Trump moves to freeze funding to New York’s Medicaid fraud unit

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The Trump administration said it is freezing millions of dollars in federal funding for New York’s Medicaid Fraud Control Unit (MFCU), the state division that investigates and prosecutes healthcare provider fraud and patient abuse or neglect in Medicaid-funded facilities.

In a letter sent Tuesday to state officials, Department of Health and Human Services Inspector General T. March Bell said the state MFCU failed to secure enough indictments and was not doing enough to protect taxpayer funding.

“Enough is enough,” Bell wrote.  “The New York MFCU has failed to comply with the terms and conditions of its MFCU grant award.”

The New York MFCU was the poorest performing unit “by a wide margin” among similar-sized units from 2023 to 2025, Bell wrote.

New York’s fraud control unit only secured eight or nine criminal indictments in fiscal 2025 and fiscal 2023, while other similar-sized units have secured hundreds, even though they oversee Medicaid programs that are half the size of New York’s, Bell wrote.

New York receives approximately $60 million per year from the federal government for fighting fraud and has a staff of more than 270 people. Bell said that funding would be suspended through at least Sept. 30.

The MFCU “must take immediate action to demonstrate that it is capable of effectively carrying out its statutory fraud fighting responsibilities” before the administration considers any additional funding, Bell wrote.

The move is the second suspension of a state Medicaid fraud unit this year, part of recent ramped-up efforts to attack alleged Medicaid fraud across the country. The administration announced a similar move against Hawaii earlier this month.

President Trump launched an anti-fraud task force in April and put Vice President Vance in charge. So far, its efforts have targeted primarily blue states.

New York Attorney General Letitia James (D) in a statement called the investigation a “political distraction.”

“During my time as Attorney General, my office has recovered more than $627 million for Medicaid and was recognized by this very administration for leading the nation in anti-fraud efforts,” James said. “We are considering all legal options to stop this outrageous action.”

According to Bell’s letter to James and New York MFCU Director Amy Held, the state is moving too slowly to clear cases.

“The Unit must reassess its approach and determine what needs to change or improve so that it can make progress on its cases,” Bell wrote.

According to Bell, a major factor in the state’s poor performance was a deliberate leadership choice to focus on “high-impact, complex fraud cases” rather than individual criminal fraud and patient abuse cases.

“This shift in focus has not resulted in the New York MFCU achieving significantly improved results for its civil cases,” Bell wrote.

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fraud

Letitia James

Medicaid

New York

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