Texas Governor Issues New Directive on Medicaid Fraud Enforcement: Five Things That Managed Care Organizations Should Do Now
Key Takeaways:
- Enhanced Scrutiny of MCO SIUs: All Medicaid Managed Care Organizations must demonstrate full compliance with Texas’ SIU staffing and investigative activity requirements. Expect rapid verification efforts.
- Targeted Reviews Are Imminent: HHSC and the OIG will prioritize high risk service areas, with autism services being the first target under a June 2026 reporting deadline.
- Accelerated Enforcement Timelines: With a March 15, 2026 progress report due to the Governor, agencies are likely already initiating reviews, audits, and outreach to MCOs and providers.
On January 16, 2026, Governor Greg Abbott issued a directive to the Texas Health and Human Services Commission (HHSC) and HHSC’s Office of Inspector General (OIG) to increase efforts to combat Medicaid fraud. This initiative reflects federal priorities identified by the Trump Administration regarding systematic fraud in Medicaid-funded programs.
Given the Governor’s specific focus on Managed Care Organizations (MCOs) and several high-risk service areas, here are five key takeaways and action items for your organizations to consider immediately:
1. Ensure SIU Staffing and Compliance
Governor Abbott has explicitly directed the HHSC to ensure that all Medicaid MCOs maintain fully staffed Special Investigations Units (SIUs). Beyond mere staffing, MCOs must demonstrate they are completing all investigative activities required by law.
What You Can Do Now: Conduct an immediate internal audit of your SIU’s staffing levels and documentation to confirm that investigative workflows meet statutory benchmarks.
2. Prepare for Targeted Policy and Utilization Reviews
The OIG and HHSC have been tasked with performing targeted reviews of MCO policies, specifically focusing on services considered most susceptible to fraud, waste, and abuse.
What You Can Do Now: Re-evaluate internal policies and utilization management protocols for high-risk service lines to ensure they are prepared for heightened regulatory scrutiny.
3. Immediate Focus on Autism Services
The Governor has ordered a targeted utilization review of autism services, with a formal report due by June 2026. This indicates that providers and MCOs involved in the delivery or reimbursement of autism-related care will be under a microscope in the coming months.
What You Can Do Now: Providers and insurers operating in the autism service space should proactively review their billing patterns and utilization data for any outliers or potential compliance gaps.
4. Expect Increased Audits and “Enhanced” SIU Training
The OIG will be reallocating its resources to investigate suspected fraudulent activity more aggressively using its broad authority under Chapter 544 of the Texas Government Code. Additionally, the state plans to provide additional training to MCO SIUs to strengthen their ability to prevent, detect, and eliminate fraud.
What You Can Do Now: Prepare your compliance teams for increased interaction with the OIG. Ensure that your staff is prepared for state-led training sessions and that your internal reporting systems are ready for more frequent audits and inspections.
5. Aggressive Timeline for Progress Reports
The Governor has set a deadline for the OIG and HHSC to provide his office with a progress report by March 15, 2026. This short deadline suggests that the agencies will be looking for immediate results and may begin their outreach and investigations almost immediately.
What You Can Do Now: Do not wait for a formal notice of audit. Given the March deadline, the state’s “proactive steps” are likely already underway.
Looking Ahead
The Governor’s directive reinforces the obligation of state agencies to take “proactive steps to prevent fraud… to recoup inappropriately paid funds, and to hold those accountable that violate the law.” MCOs and providers should act now to review compliance infrastructure, strengthen investigative protocols, and prepare for increased state engagement. Should you have any questions, please contact a member of Foley’s Texas Government Solutions Group.
About Foley’s Texas Government Solutions Group
Foley & Lardner’s Texas Government Solutions team provides clients unparalleled legal and legislative representation and counseling. The attorneys and lobbyists manage legislative and regulatory proposals at the Texas Capitol and before state agencies. The group counsels clients regarding key governmental processes and areas of law based upon decades of collective legal or governmental experience. Our Austin office is also home to a unique federal, state, and local government enforcement defense and investigations (GEDI) and litigation defense team, as well as several members of Foley’s national State Attorneys General practice.
