Hawaiʻi 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’s record of zero Medicaid fraud convictions in four years.
“If you’re committing fraud in Medicaid in Hawaiʻi, at least up until now,” Vance
said, “you’ve had effectively free rein from the government of Hawaii to commit as much fraud as you want.”
Lopez fired back: “We welcome accountability, but we will not allow the work of this unit to be mischaracterized as doing nothing.”
In fact, however, virtually all that settlement money — $13 million of it — came from one case that settled in 2023 but started more than a decade ago.
“If that’s 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?” asked state Sen. Brenton Awa, the Republican minority leader. “I think that’s a fair question.”
The Inspector General of the U.S. Department of Health and Human Services suggested one answer: the Medicaid Fraud Control Unit’s efforts fell far too short.
”Enough is enough,” 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’s entire medical insurance program for low income residents.
“The 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,” Bell wrote in the letter, which pointedly observed that the single settlement was the lion’s share of recovered funds.
Amanda Copsey, a former senior counsel at the inspector general’s office, described the letter as “one of the most strongly worded I’ve read in a long time from the OIG.”
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’s lawsuit alleged that Liberty — 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 — 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’s civil recoveries division.
Even with that success, Bell wrote in his letter, Hawaiʻi’s 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’s Office also suggests the total amount recovered was actually closer to $13 million than the $14 million cited by Lopez. The other Hawaiʻi cases amount to $182,000 in recoveries. They involved:
1. A transportation provider that submitted claims for services not covered by Medicaid or that weren’t provided;
2. A psychologist who billed Medicaid for services delivered by therapists without proper credentials or licenses;
3. A midwife who submitted claims for goods and services that had already been billed
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’s June 4 letter, Murata used the same argument as Lopez. The settlements proved his unit’s work should be judged on its overall body of investigations, successful settlements and recoveries of funds, the fraud unit director said.
“Indictments and convictions provide an incomplete characterization of the effectiveness of the MFCU,” 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:
“Taxpayers should absolutely expect accountability and measurable results. That is why we have acknowledged the seriousness of the federal government’s concerns, have already mobilized additional resources from across the Department to review the findings, pursue reconsideration, and strengthen Hawaiʻi’s Medicaid fraud enforcement efforts.”
In his letter to Bell, Murata also argued that since 2021, Hawaiʻi’s fraud unit had outdone many similarly staffed peers in achieving civil and criminal settlements.
Hawaiʻi’s record of convictions stand out against the numbers nationally, and not in an entirely flattering way.
From fiscal years 2022 to 2025, the nation’s 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, Hawaiʻi reported an average of 440 open fraud investigations a year — but no convictions.
“If it’s always zero, that’s just a red flag,” said Copsey, the OIG’s former senior counsel. “That’s just impossible.”
By comparison, Delaware and Rhode Island — states with roughly the same population as Hawaiʻi and share of the population enrolled in Medicaid, and roughly the same number of fraud unit staff — 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’s office’s 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’s attention to Hawaiʻi, Copsey noted that the OIG has high-powered “data mining” capabilities, and may have detected an issue with billing data.
“From my read of the letter,” she said, “there’s got to be some data that does not add up whatsoever with the enforcement activity.”
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’s failures could put a state’s entire Medicaid funding in jeopardy.
In Hawaiʻi, Medicaid insures just under a third of the state’s 1.4 million residents. While it is run by the state’s Medquest agency, the federal government covers 70% of its $3.2 billion in annual costs.
So on June 4, when Bell’s letter landed announcing his decision to decertify the Medicaid Fraud Control Unit, Hawaiʻi officials scrambled to respond on two fronts.
Gov. Josh Green immediately announced he was launching an “independent Medicaid strike force … to support and build upon” the unit’s work. Green’s 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.
“The denial of recertification and the loss of federal funding will only impede the good work of the MFCU,” Murata wrote. “The Attorney General of the State of Hawai’i 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.”
While conceding the staffing and case management problems the inspector general’s office found in its recent review, Murata argued that Hawaiʻi’s 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.
“Hawai‘i affords significantly higher constitutional protections to the accused than most other states thereby confounding investigations and prosecutions,” Murata wrote, adding that the chances of a Medicaid provider convicted of fraud getting a prison sentence “are nonexistent” and they would likely be ordered only to pay restitution of “pennies on the dollar.”
“This is the reality in Hawaiʻi,” 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, “particularly in cases where the evidence does not support proving criminal fraud beyond a reasonable doubt.”
Yet in the five years before Murata was named the unit’s director in 2021, Hawaiʻi recorded 12 Medicaid fraud convictions and 34 settlements, recovering $4.5 million, according to federal records based on data submitted by the states’ fraud units. Then no convictions followed until this year.
One Hawaiʻi legal expert said that while Murata’s argument is sound in some ways, it is less so in others. The state’s 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 Hawaiʻi William S. Richardson School of Law.
However, since the government generally has access to records of a government program – in this case, Medicaid — Lawson said those strictures on search and seizure are less applicable.
“It’s really just a white collar crime and both parties already are in possession of the records,” he said.
At the same time, Lawson said, as they must everywhere, successful fraud prosecutions must prove intent, which is “a high burden.” Also, he said, defendants, given insurance billing complexities, can credibly argue their ignorance and that they made explainable errors.
Hawaiʻi jurors are also notably intent on making prosecutors meet the “beyond a reasonable doubt” standard, Lawson said.
“The AG is saying these cases are hard to win,” he said, “and they are.”
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This story was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.
