

The DOJ, CMS (Centers for Medicare & Medicaid Services), and other agencies across the board have been using data analytics for some time, certainly in the healthcare enforcement space. I’m not surprised to see the focus on data analytics. I think that trend will continue. As a result, we are seeing a growing number of what I would call organic investigations, meaning investigations that are generated internally by the government, by agencies. We are seeing more of those each day. I’ve heard that certain agencies, including CMS and HHS-OIG, have received more funding to hire agents. We also know that the Fraud Section of the DOJ’s Civil Division will be hiring more attorneys. So even though we are seeing certain areas of enforcement slashed, the focus on healthcare fraud enforcement is increasing.

Federal Medicaid funding is set to drop significantly. What happens when revenue pressure hits companies that are already under heightened scrutiny?

Medicaid cuts are going to have a tremendous impact across the board, throughout the entire industry. When budget cuts hit a company’s bottom line, the company may feel the need to take certain shortcuts to make up for losses. Some organizations might become more aggressive in their sales and marketing practices. Or they may make significant staffing cuts. All of this can result in increased fraud exposure. For example, when you lay off a certain portion of your workforce, you might also create potential future whistleblowers.

I suppose there’s a temptation to cut back on compliance spending when revenues fall.

Yes, and that’s particularly risky right now. Companies might think, well, a robust compliance department is a luxury — or at least it’s a cost center. The reality is, when you combine aggressive practices with possible layoffs and a lax or depleted compliance function, the result is a recipe for increased fraud exposure at a time when we’re seeing both federal and state actors looking for someone to blame.

Thank you, Ilene.

Thank you, Bob.