Hospitals and Insurers Are Getting Rich Off Medical Fraud

Stephen Moore on Apr 28, 2026

Polls show Americans are angry -- and rightly so -- at accelerating medical bills. Meanwhile, the insurers and hospitals keep raking in record profits.

UnitedHealthcare just reported jumbo profits so far in 2026, and in 2025 they recorded revenues of more than $400 billion. They are raking in profits from the $1.9 trillion in federal healthcare programs.

Two of the largest "nonprofit" hospital chains, Kaiser Permanente and HCA Healthcare, recorded nearly $200 billion in assets at the end 2024. As Rep. Jason Smith, chairman of the House Ways and Means Committee, put it: "Hospitals are charging an insane amount. Hospital prices have skyrocketed 300% in just over two decades -- more than any other sector of our economy."

A major driver of costs is the fraudulent claims paid out by the government to health insurers and hospitals. Much of the scam billings are charged to the half-trillion-dollar Medicare Advantage program.

Here's one way they get away with it.

Medicare payments are based on a patient's risk factors or diagnosed conditions -- not payments for actual healthcare services. Medicare Advantage enrollees are healthier on average than traditional Medicare beneficiaries, yet insurers consistently inflate patient risk scores so they can bilk more money from Uncle Sam.

This scheme is known as "upcoding." By exaggerating the patients' health problems, insurers collect larger payments from government without providing additional healthcare. It's the healthcare equivalent of a driver filing an insurance claim for a fender-bender and seeking reimbursement for much less than the repairs actually cost.

The Medicare Advantage program is supposed to be a free-market supplement to Medicare. But the rules are written as if to fatten the wallets of the hospital and insurance giants -- while the taxpayers and employers eat the costs.

Some of my Republican friends argue that Medicare Advantage is a free-market insurance program. Really?

The GOP's Doctors Caucus -- people who treat patients firsthand -- has increasingly warned that insurers are extracting billions in payments that bear no relation to patients' actual medical needs.

The Trump administration is finally ending this blank-check billing scheme. In January, the administration stunned Medicare Advantage insurers by rejecting a "big boost" in payments. Instead, President Donald Trump wants reforms to root out "upcoding" fraud that pads insurers' profits.

Here's another commonsense way to save money on healthcare. Trump's Centers for Medicare & Medicaid Services has proposed excluding diagnoses added by an insurer who merely reviews patient records but never actually sees the patient. CMS projects that eliminating such diagnoses would save taxpayers some $7 billion next year alone.

One piece of good news is that some states are auditing hospital billing practices. Indiana's House just unanimously passed the a "payment of health claims" law pushed by Gov. Mike Braun that will root out phony reimbursement scams.

States like Arkansas, Virginia and Ohio are now following Indiana's lead, and Congress should too.

The savings impact of reining in Medicare Advantage fraud reaches into the high tens of billions of dollars every year -- money that is effectively stolen from taxpayers and employers. Medicare Advantage is now covering more than half of American seniors.

For too long, fraudulent medical care billing has been treated like a ho-hum cost of doing business in Washington and state capitals. It isn't. It's theft. The victims are patients, employers, doctors and taxpayers.

Trump and Braun should be applauded for demanding that private insurance companies stop bilking taxpayers. If insurers and hospitals keep getting rich by cheating, they should be thrown out of the program.

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Stephen Moore is a former Trump senior economic adviser and the cofounder of Unleash Prosperity, which advocates for education freedom for all children.