The Trump administration has suspended funding for New York’s Medicaid Fraud Control Unit due to its alleged failure to combat fraud, the Department of Health and Human Services (HHS) Office of Inspector General announced on June 30.
The administration denied recertification of the New York fraud unit, which makes it ineligible for federal funds after Sept. 30, the end of the 2026 fiscal year.
New York receives about $60 million per year in taxpayer dollars to root out fraud in its Medicaid program and has staffed more than 270 people to perform that function, according to a letter from HHS Inspector General T. March Bell to the New York State Attorney’s Office.
However, the unit annually produced fewer than 10 criminal indictments for fraud, on average, across the past five years. Similar units in other states have secured hundreds of Medicaid fraud indictments despite having a fraction of the budget and staff, the letter stated.
New York also reported the lowest number of fraud convictions among peer states California, Texas, Florida, and Ohio, according to the letter.
[Chart Data: Fraud Convictions, page 5, table 1, Patient Abuse and Neglect Convictions page 9, table 5]
New York Attorney General Letitia James on June 30 condemned the Trump administration’s decision to cut funding to the unit, citing more than $627 million in fraud recovery since 2019.
“This administration’s unprecedented attack on New York is another political distraction,” James said in a statement. “The only people this decision benefits are the criminals we investigate every day. We are considering all legal options to stop this outrageous action.”
The federal agency said those recoveries were the unit’s civil results, separate from its criminal prosecutions, which were not in line with its peers.
“This evidence does not outweigh the sustained poor outcomes for the Unit’s criminal fraud cases,” the letter reads.
Medicaid Fraud Control Units, on average, return nearly $4 for every $1 spent on enforcement, according to federal data. New York’s unit returned less than $2 according to Bell.
New York’s Medicaid program covers nearly 7 million people, about one-third of all New Yorkers, at a cost of more than $115 billion per year, according to the New York State Comptroller.
The state’s per-resident spending on the program was roughly 80 percent higher than the national average in 2025.
“That alone demands scrutiny, but it gets worse,” said Dr. Mehmet Oz, administrator at the Centers for Medicare and Medicaid Services, who launched a federal investigation into New York’s Medicaid program on March 3.
In addition to the state’s massive enrollment, Oz said New York has turned its Medicaid program—intended for the most vulnerable—into a taxpayer-funded jobs program.
Nearly four in 10 jobs added in New York between 2023 and 2024 were in home health and personal care.
Federal authorities decertified Hawaii’s Medicaid Fraud Control Unit earlier this month, citing a decade of poor performance. On July 1, federal officials will announce recertification decisions for units in nine other states: Colorado, Florida, Idaho, Indiana, Minnesota, Nebraska, Oklahoma, South Dakota, and Wisconsin.
Lawrence Wilson contributed to the report.
