Medicaid programs across the United States wasted over $207.5 million on payments to health insurers for deceased enrollees from July 2021 to June 2022, with the federal government covering $138.6 million of that amount. A federal audit exposed these lapses as part of deep-rooted flaws in how states track beneficiary eligibility.
Federal investigators from the U.S. Department of Health and Human Services Office of Inspector General reviewed 100 capitation payments—fixed monthly fees states pay managed care organizations per enrollee. Of those, 99 proved improper, yielding a 99% error rate. States had reclaimed 50 payments on their own before the audit, but 49 lingered unrecovered until federal pressure intervened. This highlighted weak internal controls and oversight in state systems.
The problem stretches back years. Since 2016, 18 state audits uncovered $289 million in similar improper payments to managed care groups for dead beneficiaries. Broader reviews from 2009 to 2019 across 14 states found 450,562 such payments totaling $318 million, including $249 million deemed outright unallowable under federal rules. Medicaid’s managed care model fuels the issue: states send a set per-member-per-month sum regardless of service use, so unenrolled deaths mean ongoing payments with no benefit delivered.
Privacy restrictions compound the challenge. The Social Security Administration’s Full Death Master File holds over 142 million records since 1899, but states need special certification to access it, aimed at curbing identity theft. Without timely checks, deceased people stay on rolls for months or years.
Uncovering the Scale
State examples illustrate the scope. Colorado issued over 220,000 payments for about 9,000 dead enrollees from 2018 to 2020, with a $3.8 million federal share plus $2.2 million in other errors. Officials there blamed unreliable data sources and poor automation. New York led with $23.3 million in improper payments; the state repaid $10 million to the federal government, while insurers returned $19 million, due to absent verification tools. Louisiana disbursed $9.6 million for 1,072 deceased beneficiaries, with death notifications lagging 617 to 799 days when using obituaries or the Death Master File, versus 23.5 days from vital records—exposing agency coordination failures.
Legislative Fixes Take Shape
New laws aim to stanch the flow. President Donald Trump signed the One Big Beautiful Bill Act on July 4, 2025, mandating quarterly beneficiary audits against the Death Master File starting January 2027, provider checks from January 2028, and automated systems with due process by October 2029. States must also submit enrollee addresses and Social Security numbers to a Centers for Medicare & Medicaid Services hub to block multi-state enrollments.
A Treasury pilot from December 2023 recovered $31 million in five months using temporary Death Master File access, boosting death matches by 139% and projecting $215 million in three-year gains. Bipartisan efforts continue: Senators John Kennedy, Gary Peters, and Ron Wyden’s Ending Improper Payments to Deceased People Act passed the Senate unanimously in September 2025, seeking permanent Treasury access. Senator Rick Scott’s LIVE Beneficiaries Act, under Senate Finance review, pushes quarterly Medicaid death checks.
This fits broader Medicaid strains. Fiscal 2024 saw a 5.09% improper payment rate, or $31.1 billion, mostly from documentation flaws—though some estimates hit 25% with full eligibility probes. Managed care covered 61.7 million in 29 states by December 2024, down 5.5% post-pandemic, within 77 million total enrollees.
Looking Ahead
Root causes persist: missing automation, privacy hurdles, update delays, manual processes, and inter-agency silos. Assistant Regional Inspector General Aner Sanchez, after a decade of probes, noted the issue’s nationwide persistence. States face deadlines—beneficiary checks in 2027, providers in 2028, multi-state fixes by 2029—plus penalties from fiscal 2030 if error rates top 3%. Recovery pushes and scrutiny on insurers intensify. Effective tech rollout, state adherence, and steady oversight will determine if these reforms curb billions in waste amid evolving program demands.
Sources:
“Medicaid Agencies Made Millions in Unallowable Capitation Payments to Managed Care Organizations on Behalf of Deceased Enrollees.” U.S. Department of Health and Human Services Office of Inspector General, December 21, 2025.
“Watchdog report finds Medicaid paid more than $207 million for dead people in 1 year.” PBS NewsHour, December 23, 2025.
“Medicaid paid more than $207 million for dead people. A new law could help fix that.” Associated Press, December 23, 2025.
“‘One Big Beautiful Bill Act’: Key Final Medicaid Changes Explained.” Morgan Lewis, July 8, 2025.
“Treasury Data Pilot Prevents and Recovers $31 Million in Improper Payments.” U.S. Department of the Treasury, January 14, 2025.
“Colorado Made Capitation Payments to Managed Care Organizations After Enrollees’ Deaths.” U.S. Department of Health and Human Services Office of Inspector General, February 13, 2025.