THE GROWING IMPORTANCE OF PAYMENT PREVENTION UNDER H.R. 1
Payment prevention will be a priority in Medicaid as a result of H.R. 1. For years, Medicaid program integrity has relied heavily on identifying improper payments after claims were paid. That model is beginning to change.
Federal enforcement initiatives continue to strengthen efforts to combat fraud, while Congress has increased financial accountability for payment accuracy through the One Big Beautiful Bill Act (H.R. 1). Together, these developments signal a broader evolution in Medicaid administration—one that places greater importance on preventing payment errors before they occur instead of relying primarily on audits and recovery efforts after the fact.
Although H.R. 1 never specifically references "payment prevention," its provisions create stronger incentives for states and managed care organizations to improve payment accuracy at the point of adjudication. As the financial consequences of erroneous payments increase, the quality of eligibility, coverage, and third-party liability data becomes increasingly important.
Administrative Errors Drive Most Improper Payments
Medicaid fraud receives significant public attention, but federal data consistently show that it represents only one part of the improper payment challenge.
According to the Centers for Medicare & Medicaid Services (CMS) Payment Error Rate Measurement (PERM) Program, the majority of Medicaid improper payments result from insufficient documentation, eligibility issues, or administrative processing errors—not confirmed fraud. CMS has repeatedly emphasized that the improper payment rate should not be viewed as a measure of fraudulent activity.
That distinction matters because it shifts the conversation from enforcement alone to improving the underlying processes that produce payment decisions.
The Government Accountability Office has listed Medicaid as a High-Risk program for more than twenty years because of persistent improper payment concerns. During that period, federal and state oversight has expanded considerably, yet many payment errors continue to originate during eligibility verification and claims processing rather than from intentional misconduct.
H.R. 1 Places Greater Emphasis on Payment Accuracy
The One Big Beautiful Bill Act increases the importance of getting Medicaid payments right the first time.
Beginning in federal fiscal year 2030, H.R. 1 limits the Department of Health and Human Services' authority to waive repayment obligations for certain excessive erroneous Medicaid payments while broadening the circumstances under which payments may be classified as erroneous. These provisions increase financial accountability for states with elevated payment error rates.
A helpful overview of these changes is available from the Bipartisan Policy Center's analysis of PERM and H.R. 1.
The legislation reinforces a simple reality: accurate information before payment is becoming just as important as recovery after payment.
Because Medicaid serves as the payer of last resort, agencies and managed care organizations must determine whether another insurer is responsible before Medicaid pays a claim. Commercial insurance, Medicare, employer-sponsored health plans, TRICARE, and other third-party coverage must all be considered when adjudicating claims.
If that coverage is overlooked because eligibility information is incomplete, outdated, or unavailable, Medicaid may pay claims that another payer should have covered. While those payments can sometimes be recovered later, PERM evaluates whether the original adjudication was accurate. Subsequent recoveries generally do not eliminate the improper payment determination.
This makes high-quality eligibility information, accurate third-party liability (TPL) data, and effective coordination of benefits (COB) processes increasingly valuable.
Prevention Is More Efficient Than Recovery
Fraud investigations and recovery efforts remain indispensable components of Medicaid oversight. Medicaid Fraud Control Units continue to recover billions of dollars while protecting public resources and holding bad actors accountable.
Even so, these activities occur only after improper payments have already been made.
Preventing an incorrect payment before funds leave the Medicaid program is typically more efficient than identifying, investigating, and recovering the payment months or years later. Avoiding improper payments reduces administrative costs, improves payment accuracy, lowers audit risk, and allows agencies to devote more resources to serving beneficiaries.
As financial accountability increases under H.R. 1, prevention strategies are becoming a larger part of comprehensive program integrity.
Modern Payment Integrity Depends on Better Information
Accurate payment decisions depend on accurate data.
Many Medicaid organizations continue to rely on periodic eligibility files to identify other insurance coverage. Although these data exchanges remain an important part of third-party liability programs, they may not capture changes that occur between monthly or quarterly updates. That creates opportunities for Medicaid to pay claims that should have been billed elsewhere.
To close those gaps, agencies and managed care organizations are investing in technologies that continuously validate coverage information before claims are adjudicated.
Automated Algorithmic Analysis and Insurance Discovery Engines (AAAIDE), including technology developed by Syrtis Solutions, continuously analyze eligibility and coverage information to identify commercial insurance, Medicare, TRICARE, and other liable third-party coverage that may not appear in traditional eligibility files. Providing more complete and current coverage information before payment helps organizations strengthen payer-of-last-resort compliance while reducing avoidable improper payments.
Other modernization initiatives include:
Automated verification using authoritative government and commercial data sources.
Continuous validation of TPL and COB information throughout the claims lifecycle.
Real-time identification of newly discovered or updated insurance coverage before adjudication.
Improved data sharing among Medicaid, Medicare, commercial insurers, and other trusted sources.
Collectively, these capabilities improve payment accuracy while supporting a shift toward cost avoidance rather than traditional pay-and-chase recovery.
The Future of Medicaid Program Integrity
Medicaid program integrity is entering a new phase.
Audits, investigations, and recovery efforts will remain essential, but they are no longer sufficient on their own. Increasingly, success will depend on preventing improper payments through stronger data quality, automated verification, continuous insurance discovery, and more accurate payment decisions.
H.R. 1 reinforces this direction by increasing the financial consequences of payment errors and elevating the importance of payment accuracy at the time claims are processed.
Payment Prevention is becoming more than an operational objective for Medicaid agencies and managed care organizations—it is emerging as a core strategy for improving compliance, protecting taxpayer dollars, strengthening payer-of-last-resort requirements, and supporting the long-term sustainability of the Medicaid program.
Click here to learn more.