Medicaid fraud is the knowing submission of false claims to the Medicaid program to obtain payment — and because Medicaid is funded jointly by the federal government and the states, it can be prosecuted by both. Federal prosecutors charge it under statutes like 18 USC 1347, while state prosecutors pursue it under state law; in California, the program is called Medi-Cal, and a state Medicaid Fraud Control Unit investigates provider fraud. This dual structure is the single most important thing to understand about a Medicaid fraud case, because it means a provider may face two sets of investigators, and two sets of penalties, over the same conduct at the same time.

This post walks through how the state-federal Medicaid system shapes these prosecutions, who investigates, the penalties, and the most effective defenses — including why the overlap between state and federal jurisdiction has to drive defense strategy from the very first day.

What “Medicaid Fraud” Actually Means

Medicare and Medicaid are often mentioned in the same breath, but they work very differently, and that difference drives how fraud is prosecuted. Medicare is a purely federal program for older and disabled Americans. Medicaid is a partnership: the federal government sets baseline rules and provides much of the funding, while each state runs its own program under its own name, sets many of its own rules, and adds its own administrative requirements. Because federal dollars flow into every state Medicaid program, fraud against Medicaid is simultaneously a fraud against the federal government and against the state.

The conduct alleged in Medicaid cases mirrors what arises in Medicare cases — billing for services not rendered, medically unnecessary services, upcoding, falsified records, and kickbacks for referrals. What sets Medicaid apart is not the type of fraud but the dual sovereignty behind the enforcement: the same billing pattern can be a state crime and a federal crime at once, exposing a provider to parallel investigations and overlapping penalties that have to be managed as a single, coordinated problem.

Who Investigates Medicaid Fraud

Several agencies share jurisdiction over Medicaid fraud, which is a large part of what makes these cases complex. The key players include:

  • State Medicaid Fraud Control Units (MFCUs). Units, usually housed in the state attorney general’s office, dedicated to investigating Medicaid provider fraud and the abuse or neglect of patients in facilities that receive Medicaid funds. Nearly every state has one.
  • HHS Office of Inspector General (HHS-OIG). The federal investigative arm for health program fraud.
  • The FBI and the Department of Justice. For federal criminal prosecution.
  • State Medicaid agencies and their contractors. Which run audits, recover overpayments, and can suspend payments while an investigation is pending.

These agencies frequently share information and coordinate, so a provider should never assume that resolving an inquiry from one means the others have gone away. For a sense of how a federal investigation actually unfolds — from data flags to subpoenas to charges — see our post on what happens in an OIG health care investigation.

How Medicaid Fraud Is Charged

On the federal side, the lead charge is usually health care fraud under 18 USC 1347, frequently paired with a conspiracy charge under 18 USC 1349 and, where referrals were paid for, the Anti-Kickback Statute. State law then adds its own fraud, theft, and false-claims charges on top, so a single course of conduct can generate parallel charges in two court systems.

The civil exposure is just as important as the criminal. The federal False Claims Act applies to Medicaid claims, and many states — including California — have their own false claims acts modeled on the federal statute. That means a provider can face treble damages under both state and federal law for the same billing. California also prosecutes Medi-Cal fraud directly under state law, which we address on our California Medi-Cal and health care fraud defense page.

The Penalties for Medicaid Fraud

On the federal side, 18 USC 1347 carries up to 10 years in prison per count, plus restitution, fines, forfeiture, and exclusion from federal health programs. State penalties vary but can include their own prison terms, fines, and restitution, and a single course of conduct can be charged in both systems. Where civil false-claims liability attaches — federal, state, or both — the financial exposure can dwarf the original billing, because each claim can trigger treble damages plus a separate penalty.

Exclusion deserves special mention because of how it works in the Medicaid context. A conviction commonly results in being barred from billing Medicare and Medicaid nationwide, not just in the state where the case arose. For most providers, that nationwide exclusion is the end of their practice, regardless of what happens with any prison term — which is why protecting against exclusion is often as important a goal as avoiding incarceration.

Why the Dual System Drives the Defense

The state-federal overlap is not just a technicality — it shapes strategy at every step, and getting it wrong can be costly. Statements made to a state investigator can be used in a federal case, and vice versa. A civil settlement with a state Medicaid agency can carry criminal implications, and a criminal plea can drive civil and administrative consequences. A provider who settles a state audit simply to “make it go away” may inadvertently strengthen a federal criminal case that is building in parallel.

Effective defense therefore means treating the matter as a single, coordinated problem across every agency involved — sequencing responses, controlling the flow of information, and making sure a step taken to resolve one exposure does not worsen another. This is one area where having a single attorney managing the full picture, rather than separate lawyers for separate proceedings, makes a real difference, because only a coordinated strategy accounts for how a move on one front ripples across the others.

The Most Effective Defenses in Medicaid Fraud Cases

As with all health care fraud, intent is central, but the dual-jurisdiction context adds defenses of its own. The most effective strategies include:

  • Good faith and honest error. The government must prove knowing, willful conduct, so good-faith error and reasonable reliance on staff or billing services are genuine defenses — and Medicaid’s rules are often even more complex and state-specific than Medicare’s, making honest confusion both common and defensible.
  • Coordinating across jurisdictions. Managing the state and federal tracks together, and the civil and criminal proceedings together, so that progress on one front does not damage another.
  • Attacking statistical extrapolation. Challenging the data extrapolation the government uses to project overpayments across many claims, which can sharply reduce the alleged loss.
  • Cooperator credibility. Testing the motives and agreements of employees or co-defendants who are cooperating in exchange for leniency.
  • Disputing loss and exclusion exposure. Narrowing the loss calculation that drives sentencing and negotiating to limit or avoid program exclusion, which is often the most consequential outcome for a provider.

Clients are often surprised by how much can be accomplished before charges are ever filed, when there is still room to present the provider’s side and narrow or redirect an investigation across both the state and federal tracks.

People Also Ask: Common Questions About Medicaid Fraud

What is Medicaid fraud?

Medicaid fraud is the knowing submission of false claims to the Medicaid program — in California, Medi-Cal — to obtain payment. It includes billing for services not provided, billing for medically unnecessary care, upcoding, falsifying records, and paying or receiving kickbacks for referrals. Because Medicaid is jointly funded, the same conduct can be charged as both a state and a federal crime, and the government must prove the provider acted knowingly and willfully.

Is Medicaid fraud a state or federal crime?

It can be either or both. Medicaid is funded jointly by the federal government and the states, so federal prosecutors can charge it under statutes like 18 USC 1347 while state prosecutors pursue it under state law. In California, a state Medicaid Fraud Control Unit investigates Medi-Cal provider fraud, often in coordination with federal agencies, so a single case can proceed on parallel tracks.

What is a Medicaid Fraud Control Unit?

A Medicaid Fraud Control Unit (MFCU) is a state-level law enforcement body — almost always part of the state attorney general’s office — that is federally authorized and partly federally funded to investigate and prosecute two things: fraud by Medicaid providers, and the abuse or neglect of patients in facilities that receive Medicaid funds. MFCUs have their own investigators, auditors, and prosecutors, and they routinely coordinate with HHS-OIG and the FBI. For a provider, an MFCU contact is a serious signal that a dedicated fraud unit — not a routine billing reviewer — is examining the claims.

What are the penalties for Medicaid fraud?

Federal charges under 18 USC 1347 carry up to 10 years in prison per count, plus restitution, fines, forfeiture, and exclusion from federal programs. State charges add their own penalties, and the same conduct can be charged in both systems. Civil liability under the federal or a state false claims act can add treble damages and per-claim penalties, and a conviction commonly triggers nationwide exclusion from Medicare and Medicaid.

Can I be investigated by both state and federal authorities at once?

Yes. Because Medicaid is jointly funded, a state MFCU and federal agencies can investigate the same conduct in parallel — sometimes in coordination, sometimes independently. Resolving one inquiry does not mean the others have ended, and a statement or settlement on one track can affect the other. This is exactly why a coordinated defense across all agencies, managed by a single attorney, is so important.

Key Takeaways

  • Medicaid is a joint state-federal program, so Medicaid fraud can be charged by both — in California, the program is Medi-Cal.
  • State Medicaid Fraud Control Units and federal agencies often investigate the same conduct in parallel, sometimes without coordinating.
  • The federal lead charge is 18 USC 1347 — up to 10 years per count, plus restitution, forfeiture, and nationwide exclusion.
  • Both federal and state false claims acts can impose treble damages for the same billing.
  • A step taken to resolve one track can damage another, so coordinating the defense across all agencies and both tracks is essential.
  • Much can be accomplished before charges are filed, when there is still room to present the provider’s side.

Contact a Medicaid Fraud Defense Attorney

Medicaid fraud cases are uniquely complicated because of the overlapping state and federal jurisdiction — and you want one attorney managing the whole picture from the start, so that a move on one front does not undermine your position on another. Attorney Chris Nalchadjian of KN Law Firm, APLC defends Medicaid and Medi-Cal fraud clients in both state court and the U.S. District Court for the Central District of California at every stage — from pre-charge investigation through trial and appeal. To learn more about how the firm handles these matters, visit our Federal Health Care Fraud Defense hub. To schedule a free, confidential consultation, call (888) 950-0011 — available 24/7 in English and Spanish.