Kentucky officials describe Medicaid program-integrity work, cite $251 million in 2025 savings

Commissioner Lisa Lee and Jennifer Dudinsky, director of the Division of Program Integrity at the Kentucky Department for Medicaid Services (DMS), described the state's efforts to identify and curb Medicaid fraud, waste and abuse during a Health Budget Review Subcommittee meeting.

Lee said Kentucky's Medicaid program is a federal-state partnership and outlined program size and spending. "Medicaid is a partnership between the state and federal government," she said. The department reported roughly 1,400,000 members on Medicaid, about 69,000 enrolled providers and combined 2024 expenditures of about $18.5 billion.

Program-integrity work focuses on provider activity rather than members, Dudinsky told the committee. She said member fraud accounts for roughly 2% or less of identified fraud and abuse, and most investigations and enforcement actions are provider-driven. "We have about 60 employees" in the program-integrity unit, Dudinsky said in response to a committee question about staff size.

Why this matters: Committee members pressed for clarity because program-integrity outcomes affect both budget recoveries and continued access to care. Officials said the department combines front-end defenses (enrollment screening and exclusions) with audits and partnerships with federal and state law enforcement to prevent improper payments and recover funds.

Key details and process: DMS said provider enrollment checks include matches against the Social Security Death Master File, the Office of Inspector General exclusion list, Medicare revocation records and terminations from other states. The agency conducts site reviews and fingerprint background checks for higher-risk provider types and requires revalidation of providers every five years.

Audits and referrals: DMS runs in-house analytics to flag high utilization and other anomalies for pre- and post-payment audits. Credible allegations of fraud are handled under federal rules and referred to the Kentucky attorney general or the state's Medicaid fraud control entity as required (the department referenced 42 CFR 455.23 in describing referral obligations). Dudinsky said the department meets monthly with the attorney general's office to review pending and referred cases and that the department refers on average about two cases per month for potential prosecution.

Payment suspension and recovery: When a credible allegation exists, DMS said it may suspend payments to a provider'a rapid step intended to stop further questionable outflows while investigations proceed. The department works to protect member access before suspending payments and can grant law enforcement exceptions that delay suspension while investigations are ongoing. Recovery efforts, third-party liability work and estate recovery were described as additional recovery tools; DMS reported roughly $251 million saved or recovered so far in 2025 across those efforts.

Oversight partners: DMS described collaborations with managed care organizations' internal investigative units, the U.S. Attorney's Office, the Office of Inspector General (HHS OIG), CMS, a unified program-integrity contractor (recovery audit-type contractor) and pharmaceutics monitoring organizations.

What the committee asked: Members asked for more precise prosecution statistics and case counts; Dudinsky said she would provide those figures to staff. Representative Williams specifically asked how many prosecutions resulted from identified fraud; Dudinsky said she did not have exact prosecution counts at the table but that DMS could produce that data.

Ending: Committee members complimented department staff on recoveries but indicated they want more reporting on outcomes, prosecution numbers and measures that link integrity work to improved member outcomes. DMS said it would provide follow-up materials and reports to staff.