A December 2025 report from the Department of Health and Human Services Office of Inspector General (HHS-OIG) revealed that Medicaid programs made more than $207 million in improper payments to healthcare providers for individuals who had already died during a single twelve-month period between July 2021 and July 2022. This finding represents the first nationwide assessment of deceased-beneficiary payment errors in Medicaid and underscores a persistent systemic vulnerability in program integrity that has defied resolution for more than a decade despite repeated audits and policy interventions.
The issue of payments for deceased beneficiaries is neither novel nor confined to individual states with weak administrative controls. Rather, it reflects fundamental coordination challenges between federal and state agencies, technological limitations in real-time data sharing, privacy constraints on death record access, and the operational complexity of administering a $800 billion federal-state health insurance program serving more than 80 million Americans. This analysis examines the scope and causes of improper Medicaid payments to deceased enrollees, evaluates recent legislative attempts to address the problem, and considers whether new data-sharing requirements will prove sufficient to substantially reduce payment errors.
The Scope of Improper Payments: Context and Scale
The $207.5 million in managed care payments identified in the OIG report represents a snapshot of a single year within Medicaid managed care arrangements, where states contract with private insurance companies to deliver care to beneficiaries in exchange for capitated monthly payments. Under this model, states pay health plans a fixed amount per enrollee regardless of whether services are actually delivered, creating a financial vulnerability when eligibility data becomes outdated.
To contextualize this figure, it is important to note that Medicaid managed care payments totaled approximately $367 billion in fiscal year 2022, meaning that identified improper payments to deceased enrollees represented roughly 0.06% of total managed care spending during the audit period. While this percentage may appear modest, the absolute dollar amount is substantial, and the OIG has emphasized that this figure likely understates the true scope of the problem for several reasons.
First, the audit methodology focused exclusively on managed care payments and did not examine fee-for-service Medicaid, where providers bill directly for services rendered. Fee-for-service arrangements may present different vulnerabilities to improper payments for deceased individuals, particularly in states with slower claims processing timelines. Second, the audit period preceded the enrollment surges associated with Medicaid continuous coverage protections during the COVID-19 public health emergency, which created significant administrative backlogs as states resumed eligibility redeterminations in 2023. Third, detection methodologies depend on the timeliness and completeness of death reporting, which varies substantially across jurisdictions.
The persistence of this issue is particularly notable. Since 2016, the HHS-OIG has conducted eighteen separate audits examining selected state Medicaid programs and has identified approximately $289 million in improper managed care payments to deceased enrollees across these more limited reviews. Aner Sanchez, deputy regional inspector general in the Office of Audit Services, told the Associated Press that she has been researching this issue for a decade and that these payment errors are “not unique to one state, and the issue continues to be persistent.”
Root Causes: Data Coordination Challenges
The fundamental challenge underlying improper payments to deceased beneficiaries is the fragmented nature of vital statistics reporting and the limited mechanisms for real-time coordination between death records and program eligibility systems. When an individual dies, multiple reporting pathways exist: family members may notify funeral homes, which file death certificates with state vital statistics offices; healthcare facilities may report deaths; Social Security beneficiaries’ deaths are reported to the Social Security Administration (SSA). However, these reporting systems operate largely independently, with varying timelines and no guaranteed mechanism to automatically trigger eligibility termination in Medicaid.
State Medicaid agencies typically rely on periodic data matches with death records rather than real-time feeds, creating windows of vulnerability during which payments can continue for individuals who are no longer alive. The length of these windows depends on the frequency of data matching, the timeliness of death reporting to source databases, and the administrative processes states use to act on death information once received.
The most comprehensive source of death information is the Social Security Administration’s Full Death Master File (DMF), which contains more than 142 million records dating back to 1899. However, access to the DMF has been severely restricted since 2013 due to privacy concerns and identity theft risks. The restriction followed reports that identity thieves were using publicly available death records to fraudulently obtain credit cards and loans in deceased individuals’ names. While the restriction addressed legitimate security concerns, it simultaneously limited the ability of government agencies to verify beneficiary status and prevent improper payments.
Legislative Response: The One Big Beautiful Bill
The Republican-led One Big Beautiful Bill, signed into law by President Donald Trump in summer 2025, included a provision specifically designed to address Medicaid improper payments to deceased enrollees. The legislation mandates that state Medicaid agencies conduct quarterly audits of their provider and beneficiary lists against the Full Death Master File beginning in 2027.
This requirement represents a significant expansion of DMF usage permissions, which have been tightly controlled since the 2013 restrictions. By requiring quarterly rather than annual or biannual data matching, the legislation aims to narrow the window during which payments can continue after a beneficiary’s death. The quarterly cadence should theoretically reduce the average lag between death and eligibility termination from several months to approximately six weeks, assuming states implement the requirement promptly at the beginning of each quarter.
The legislation reflects a bipartisan recognition that program integrity in means-tested entitlement programs requires robust data verification mechanisms. However, several implementation challenges merit consideration. First, the 2027 effective date provides a two-year implementation window, during which improper payments will continue under existing protocols. Second, quarterly matching requirements will impose new administrative burdens on state Medicaid agencies, many of which are already struggling with staffing shortages and technology modernization challenges following the pandemic-era continuous coverage provisions. Third, the requirement addresses only one dimension of improper payments—those related to beneficiary death—and does not address other categories of eligibility errors or provider fraud.
Prior Efforts: The Treasury Department Pilot Program
The potential effectiveness of expanded DMF access is supported by results from a pilot program conducted by the Treasury Department earlier in 2025. Congress had granted Treasury temporary access to the Full Death Master File for three years as part of the 2021 appropriations bill, and Treasury used this access to conduct a five-month pilot program focused on recovering federal payments improperly made to deceased individuals across multiple programs.
In January 2025, Treasury reported that it had successfully clawed back more than $31 million in improper payments through this initiative. While this figure represents payments across all federal programs rather than Medicaid specifically, it demonstrates that systematic death record matching can identify substantial sums and suggests that the expanded Medicaid requirement may yield meaningful savings if properly implemented.
However, the Treasury pilot also highlights an important distinction: recovering payments after they have been made is substantially more difficult and less cost-effective than preventing improper payments proactively. The $31 million recovered likely represents only a fraction of the improper payments initially identified, as collection efforts face legal and practical obstacles, particularly when payments went to legitimate providers who delivered services before becoming aware of a beneficiary’s death. Prevention through timely eligibility termination is operationally and financially superior to post-payment recovery.
Data Integrity Concerns
The effectiveness of the new quarterly audit requirement depends fundamentally on the accuracy and integrity of the Full Death Master File itself. Recent developments have raised concerns about unusual data quality issues that could undermine the file’s utility for program integrity purposes.
The Social Security Administration has made atypical updates to the DMF, adding and removing records in ways that complicate its use for verification purposes. Most notably, in April 2025 the Trump administration moved to classify thousands of living immigrants as deceased and cancel their Social Security numbers as part of an immigration enforcement initiative targeting individuals who had been temporarily allowed to remain in the United States under Biden administration programs. This action introduced known inaccuracies into the death records system and created risks of erroneous benefit terminations for living individuals.
These data integrity concerns are not merely technical issues—they have profound implications for vulnerable populations. Medicaid serves low-income children, pregnant women, elderly individuals, and people with disabilities, many of whom have limited capacity to quickly resolve administrative errors that result in coverage termination. If quarterly audits against the DMF result in erroneous terminations for living beneficiaries due to database inaccuracies, the human consequences could be severe, including disrupted access to medications, cancelled medical appointments, and gaps in care for individuals with chronic conditions.
The tension between program integrity and beneficiary protection represents a fundamental policy challenge. Aggressive matching protocols that minimize false negatives (failing to identify deceased beneficiaries) may increase false positives (incorrectly identifying living beneficiaries as deceased). States will need to implement careful verification protocols and due process protections to ensure that legitimate beneficiaries are not harmed by data errors.
Broader Context: Medicaid Program Integrity
The issue of improper payments to deceased enrollees exists within a broader landscape of Medicaid program integrity challenges. The Centers for Medicare & Medicaid Services (CMS) estimated that the Medicaid improper payment rate was 21% in fiscal year 2024, representing approximately $80 billion in improper payments across all categories—though CMS notes that “improper” does not necessarily mean “fraudulent,” and many improper payments result from documentation errors rather than intentional wrongdoing.
Common categories of Medicaid improper payments include eligibility verification errors, where beneficiaries do not meet income or categorical requirements; provider billing errors, where services are miscoded or inadequately documented; duplicate payments for the same service; and payments for services not covered by Medicaid. Payments to deceased enrollees represent a small subset of total improper payments, suggesting that while the DMF audit requirement may reduce one category of errors, comprehensive program integrity requires a multifaceted approach.
Federal and state governments have invested substantially in Medicaid fraud and abuse prevention, including sophisticated data analytics, provider enrollment screening, prepayment reviews, and post-payment audits. The challenge is balancing aggressive program integrity efforts with the need to maintain access to care for legitimate beneficiaries and avoid creating excessive administrative burdens for providers and state agencies.
Policy Implications and Recommendations
The quarterly DMF audit requirement represents a meaningful step toward reducing improper payments to deceased Medicaid enrollees, but several additional policy considerations merit attention.
First, states will require adequate federal support and technical assistance to implement the requirement effectively. CMS should develop standardized protocols, provide implementation guidance, and consider enhanced federal matching for states’ administrative costs associated with the new requirement. Second, robust due process protections must be established to prevent erroneous terminations of living beneficiaries due to database errors, including rapid appeals processes and continuation of coverage during disputes. Third, continued monitoring and evaluation will be essential to assess whether the quarterly matching requirement achieves meaningful reductions in improper payments and whether the administrative costs of implementation are justified by the savings achieved.
Looking forward, policymakers should consider whether similar data-matching requirements should be extended to other federal programs, whether more frequent matching (monthly rather than quarterly) would be cost-effective, and whether real-time data feeds could eventually replace periodic batch matching as technology systems modernize.
The $207 million in improper Medicaid payments to deceased enrollees identified in the December 2025 OIG report reflects a persistent program integrity challenge that has defied easy resolution despite years of audits and policy attention. The problem stems from fundamental coordination challenges between death reporting systems and program eligibility databases, exacerbated by privacy restrictions that have limited access to the most comprehensive source of death information.
The quarterly audit requirement included in the One Big Beautiful Bill represents a promising policy intervention supported by evidence from the Treasury Department’s pilot program demonstrating that systematic death record matching can recover significant improper payments. However, implementation success will depend on adequate state capacity, data integrity safeguards, beneficiary protections against erroneous terminations, and sustained federal oversight.
Ultimately, addressing improper payments to deceased enrollees is one component of the broader challenge of maintaining Medicaid program integrity while ensuring that legitimate beneficiaries retain access to essential healthcare services. As states prepare for the 2027 implementation deadline, careful attention to both preventing improper payments and protecting vulnerable populations will be essential to achieving the policy’s intended goals without creating unintended harms.
Sources
U.S. Department of Health and Human Services, Office of Inspector General. “Medicaid Made Managed Care Payments on Behalf of Deceased Enrollees.” December 2025.
The Associated Press. “Watchdog report finds Medicaid paid more than $207 million for dead people in 1 year.” December 23, 2025.
U.S. Department of the Treasury. “Treasury Department Pilot Program Results: Recovery of Federal Payments to Deceased Individuals.” January 2025.
Centers for Medicare & Medicaid Services. “Medicaid Program Integrity: Improper Payment Rates.” Fiscal Year 2024.
U.S. Congress. “One Big Beautiful Bill.” Signed into law, Summer 2025.
Social Security Administration. “Full Death Master File: Privacy and Security Considerations.” Various dates.
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