Medicaid Fraud in NC: Laws, Provider Cases, and Penalties

Medicaid fraud in NC covers two very different kinds of conduct: recipients who lie to get or keep benefits, and providers who bill the Medicaid program for services, equipment, or patients that don’t exist. Both are illegal under North Carolina law, but they are prosecuted under different statutes, carry very different penalties, and lead to very different outcomes. Recipient fraud of more than $400 is a felony under state law. Provider fraud is usually prosecuted federally and has produced restitution orders in the tens of millions of dollars.

What Counts as Medicaid Fraud in North Carolina

On the recipient side, N.C. General Statute § 108A-64 prohibits making false statements on a Medicaid application, concealing facts that affect eligibility, and misusing a Medicaid identification card, including selling, altering, or lending it.¹

On the provider side, the schemes North Carolina has actually prosecuted include billing for equipment never delivered, billing under the names of patients who never ordered anything (including deceased patients), paying kickbacks to patients to generate claims, waiving copays to lure beneficiaries, pressuring doctors to sign orders for unnecessary equipment, and fabricating documentation for mental health services. The underlying principle is the same across all of them: a claim submitted to Medicaid for payment that misrepresents what was done, for whom, or by whom.

Criminal Penalties for Recipient Fraud

Under § 108A-64, the dollar amount wrongfully obtained sets the charge. Fraudulently obtaining more than $400 in Medicaid benefits is a Class I felony. Amounts of $400 or less are a Class 1 misdemeanor.¹

Those penalties are only part of the picture for recipients. A separate state law allows a district court judge to order wage garnishment of up to 20% of a former recipient’s monthly disposable income to recover fraudulent payments, but only after administrative remedies have been exhausted. The judge cannot enter the garnishment order if it would jeopardize the person’s ability to pay for basic necessities such as housing, food, healthcare, and utilities.²

Criminal history can also close the door on future benefits. Public assistance is denied to anyone with an outstanding felony warrant or in violation of parole or probation. People convicted of certain controlled substance felonies may still qualify for Work First and food assistance, but only after being at least six months past release or conviction and successfully participating in substance abuse treatment.²

Civil Liability Under the North Carolina False Claims Act

The North Carolina False Claims Act, N.C. General Statutes §§ 1-605 through 1-616, is the main civil tool against anyone who submits false claims to a state program, including Medicaid. A violator is liable for three times the damages the state sustained, plus a civil penalty of $5,500 to $11,000 for each false claim.³

The act’s qui tam provisions let private citizens sue on behalf of the state. The complaint is filed under seal for at least 120 days while the Attorney General’s office decides whether to intervene. If the state intervenes, the whistleblower receives 15% to 25% of the recovery. If the state declines and the whistleblower proceeds alone, the share is 25% to 30%. The act also protects whistleblowers from employer retaliation, with remedies that include reinstatement, double back pay with interest, and litigation costs.³

How Provider Fraud Gets Prosecuted

Large provider schemes are typically charged under federal statutes, mainly 18 U.S.C. § 1347 (healthcare fraud) and the federal False Claims Act, by the U.S. Attorney’s Office working with the Department of Justice and the HHS Office of Inspector General. The sentences and restitution amounts in recent North Carolina cases show what that looks like in practice.

A Perfect Fit for You: $10 Million in False DME Claims

A Perfect Fit for You, Inc., a durable medical equipment company in Morehead City owned by Margaret A. Gibson, submitted fraudulent claims to North Carolina Medicaid between March 2015 and November 2016 for powered wheelchairs, orthotic braces, diabetic shoes, and other equipment. The billing used the personal information of Medicaid recipients who had never ordered or received anything, and in some cases the patients were deceased. Losses to the program were about $10.07 million.⁴

In the criminal case, the company was sentenced to five years of probation, a $2 million fine, and full restitution of $10,069,361.35. On the civil side, a federal and state False Claims Act lawsuit filed in December 2017 ended with the company settling for $20,138,722.70 and Gibson personally agreeing to pay $4 million. Employee Shelley P. Bandy pleaded guilty to making false statements relating to healthcare matters.⁴

Agape Healthcare Systems: Billing Under the Names of the Deceased

Latisha Harron, who founded Agape Healthcare Systems, Inc. in Roanoke Rapids, ran one of the state’s most brazen schemes. Between 2017 and 2019, she and her husband Timothy Mark Harron scanned online obituaries to identify recently deceased North Carolinians, used a Medicaid eligibility tool to confirm valid Medicaid identification numbers, and then back-billed the program for up to a year of fictitious home health services supposedly provided before each person’s death. Latisha Harron had concealed a prior felony conviction for identity theft when enrolling Agape as a Medicaid provider, and the couple kept billing the program after moving to Las Vegas.⁵

In May 2021, Latisha Harron was sentenced to 170 months in federal prison and ordered to pay $13,396,921.64 in restitution to the North Carolina Medicaid Program. Timothy Mark Harron was sentenced in September 2021 to 144 months in prison and $4,321,590.39 in restitution.⁶

The 2025 National Healthcare Fraud Takedown

North Carolina figured heavily in the national takedown announced on June 30, 2025, which involved 324 defendants nationally and the seizure of $245 million in assets.⁷ Seven licensed mental health practitioners from eastern North Carolina pleaded guilty in connection with an investigation into two Raleigh-based entities, Our Treatment Center and Partners Against Sexually Transmitted Diseases, admitting to conspiracy to make and use materially false writings and documents relating to healthcare matters. Each faces up to five years in prison.⁸

Other North Carolina charges in the takedown included Crystal Jackson of Jackson Consulting Services, accused of submitting $1.9 million in fraudulent drug testing and therapy claims (of which $1.6 million was paid), and three people associated with Life Touch, LLC, charged with paying kickbacks in the form of gift cards to patients and generating more than $25 million in Medicaid payments.⁷ Lori Adcock of Hampstead was charged with conspiracy to commit healthcare fraud for her role at Ability Unlimited, a company that allegedly inflated costs for Medicaid-funded home and vehicle modifications such as wheelchair ramps.⁹ Defendants who have not pleaded guilty are presumed innocent.

Autism Therapy: The Current Flashpoint

The biggest active fraud concern in North Carolina Medicaid right now involves applied behavior analysis, a therapy for children with autism. State and federal Medicaid spending on ABA therapy surpassed $505 million in 2025, up from roughly $1.9 million in 2020, and the number of children receiving the services grew from 3,844 in fiscal year 2022 to 13,447 by fiscal year 2025. Projections put spending at $1.1 billion by fiscal year 2027.¹⁰¹¹

State Auditor Dave Boliek opened a review of ABA spending after identifying what he called a “tremendous spike” and said his office found billing anomalies, including instances where multiple clinical providers billed for the same client during the same timeframe. Boliek attributed the irregularities to “poor rulemaking” by the Department of Health and Human Services rather than a proven large-scale scheme. NCDHHS Secretary Devdutta Sangvai said the department was questioning the validity of the service spikes but added, “right now, we have no reason to believe that services aren’t being provided.”¹²¹¹

A rewritten version of House Bill 34 advanced through the Senate Health Care Committee in June 2026, proposing to close the provider network for peer support, community support, and ABA services by requiring credentialing and specific enrollment thresholds before a provider can be reimbursed. The bill also addresses out-of-state telehealth providers billing North Carolina Medicaid for ABA. The auditor’s office is hiring a senior Medicaid audit director and investing in AI-driven technology to detect sophisticated billing fraud.¹⁰¹¹

1
FindLaw. NC Gen. Stat. § 108A-64
2
North Carolina General Assembly. NC General Statutes Chapter 108A, Article 2
3
North Carolina General Assembly. Update NC False Claims Act
4
U.S. Department of Justice. North Carolina Durable Medical Equipment Corporation Sentenced in $10 Million Healthcare Fraud
5
U.S. Department of Justice. Las Vegas Business Owner Sentenced to More Than 14 Years for Orchestrating $13 Million Fraud
6
North Carolina Department of Justice. Attorney General Josh Stein Announces Health Care Fraud Sentencing
7
CBS 17. Federal Agencies in Charlotte Announce Charges in Major Healthcare Fraud Case
8
U.S. Department of Justice. Multiple Eastern North Carolina Healthcare Professionals Charged in Connection With 2025 National Healthcare Fraud Takedown
9
U.S. Department of Justice. U.S. Attorney Announces Charges as Part of DOJ’s National Health Care Fraud Takedown
10
NC Newsline. NC Lawmakers Seek Tighter Rules for Autism Therapy in Push To Eliminate Medicaid Fraud
11
The News & Observer. NC Auditor Reviews Medicaid Autism Therapy Spending
12
Carolina Journal. Boliek Talks Autism Therapy Spending Probe Amid Medicaid Fraud Fears