Hawai驶i was under fire for looking the other way on Medicaid fraud but its attorney general and the director of its anti-fraud unit had a ready response.
Look at the $14 million in settlements our fraud unit has secured, Attorney General Anne Lopez said in mid-May when Vice President JD Vance called out the state鈥檚 record of zero Medicaid fraud convictions in four years.
鈥淚f you鈥檙e committing fraud in Medicaid in Hawai驶i, at least up until now,鈥� Vance said, 鈥測ou鈥檝e had effectively free rein from the government of Hawaii to commit as much fraud as you want.鈥�
Lopez fired back: 鈥淲e welcome accountability, but we will not allow the work of this unit to be mischaracterized as doing nothing.鈥�
In fact, however, virtually all that settlement money 鈥� $13 million of it 鈥� came from one case that settled in 2023 but started more than a decade ago.
鈥淚f that鈥檚 what it is, $13 million of the $14 million was one case that started back in the 2010s, well, what are you guys really doing?鈥� asked state Sen. Brenton Awa, the Republican minority leader. 鈥淚 think that鈥檚 a fair question.鈥�
The Inspector General of the U.S. Department of Health and Human Services suggested one answer: the Medicaid Fraud Control Unit鈥檚 efforts fell far too short.
鈥滶nough is enough,鈥� Inspector General T. March Bell wrote in a letter informing Lopez and Landon Murata, the fraud unit director, he would not recertify the fraud unit, effectively yanking the funding. That meant a hit of nearly $3 million a year with potential to gut the state鈥檚 entire medical insurance program for low income residents.
鈥淭he Hawaii MFCU has demonstrated that it is ineffective in fighting Medicaid fraud and has failed to comply with the terms and conditions of its MFCU grant award,鈥� Bell wrote in the letter, which pointedly observed that the single settlement was the lion鈥檚 share of recovered funds.
Amanda Copsey, a former senior counsel at the inspector general鈥檚 office, described the letter as 鈥渙ne of the most strongly worded I鈥檝e read in a long time from the OIG.鈥�
Road To Settlement Started Years Ago
The single $13 million settlement involved Liberty Dialysis, a company that continued to submit Medicaid payment claims to the state even after it was told that earlier reimbursements had been made in error.
That case was initiated by the fraud unit in the 2010s. And in 2015, then-Attorney General Doug Chin sued the company for $7 million in overpaid billings between 2006 and 2010 plus damages and penalties.
The state鈥檚 lawsuit alleged that Liberty 鈥� which has facilities across the islands and is a subsidiary of Fresenius Medical Care, a Germany company with more than 2,500 dialysis clinics in the United States 鈥� had submitted claims it knew were not eligible for reimbursement.
Dialysis providers deliver frequently expensive medications through high volume services that generate an avalanche of bills and have been repeated culprits in Medicaid fraud cases across the country, accounting for hundreds of millions of dollars in settlements.
The settlement with Liberty was finally reached three years ago, although not by the fraud unit, which has its own attorneys and authority to pursue settlements, but by the Attorney General鈥檚 civil recoveries division.
Even with that success, Bell wrote in his letter, Hawai驶i鈥檚 total recoveries came to less than 1% of its Medicaid expenditures from 2022 to 2025.
A breakdown of settlements from 2021 and 2025 provided by the Attorney General鈥檚 Office also suggests the total amount recovered was actually closer to $13 million than the $14 million cited by Lopez. The other Hawai驶i cases amount to $182,000 in recoveries. They involved:
The fraud unit reached another settlement this February, of $208,000, with a doctor who submitted Medicaid claims for performing fetal ultrasounds without proper credentials.
Responding to Bell鈥檚 June 4 letter, Murata used the same argument as Lopez. The settlements proved his unit鈥檚 work should be judged on its overall body of investigations, successful settlements and recoveries of funds, the fraud unit director said.
鈥淚ndictments and convictions provide an incomplete characterization of the effectiveness of the MFCU,鈥� Murata wrote in a June 5 letter to Bell.
Asked by Civil Beat whether the inspector general and taxpayers should be concerned about the low number of settlements obtained in four years, and that just one accounted for such a large share, Murata responded in a statement:
鈥淭axpayers should absolutely expect accountability and measurable results. That is why we have acknowledged the seriousness of the federal government鈥檚 concerns, have already mobilized additional resources from across the Department to review the findings, pursue reconsideration, and strengthen Hawai驶i鈥檚 Medicaid fraud enforcement efforts.鈥�
In his letter to Bell, Murata also argued that since 2021, Hawai驶i鈥檚 fraud unit had outdone many similarly staffed peers in achieving civil and criminal settlements.
A Red Flag
Hawai驶i鈥檚 record of convictions stand out against the numbers nationally, and not in an entirely flattering way.
From fiscal years 2022 to 2025, the nation鈥檚 53 Medicaid fraud units recorded 3,433 fraud convictions and 1,372 convictions for patient abuse or neglect, and recovered $5 billion in criminal and civil settlements.
Over the same four-year period, Hawai驶i reported an average of 440 open fraud investigations a year 鈥� but no convictions.
鈥淚f it鈥檚 always zero, that鈥檚 just a red flag,鈥� said Copsey, the OIG鈥檚 former senior counsel. 鈥淭hat鈥檚 just impossible.鈥�
By comparison, Delaware and Rhode Island 鈥� states with roughly the same population as Hawai驶i and share of the population enrolled in Medicaid, and roughly the same number of fraud unit staff 鈥� recorded 16 and five fraud convictions, respectively, over the four years.
In that period, Delaware recovered $13 million while Rhode Island recovered just $2.8 million, according to the inspector general鈥檚 office鈥檚 annual reports.
The Trump administration has told all states their fraud units will face reviews, and warned that enforcement failures could put overall Medicaid funding at risk. But it has so far only attempted to freeze Medicaid reimbursements to two Democrat-led states, Minnesota and New York, while also calling Florida a hotspot of fraud.
Speculating on what drew the Office of the Inspector General鈥檚 attention to Hawai驶i, Copsey noted that the OIG has high-powered 鈥渄ata mining鈥� capabilities, and may have detected an issue with billing data.
鈥淔rom my read of the letter,鈥� she said, 鈥渢here鈥檚 got to be some data that does not add up whatsoever with the enforcement activity.鈥�
Tough To Convict
As the precedent in Minnesota and New York suggests, more could be at stake than just federal funding for the fraud unit. Bell made it clear to all the state attorneys general in May that a fraud unit鈥檚 failures could put a state鈥檚 entire Medicaid funding in jeopardy.
In Hawai驶i, Medicaid insures just under a third of the state鈥檚 1.4 million residents. While it is run by the state鈥檚 Medquest agency, the federal government covers 70% of its $3.2 billion in annual costs.
So on June 4, when Bell鈥檚 letter landed announcing his decision to decertify the Medicaid Fraud Control Unit, Hawai驶i officials scrambled to respond on two fronts.
Gov. Josh Green immediately announced he was launching an 鈥渋ndependent Medicaid strike force 鈥� to support and build upon鈥� the unit鈥檚 work. Green鈥檚 office did not respond to a question from Civil Beat about what that strike force would do differently than the fraud unit or how it would add to it.
The following day, Murata responded to Bell with a six-page letter pleading with him to reverse his decision.
鈥淭he denial of recertification and the loss of federal funding will only impede the good work of the MFCU,鈥� Murata wrote. 鈥淭he Attorney General of the State of Hawai鈥檌 is firmly committed to the mission of the MFCU. This denial will only compound the difficulties the HHS-OIG onsite team observed this past April.鈥�
While conceding the staffing and case management problems the inspector general鈥檚 office found in its recent review, Murata argued that Hawai驶i鈥檚 legal landscape differs from many other states, which he said partially accounts for the lack of fraud convictions and indictments. State laws, he said, make it tougher to pursue criminal fraud cases here.
鈥淗awai鈥榠 affords significantly higher constitutional protections to the accused than most other states thereby confounding investigations and prosecutions,鈥� Murata wrote, adding that the chances of a Medicaid provider convicted of fraud getting a prison sentence 鈥渁re nonexistent鈥� and they would likely be ordered only to pay restitution of 鈥減ennies on the dollar.鈥�
鈥淭his is the reality in Hawai驶i,鈥� he wrote.
Murata said in his email to Civil Beat that his point to Bell was that civil cases and settlements are often easier and more effective ways to recover Medicaid fraud losses, 鈥減articularly in cases where the evidence does not support proving criminal fraud beyond a reasonable doubt.鈥�
Yet in the five years before Murata was named the unit鈥檚 director in 2021, Hawai驶i recorded 12 Medicaid fraud convictions and 34 settlements, recovering $4.5 million, according to federal records based on data submitted by the states鈥� fraud units. Then no convictions followed until this year.
One Hawai驶i legal expert said that while Murata鈥檚 argument is sound in some ways, it is less so in others. The state鈥檚 constitution does grant defendants greater protections than many states in terms of search and seizure of evidence, said Kenneth Lawson, who teaches criminal law at the University of Hawai驶i William S. Richardson School of Law.
However, since the government generally has access to records of a government program 鈥� in this case, Medicaid 鈥� Lawson said those strictures on search and seizure are less applicable.
鈥淚t鈥檚 really just a white collar crime and both parties already are in possession of the records,鈥� he said.
At the same time, Lawson said, as they must everywhere, successful fraud prosecutions must prove intent, which is 鈥渁 high burden.鈥� Also, he said, defendants, given insurance billing complexities, can credibly argue their ignorance and that they made explainable errors.
Hawai驶i jurors are also notably intent on making prosecutors meet the 鈥渂eyond a reasonable doubt鈥� standard, Lawson said.
鈥淭he AG is saying these cases are hard to win,鈥� he said, 鈥渁nd they are.鈥�
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