(The Center Square) - Arizona is turning to artificial intelligence to tackle waste, fraud and abuse in Medicaid.
Gov. Katie Hobbs unveiled what she called a first-in-the-nation A.I. tool at a press conference on Monday, where she said it will “superpower [the state’s] accountability efforts … and stop fraudsters in their tracks.”
Hobbs said the new AI tool will “help flag claims that are at high risk for fraud so they can be reviewed before any payment goes out.”
The new AI tool will launch in July 2026, according to Hobbs.
Arizona Health Care Cost Containment System Inspector General Vanessa Templeman said a benefit of the AI tool is that it will allow Arizona to respond to fraud and “stop it from continuing to occur.”
Humans will have purposeful interactions with the AI system to ensure that the individuals identified by AI as fraudsters are, in fact, fraudsters, she noted.
Templeman said AHCCCS has been working on the fraud tool for the past year.
Democrats and Republicans, meanwhile, disagree on how much progress Arizona has made against Medicaid fraud and waste.
Hobbs, a Democrat, said Arizona is “leading the way in fraud detection and prevention."
“We have cracked down on historic levels of fraud, saved countless vulnerable people from exploitation and ensured that taxpayer dollars are used for their intended purpose,” she noted.
Over the last three years, Hobbs said Arizona has made “significant progress to crack down on waste, fraud and abuse.”
“We have also deployed new tools to stay one step ahead of the fraudsters and ensure that this never happens again.”
Hobbs said her administration stopped 85 alleged fraudsters from billing the state’s Medicaid program in 2023. The next year, Arizona stopped 69 alleged fraudsters, she said, adding that in 2026 the number decreased even further to two alleged fraudsters.
“This decline isn’t because we have slowed our efforts. It’s because the criminals have heard our message loud and clear. Arizona has zero tolerance for waste, fraud and abuse,” she noted.
Hobbs said when she first took office in January 2023, “claims for the procedures most targeted by fraud reached nearly $350 million.”
“By July 2025, that number had dropped to just over $100 million, the same level in January 2021,” Hobbs noted.
During her administration, the Hobbs administration discovered a $2.5 billion state Medicaid fraud scheme that primarily exploited Native Americans from 2019 to 2023.
The scheme steered Arizonans seeking help with behavioral health and substance abuse to unlicensed or fraudulent homes that got billed for improper services or services that never took place.
While Hobbs says fraud in the state Medicaid program is going down, Republicans held a press conference on Monday to detail how it is still occurring.
State Sen. Carine Werner, R-Scottsdale, said if a person were to ask the Hobbs administration, Mayes’ office, and ACCHS leadership, they would say fraud no longer occurs.
She said this is not correct, citing meetings she has had with medical providers, state Medicaid members and tribal members.
Werner noted that tribal members have brought evidence to her showing that state Medicaid fraud is still occurring.
Arizona’s fraud response was “blunt, unorganized and unable to distinguish good guys from bad guys, Werner said, adding that it “failed to stop the fraud from occurring.”
In May 2023, Werner said the Arizona state government issued a moratorium on certain state Medicaid provider payments in an attempt “to force bad actors out.” The moratorium lasted until December 2024.
However, Werner said the “fallout was bad” from the moratorium, noting “hundreds if not thousands” of Arizonans “lost access to care because providers weren’t being paid.” Some of these individuals ended up being homeless after not being able to receive treatment, according to Fox 10, a Phoenix TV station.
The moratorium “swept up the good providers,” Werner said, adding that “providers were unable to keep up and had to close their doors and patients were once again put on the street.”
The senator said she has seen “honest providers who came to the state asking for help [and] get paid for the good work they have done to help those suffering from substance disease.”
“Instead of working with them, ACCHS and other state regulatory agencies launched coordinated attacks in what can only be described as an effort to silence them,” she said.
Regarding Republicans having concerns about the state’s overcorrection regarding the crackdown on fraud, Hobbs said it is “unfortunate some folks want to play politics” with the situation.
“We are taking this seriously. This kind of fraud is not going to happen under my watch," the Democratic governor said. "We are going to take action to stop bad actors. If folks are caught up in that who are not committing fraudulent acts, they have every opportunity to correct their record and make sure they're able to continue providing services.”
Templeman said there has been improvement in paying providers who have not been paid.
