$12.7M Medicaid fraud scheme exposes wider program concerns

Last week, a federal judge sentenced four people tied to fake substance-abuse treatment facilities in Kinston and Goldsboro to 14 year prison sentences. Prosecutors say they were orchestrating a $12.7 million Medicaid billing scheme that used illegal kickbacks to lure patients into unnecessary services. The operation billed Medicaid for fraudulent claims between 2018 and 2023. The crime resulted in prison sentences, the permanent closure of the facility, and millions of dollars in fines and seized assets.

“This is shocking Minnesota-Somali-style fraud right here in North Carolina,” said US Attorney Ellis Boyle in a press release issued March 5. “For too long, government has allowed grifters to steal taxpayer dollars with impunity. Here, these vultures exploited particularly susceptible drug abusers trying to recover their lives and dignity.  Shameful abuse, no remorse. They better learn, and everyone should get the message. Cheaters. Never. Win.”

In the first two months of 2026, 64 allegations of Medicaid fraud in North Carolina have already been reported to the North Carolina Department of Health and Human Services (NCDHHS). In 2025, 386 allegations were reported.

“The Center for Medicare and Medicaid Services reports more than $37 billion in improper Medicaid payments were made last year nationwide,” Brian Balfour, VP of research for the John Locke Foundation, told the Carolina Journal. “But that’s just what they caught, the actual number is probably much higher.”

fraud may be systemic

Cases like this illustrate the most visible form of Medicaid fraud, providers billing the program for services that were unnecessary or never provided, but policy analysts say concerns are also emerging around improper enrollment and potential fraud during the sign-up process itself.

According to a 2024 report from the Paragon Institute, North Carolina is one of nine states with the most Medicaid sign-ups among those reporting income between 100-150% of the federal poverty level (FPL), exceeding the number of potential enrollees.

State officials say it is important to distinguish who is responsible when fraud occurs. The North Carolina Department of Health and Human Services says fraud by Medicaid members themselves is the least common type, compared with fraud involving providers or insurance brokers.

It is noted that some instances of ineligible individuals enrolling in Medicaid are attributed to the Federally Facilitated Marketplace (FFMD) system design, according to NCDHHS.

North Carolina determines Medicaid eligibility using ePASS or FFMD on Healthcare.gov. The FFMD system assesses an applicant’s eligibility and applies on their behalf, while a broker assists in finding an Affordable Care Act (ACA) plan, according to NCDHHS. In these cases, Medicaid and ACA applications may be processed simultaneously, and Medicaid eligibility is not always finalized before an individual chooses an ACA plan.

The report also suggests that brokers and health insurers are contributing to the rise in improper Medicaid enrollment as only an individual’s name, birth date, and address are needed to sign them up for coverage. They also may have been recently removed from their plan and enrolled in another by brokers who earn commissions doing so, according to reports.

enrolled in Medicaid without consent

Kevin Estile, a North Carolina native, says this happened to his family. One of his children has, not once but twice, been enrolled in Medicaid without his knowledge or consent when he enrolled himself and his family in a health insurance plan through the marketplace system. 

“During open enrollment (typically in November and December preceding the coverage year), enrollees sign up for exchange plans,” according to the Paragon report. “During this period, they, likely with the assistance of brokers or navigators working with them on their applications, estimate their household income for the following year.”

During the 2025 enrollment period, Estile reenrolled his family on a plan through the marketplace. He completed the process of picking a plan, filling out the application, and sending it in just a couple of days before the deadline. About two weeks later, he received a letter saying that he needed to provide documentation that his daughter did not qualify for Medicaid. However, the letter provided no details on what kind of documentation was needed or who to contact, only that documentation must be provided or that his daughter could lose her coverage. 

Estile reached out to a health insurance broker near Charlotte for assistance. The broker resubmitted the application on behalf of Estile and then sent Estile the documentation verifying that none of his children were eligible for Medicaid. At the end of February 2026, Estile received notification that someone in his household had been enrolled in Medicaid. So he reached out to his broker again, who informed him that there was no way in which he could assist him at this point.

Estile went through this process several times before 2024, the first year he was able to enroll his family in a health care plan without a navigator’s assistance.

During his previous enrollments in Medicaid, Estile had received repeated notifications that his son or daughter was enrolled in a specific plan; however, he brushed them off as fraud or as automatically generated by the system. After hours on the phone with various agencies (following 2024 enrollment), he finally connected with a Wake County employee. 

“I explained to her, I don’t know how my kids got into this,” said Estile.  “All I know is I keep getting these letters, and I don’t understand what they’re for. I never signed up for anything; I never authorized anybody to sign up for anything.” 

incentive to misreport is amplified

According to the Paragon report, the incentive to misreport income is amplified due to legal limits on what filers repay when they file taxes. Due to these limits, the incentive to underreport income is increased. This was Estile’s primary concern when his children were enrolled in Medicaid without his knowledge or consent. Estile emphasized to the Carolina Journal that he was not trying to cheat the system.

“I don’t want to get in trouble,” said Estile. “I’m not trying to scam the system. So I very distinctly said ‘no Medicaid,’ didn’t sign anything, didn’t give anyone any authorization to file paperwork or do anything. It was very, ‘No that is not an option; everyone’s going on the same plan through marketplace.’”

The NCDHHS already has systems in place to protect against fraud, waste, and abuse, which includes promoting more rigorous screening of providers, conducting audits, monitoring data and analytics systems, and utilizing Medicaid Fraud Control Units (MFCUs) to investigate and prosecute Medicaid fraud. 

“If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation,” according to federal regulations.  

“With any massive government program comes extensive fraud and abuse,” said Balfour. “Unfortunately, North Carolina is no exception, and increases in fraud come along with a rapidly growing Medicaid program, courtesy of expansion. Politicians have spent decades promising to clean up fraud and waste in government social programs. Still, the problem continues to cost taxpayers tens, if not hundreds, of billions of dollars every year.”

“$12.7M Medicaid fraud scheme exposes wider program concerns” was originally published on www.carolinajournal.com.