Your confusing Medicare and Medicaid.
I can have my Medicare part-D script filled in any pharmacy in any state. The state’s not on the hook and has no control over it. The only fraud would be people who pretended to be disabled to get on SS and Medicare but that’s another topic.
Medicaid is quite different and is handled through the state and there is a lot of fraud there.
So the states have no recourse into the program? I understood it as the Feds pay part as primary and the state has it’s own program to cover the rest. At least in NY and NJ that what I think it is and both a fraught with fraud.