Medicaid fraud is prosecuted under Texas Penal Code § 35A.02 — retitled "health care fraud" in 2019 — and is graded by dollars and claim volume: Class C misdemeanor under $100, state jail felony at $2,500, first-degree felony at $300,000 or more. Below: the punishment table, the elements, defense strategies, and how MFCU investigations actually unfold.
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Published 2026-06-11 · Reviewed by Reggie London and Njeri London, Co-Founding Partners · Last reviewed: 2026-06-11
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Controlling statute:Texas Penal Code § 35A.02 (Chapter 35A, "Health Care Fraud") Classification: Class C misdemeanor through first-degree felony — graded by the dollar value of the payments and, independently, by the number of fraudulent claims Punishment range: fine-only (under $100) up to 5–99 years or life plus a $10,000 fine ($300,000 or more); more than 25 claims is automatically a third-degree felony, 50 or more a second-degree felony
What Is Medicaid Fraud Under Texas Law?
Medicaid fraud is charged under Texas Penal Code § 35A.02, which punishes knowingly false statements, concealment, kickbacks, and improper claims connected to a government-funded health care program. Prosecutors, judges, and indictments still call the offense "Medicaid fraud," but the name on the statute changed: House Bill 2894 retitled Chapter 35A "Health Care Fraud" effective September 1, 2019, and swapped the phrase "Medicaid program" for "health care program" throughout. The practical effect is wider reach — § 35A.01(4) defines a health care program as any program funded by the state or federal government (or both) that delivers health care services, so Medicaid remains the archetype while CHIP and other publicly funded programs now sit inside the same statute.
Section 35A.02(a) lists twelve separate ways to commit the offense. Condensed, the State may allege that a person knowingly:
made or caused a false statement or misrepresentation of material fact to obtain an unauthorized or inflated benefit or payment — (a)(1), the workhorse theory;
concealed or failed to disclose information that let someone receive an unauthorized payment — (a)(2);
applied for and received a benefit on another person's behalf and converted it to a different use — (a)(3);
made false statements about facility certification or information required by law or a provider agreement — (a)(4);
paid, charged, solicited, or accepted a kickback as a condition of program-paid services — (a)(5);
billed for a product or service rendered by an unlicensed provider, or one "not licensed in the manner claimed" — (a)(6);
claimed services a treating practitioner never approved, substandard services, or adulterated products — (a)(7);
filed claims that fail to identify the license type and ID number of the practitioner who actually provided the service — (a)(8);
entered an agreement or conspiracy to defraud the state or federal government through unauthorized program payments — (a)(9);
as a managed care organization, failed to provide required benefits, falsified required information, or engaged in fraudulent enrollment or marketing — (a)(10);
obstructed an Attorney General investigation of suspected Medicaid fraud — (a)(11), a stand-alone state jail felony; or
used a false record to conceal or shrink an obligation to repay the program — (a)(12), the "reverse false claim."
Two structural provisions shape every case. Under § 35A.02(c), conduct that violates this statute and another — theft, tampering with a governmental record, securing execution of a document by deception — may be prosecuted under either or both, so charge stacking is built into the statute's design. And under § 35A.02(f), the Attorney General holds concurrent prosecution jurisdiction with the consent of the local district or county attorney, which is why a Collin or Dallas County provider's case is often worked and tried by Austin-based MFCU prosecutors rather than the county DA alone.
What Are the Penalties for Medicaid Fraud in Texas?
Punishment turns on "the amount of any payment or the value of any monetary or in-kind benefit provided or claim for payment made under a health care program, directly or indirectly, as a result of the conduct" — and, separately, on how many fraudulent claims the State can prove. Tex. Penal Code § 35A.02(b).
Value of payments / benefits (or claim count)
Classification
Confinement range
Fine cap
Under $100
Class C misdemeanor
No jail — fine only
$500
$100 to $749
Class B misdemeanor
Up to 180 days county jail
$2,000
$750 to $2,499
Class A misdemeanor
Up to 1 year county jail
$4,000
$2,500 to $29,999 — or value cannot reasonably be ascertained, or obstruction of an AG investigation under (a)(11)
State jail felony
180 days to 2 years state jail
$10,000
$30,000 to $149,999 — or more than 25 but fewer than 50 fraudulent claims
Third-degree felony
2 to 10 years TDCJ
$10,000
$150,000 to $299,999 — or 50 or more fraudulent claims
Three grading rules do most of the damage in real cases. First, aggregation: under § 35A.02(d), payments obtained through "one scheme or continuing course of conduct" may be charged as a single offense with the amounts added together — the State's auditors routinely total years of claims to push a case up the ladder. Second, the claim-count ladder: more than 25 fraudulent claims is a third-degree felony and 50 or more is a second-degree felony under § 35A.02(b)(5)(B) and (b)(6)(B), no matter how small the dollars. A home-health attendant billing $40 visits can face second-degree exposure — 2 to 20 years — on volume alone. Third, the high managerial agent bump: § 35A.02(e) raises the punishment one category (except from first degree) when the State proves beyond a reasonable doubt that the actor was a director, officer, or employee with authority to speak for the provider. Owners, administrators, and office managers carry structurally higher exposure than line staff.
One more wrinkle worth knowing: if the value of the payments "cannot be reasonably ascertained," the offense defaults to a state jail felony under § 35A.02(b)(4)(C) — the Legislature made messy books a floor, not a ceiling.
Elements the State Must Prove
Most indictments charge subsection (a)(1) or (a)(2). The El Paso court of appeals recently restated the elements in a home-health prosecution: the State must show the defendant (1) knowingly made or caused to be made (2) a false statement or representation of material fact — or knowingly concealed or failed to disclose information — (3) in order to permit a person to receive an unauthorized or inflated benefit or payment under the program, plus (4) the value band that sets the grade. David Kenneth Bermudez v. the State of Texas, No. 08-23-00349-CR (Tex. App. Jan 27, 2025).
Culpable mental state — "knowingly"
The State must prove knowledge under Penal Code § 6.03(b), not just sloppiness. Juries may infer it circumstantially: in Bermudez, the court pointed to the defendant's training, his signed acknowledgments of agency policy, and the obvious nature of the misrepresentation as enough for a rational juror to find knowing concealment.
A false statement, misrepresentation, or concealment
An affirmative lie about a material fact — a code, a date of service, a provider identity — or silence about information the program needed. The statement need not be handwritten or signed in ink: the Human Resources Code defines "signed" to include a signature affixed "by means of … computer impulse," and Bermudez held that punching unique credentials into an electronic visit-verification (EVV) system is a signed claim.
Connection to a health care program payment
The false statement must permit a person — not necessarily the defendant — to receive an unauthorized or inflated benefit or payment under Medicaid or another government-funded program. A "claim" under § 35A.01(1) includes any written or electronic request identifying a service as reimbursable, whether or not the money was ever paid.
Value or claim count (the grading element)
The State must prove the dollar band or claim volume that fixes the grade. Bermudez teaches that value is measured by the gross benefit the statutory "person" received — there, the agency's $3,463 reimbursement — not the $1,962 the defendant personally pocketed. The defense cannot shrink the number to the defendant's cut.
The other ten subsections carry their own element sets — kickback cases under (a)(5) focus on the condition-of-service exchange, unlicensed-provider cases under (a)(6) on licensure status, and (a)(8) cases on whether the claim named the practitioner who actually did the work — but the knowingly requirement runs through all of them.
How Do MFCU and OIG Investigations Work?
Two agencies dominate this space, and neither is the local police department. The Texas Attorney General's Medicaid Fraud Control Unit (MFCU) is the criminal arm: commissioned investigators, auditors, and prosecutors who handle provider fraud and abuse or neglect in Medicaid-funded facilities statewide. The HHSC Office of Inspector General (OIG) is the administrative arm: audits, overpayment demands, payment holds, and exclusion from the program. They share referrals — an OIG audit can become an MFCU prosecution, and managed-care organizations' special investigative units feed both.
Cases rarely start with an arrest. They start with data: claims-pattern analytics, EVV anomalies, a terminated employee's call, or a qui tam filing. In Bermudez, the AG's criminal investigative auditor built the case by subpoenaing the managed-care payor's claims data and the defendant's personal bank records — fifty-two claims were documented before anyone knocked on a door. By the time a provider learns there is an investigation, the State usually has the billing file, the provider agreement, the training records, and a draft loss spreadsheet.
That sequencing drives defense strategy. The first sign is typically a records subpoena, an audit letter, an investigator's request for a "voluntary" interview, or a payment hold. Each is an inflection point: statements made in an early interview — without counsel, often framed as routine compliance — become the knowledge evidence at trial. Providers should preserve the EHR audit trail, EVV logs, and billing-company correspondence immediately; the same records that convict can exonerate when they show the codes were supportable.
Which Billing Practices Draw § 35A.02 Charges?
Most provider prosecutions reduce to a handful of billing patterns. Understanding the label the State will use — neutrally, since none of these patterns is criminal without knowledge of falsity — is the first step in defending the file:
Upcoding — billing a higher-reimbursing procedure code than the documentation supports (a 60-minute psychotherapy code for a 20-minute session; a comprehensive exam code for a brief recheck).
Unbundling — splitting one bundled service into separately billed components to capture more reimbursement than the fee schedule allows.
Phantom billing — claims for services never rendered, including visits logged on dates the patient was hospitalized, out of state, or deceased.
EVV falsification — clocking electronic visit-verification entries for attendant-care hours not actually worked; after Bermudez, each false clock-in can count as a signed claim.
Wrong-provider billing — submitting claims under one practitioner's ID for services someone else performed. The companion civil statute makes failing to identify the actual performing provider an unlawful act in itself, and the criminal analogue sits at § 35A.02(a)(8).
Unlicensed staff — billing services that required a license the performing person did not hold, or "not in the manner claimed" — (a)(6).
Marketing kickbacks — paying recruiters, marketers, or patients for program-paid referrals — (a)(5).
A clearly hypothetical example shows how volume builds: an attendant keeps logging daily EVV visits during three weeks her client spends in a rehabilitation hospital. Twenty-one false entries at $38 each is only $798 in dollars — but it is 21 claims, and if the pattern stretches past 25, the State can charge a third-degree felony on count alone. The dollars stopped mattering at claim 26.
What Defenses Work Against a Medicaid Fraud Charge?
L and L Law Group builds § 35A.02 defenses around the statute's own pressure points:
No knowing falsity. The criminal statute demands knowledge — there is no "should have known" shortcut. Coding confusion, EHR templates that auto-populate, staff turnover in the billing chair, and genuine manual ambiguity are not crimes. This is the sharpest contrast with the civil TMFPA, where conscious indifference suffices; in the criminal courtroom the State must prove actual knowledge beyond a reasonable doubt.
The documentation supports the claim. Upcoding allegations die when the chart justifies the code. Hypothetically: a dental office manager is accused of upcoding extractions, but the radiographs and operative notes document surgical complexity matching the billed code — the State's "pattern" was medicine, not fraud. Early expert review of the clinical file is often the whole case.
Falsity and materiality attacks. The misrepresentation must concern a material fact. Disputed clinical judgment — medical necessity, appropriate frequency — is fought through competing experts, not presumed false because an auditor disagrees.
Value and aggregation contests. The grade rides on the State's loss model, so the model is a target: was every claim in the spreadsheet actually false, or did the auditor extrapolate? Is the "scheme or continuing course of conduct" really one scheme? Bermudez lets the State count the gross payment to the provider entity, but it still must tie each aggregated claim to proven fraudulent conduct.
Who made the claim. Where a billing company or agency sits between the defendant and the payor, the defense probes whether the defendant's inputs were accurate and the errors entered downstream. The conduit theory in Bermudez works only when the intermediary relied on the truth of the defendant's entries — accurate inputs break the chain.
Statements and process. Early "compliance" interviews conducted without counsel, overbroad administrative subpoenas, and grand-jury presentation defects all supply suppression and dismissal leverage, particularly where the investigation ran for years before charges.
Can a Medicaid Fraud Charge Be Dismissed or Reduced?
Yes — outcomes short of conviction are realistic in cases built on disputed coding and thin knowledge evidence. The recurring paths: a knowledge-based dismissal or acquittal where the State cannot move the case past negligence; reduction from felony to misdemeanor bands by attacking the loss model; § 12.44(a) misdemeanor punishment for a state jail felony; deferred adjudication, which avoids a conviction if successfully completed; and repayment-driven negotiation, since restitution to the program is usually the State's first practical priority. Availability of pretrial diversion varies by county and by the AG's posture in MFCU-led cases.
The record consequences track the outcome. An acquittal or full dismissal can support expunction under Code of Criminal Procedure Chapter 55A. Deferred adjudication, once completed, may qualify for an order of nondisclosure under Government Code § 411.0725 after the waiting period. A conviction — misdemeanor or felony — stays. Our expunction and nondisclosure guide walks the eligibility tree, and this explainer covers the difference in plain terms.
What About Parallel Civil Liability Under the TMFPA?
Nearly every provider case carries a second front: the Texas Medicaid Fraud Prevention Act, Human Resources Code Chapter 36. Its list of civil "unlawful acts" mirrors § 35A.02, but the State — or a private whistleblower suing qui tam — pursues money instead of jail: recovery of the payments, per-act civil penalties, fees, and program exclusion.
The scienter gap is the trap. Under the TMFPA, a person acts "knowingly" if he has knowledge of the information, acts with conscious indifference to its truth or falsity, or acts in reckless disregard of it — and no specific intent to commit an unlawful act is required. Richard J. Malouf, D.D.S. v. the State of Texas Ex Rels. Dr. Christine Ellis, D.D.S., and Madelayne Castillo, No. 08-20-00235-CV (Tex. App.—El Paso Oct 14, 2022). In Malouf, a dentist whose provider number appeared on claims for work other dentists performed lost at summary judgment; the court held his general denial of knowledge was conclusory and that billing under his own ID for services he did not render violated the Act's provider-identification provision.
Two planning consequences follow. A criminal acquittal does not close the file — the civil case proceeds on a preponderance standard with the broader mental state. And anything said in the civil or administrative track is available to MFCU prosecutors, so the criminal defense has to lead the coordination, not follow it.
How Does Texas Medicaid Fraud Differ From Federal Health Care Fraud?
Because Medicaid is jointly funded, the same billing can be charged by either sovereign. The federal counterparts are 18 U.S.C. § 1347 (health care fraud — up to 10 years per count, more if serious injury or death results), the Anti-Kickback Statute at 42 U.S.C. § 1320a-7b, and the civil False Claims Act. Dual sovereignty means a state plea does not bar a federal indictment, though in practice one system takes the lead: high-dollar, multi-state, or Medicare-heavy schemes tend to land with federal prosecutors in the Northern or Eastern District of Texas, while Texas-only Medicaid billing usually stays with the MFCU in state court.
The defense calculus differs by forum — federal sentencing is guideline-driven by loss amount, while the Texas ladder above is band-driven and aggregation can be contested claim by claim. If your case has federal exposure, see our federal health care fraud practice page and the § 1347 explainer.
Where Are Medicaid Fraud Cases Heard in North Texas?
Collin County: felony health care fraud cases are indicted by the Collin County grand jury and heard in the district courts at the Collin County Courthouse, 2100 Bloomdale Road, McKinney; misdemeanor-band cases go to the county courts at law. When the MFCU prosecutes under § 35A.02(f), its prosecutors appear with the consent of the Collin County District Attorney — a detail that changes who is across the table at every setting.
Dallas County: cases are filed at the Frank Crowley Courts Building, 133 N. Riverfront Boulevard. Dallas's provider density — home health, hospice, dental, DME — makes it a recurring venue for both MFCU cases and parallel federal prosecutions out of the Northern District of Texas, whose Dallas courthouse sits across downtown.
Denton County: felony dockets run through the district courts at the Denton County Courts Building, 1450 E. McKinney Street, Denton. Tarrant County: criminal cases are heard at the Tim Curry Criminal Justice Center in Fort Worth. In all four counties, provider cases typically follow months of quiet records work before the first court date, and the filing county is usually where the provider practices or where the claims were generated.
What Is the Timeline of a Texas Medicaid Fraud Case?
The arc is longer than a typical street-crime case, and the early stages are administrative rather than criminal:
Investigation (months to years). Data analytics flag the billing; OIG may audit or impose a payment hold on a credible allegation of fraud; MFCU subpoenas claims data, bank records, and personnel files; investigators interview staff and patients.
Charging. Felony cases go to a grand jury for indictment; white-collar defendants are often allowed to surrender or appear by summons rather than face a dawn arrest — but not always.
Magistration and bond. Article 15.17 warnings, then bond. Conditions in provider cases commonly address continued program billing and contact with former patients or employees.
Discovery and the audit battle. The State produces its claims spreadsheets and auditor analysis under the Michael Morton Act; the defense re-works the loss model, pulls the underlying charts, and engages coding or clinical experts.
Pretrial motions. Suppression of interview statements, challenges to aggregation, materiality litigation, and — where the civil case is running — sequencing fights over depositions and the Fifth Amendment.
Resolution. Dismissal, reduction, deferred adjudication, trial, or a negotiated plea with restitution. License-board and exclusion consequences should be negotiated in parallel, not discovered afterward.
Collateral Consequences for Providers and Staff
The conviction is rarely the worst line item for a licensed professional. Expect these parallel tracks:
License discipline. The Texas Medical Board, Board of Nursing, State Board of Dental Examiners, and behavioral-health boards open their own cases on fraud allegations, on lower proof standards. See our professional license defense practice and the TMB complaint-response guide.
Program exclusion. HHSC-OIG can exclude a person from Texas Medicaid, and a program-related conviction triggers mandatory exclusion from all federal health care programs for at least five years under 42 U.S.C. § 1320a-7(a) — which functionally ends employment with any provider that bills Medicare or Medicaid.
Firearms. A felony conviction forfeits firearm rights under Texas Penal Code § 46.04 and 18 U.S.C. § 922(g).
Immigration. A fraud conviction with loss to the victim exceeding $10,000 is an aggravated felony under 8 U.S.C. § 1101(a)(43)(M)(i), with near-automatic removal consequences for non-citizens — plea structuring around the loss finding is critical.
Employment and credentialing. Managed-care panel terminations, NPDB reporting for clinicians, and provider-agreement terminations follow the public record even when the criminal case ends well.
How Medicaid Fraud Differs From Related Offenses
Prosecutors choose among overlapping statutes — and § 35A.02(c) lets them stack. The neighbors:
Insurance fraud — § 35.02: false claims against private insurers; same value-ladder logic, different victim. Government health programs are charged under 35A, not 35.
Theft — § 31.03: the general appropriation statute; Medicaid overpayments are sometimes charged as theft of the same dollars (the Bermudez indictment paired both).
The current name of the offense everyone still calls Medicaid fraud; Chapter 35A was retitled and broadened from "Medicaid" to any government-funded "health care program" effective September 1, 2019.
Claim (§ 35A.01(1))
Any written or electronic request or demand identifying a service or product as reimbursable under a health care program — whether or not the money was ever paid. Electronic visit-verification entries can qualify as signed claims.
Health Care Program (§ 35A.01(4))
A program funded by the state or federal government, or both, designed to provide health care services — Medicaid and CHIP are the principal examples, including their managed-care delivery models.
High Managerial Agent (§ 35A.01(10))
A director, officer, or employee authorized to act for a provider whose conduct may be assumed to represent the provider's policy; conviction in that role raises the punishment one category under § 35A.02(e).
MFCU
The Texas Attorney General's Medicaid Fraud Control Unit — the statewide criminal investigators, auditors, and prosecutors for provider fraud, with concurrent prosecution authority on local-DA consent.
TMFPA
The Texas Medicaid Fraud Prevention Act, Human Resources Code Chapter 36 — the civil enforcement mirror of § 35A.02, with a broader knowingly standard and qui tam whistleblower suits.
Payment Hold
An administrative suspension of Medicaid payments by HHSC-OIG on a credible allegation of fraud — frequently the first visible sign that an investigation is underway.
Frequently Asked Questions
Is Medicaid fraud a felony in Texas?
Medicaid fraud is a felony whenever the payments at issue reach $2,500 or the State alleges more than 25 fraudulent claims. Below $2,500 the offense is a misdemeanor (Class C, B, or A by value). At $2,500 it becomes a state jail felony, and the grade climbs to a first-degree felony at $300,000 or more. Tex. Penal Code § 35A.02(b).
What is the punishment for Medicaid fraud in Texas?
Punishment runs from a fine-only Class C misdemeanor to a first-degree felony carrying 5 to 99 years or life. The grade depends on the value of the payments or benefits obtained — aggregated across the whole scheme under § 35A.02(d) — or on claim volume: more than 25 fraudulent claims is a third-degree felony, 50 or more a second-degree felony, regardless of dollars.
Can I be charged if my employer or billing company submitted the claims?
Yes — Texas courts treat the person whose false entries drive the billing as having caused the claims. In the 2025 Bermudez decision, an attendant's electronic visit-verification entries flowed through his home-health agency to the Medicaid managed-care payor, and the El Paso court of appeals held he submitted the claims because the agency was a conduit relying on the truth of his inputs.
Is a billing mistake the same as Medicaid fraud?
No. Section 35A.02 requires the State to prove you acted knowingly — clerical errors, coding confusion, and documentation gaps are not crimes by themselves. The dividing line is knowledge of falsity, which prosecutors usually try to prove circumstantially through training records, provider-manual acknowledgments, repayment history, and billing patterns over time.
What is the Medicaid Fraud Control Unit (MFCU)?
The MFCU is the Texas Attorney General's law-enforcement unit for provider-side Medicaid fraud and for abuse or neglect in Medicaid-funded facilities. Its investigators and auditors build cases from claims data, subpoenaed records, and interviews, and under Penal Code § 35A.02(f) the Attorney General may prosecute directly with the consent of the local district or county attorney.
Why were my Medicaid payments put on hold before any charge was filed?
A payment hold is an administrative action by the Health and Human Services Commission's Office of Inspector General, and it often arrives long before — or instead of — criminal charges. Texas law lets OIG suspend program payments on a credible allegation of fraud while it investigates. Treat a hold, audit letter, or records subpoena as the start of the defense clock, not routine paperwork.
What is the difference between criminal Medicaid fraud and the TMFPA?
Criminal Medicaid fraud under Penal Code § 35A.02 can result in prison time; the Texas Medicaid Fraud Prevention Act (Human Resources Code Chapter 36) is a civil enforcement statute seeking money — per-act civil penalties, recovery of payments, and program exclusion. The civil knowingly standard is broader, reaching conscious indifference and reckless disregard, so an acquittal in the criminal case does not end TMFPA exposure.
Will a Medicaid fraud case affect my professional license?
Nearly every licensed provider should expect a parallel board matter. Physicians, nurses, dentists, counselors, and pharmacy staff face discipline tracks that move on lower proof standards than a criminal trial, and HHSC-OIG can exclude a provider from Texas Medicaid. A program-related conviction also triggers mandatory federal exclusion under 42 U.S.C. § 1320a-7(a).
Can a Medicaid fraud charge be expunged or sealed in Texas?
A conviction cannot be expunged or sealed, which is one reason charge-level outcomes matter so much. An acquittal or a dismissal can support expunction under Code of Criminal Procedure Chapter 55A, and successfully completed deferred adjudication may qualify for an order of nondisclosure under Government Code § 411.0725, subject to its waiting periods and offense-specific exceptions.
Can I face both state and federal charges for the same billing?
Legally yes. Medicaid is jointly funded, so the same claims can violate Penal Code § 35A.02 and federal statutes such as 18 U.S.C. § 1347, and the dual-sovereignty doctrine permits both governments to prosecute. In practice one system usually takes the case — larger, multi-state, or Medicare-heavy schemes tend to go federal in the Northern or Eastern District of Texas.
Reggie London co-founded L and L Law Group with a focus on federal criminal defense, complex felony defense, and TEA/SBEC matters. Licensed in Texas, admitted to TXND and TXED.
Njeri London co-founded L and L Law Group with a focus on DWI defense, family violence cases, and juvenile defense. Licensed in Texas, admitted to TXND and TXED.
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