ANAO Audit: AI-Linked Medicare Fraud Risk Went Unaddressed for 12+ Months Despite A$5.2 Million in Flagged Cases

Between July 2024 and December 2025, Australia's Department of Health, Disability and Ageing (DHDA) used an AI-enabled model to help detect potential health-provider fraud and non-compliance in the Medicare Benefits Schedule (MBS).

In a performance audit published 22 September 2026, the Australian National Audit Office (ANAO) found that the same period saw the emergence of 'prompted billing' — healthcare providers allegedly using generative AI to help inflate claims. Eight potential fraud cases worth a combined A$5.2 million involved an AI tool.

Both custodian agencies, Services Australia and DHDA, had been aware of the issue for at least 12 months, and the Medicare Integrity Reform Steering Group discussed it in June 2025, yet Auditor-General Caralee McLiesh found it remained 'a largely unaddressed integrity risk.'

The audit rated DHDA's enterprise-level AI governance as largely effective, but its arrangements for managing AI specifically in health-provider compliance as only partly effective: neither agency had visibility of which AI software products were in use, and no regulatory requirement compelled providers to disclose AI use. ANAO issued three recommendations covering AI risk management in healthcare settings, AI use-case governance, and assurance over AI use.

Read the full analysis: https://www.anao.gov.au/work/performance-audit/artificial-intelligence-and-medicare-benefits-integrity