Trump Administration Freezes New York’s Medicaid Fraud Unit Funding

The Trump administration suspended funding for New York’s Medicaid Fraud Control Unit on Tuesday, saying the state hadn’t aggressively prosecuted misuse of public money or protected Medicaid patients from “abuse and neglect.”

The U.S. Department of Health and Human Services laid out its grievances with the state agency — which is tasked with rooting out fraud in the health care program — in a letter noting the agency was the lowest performing among similar-size units in 2023 through 2025.

HHS Inspector General Thomas March Bell claimed that the New York fraud unit and state Attorney General Letitia James’ office are not meeting federal grant requirements. New York receives $60 million in federal funds for Medicaid fraud prevention for a system that serves more than 6.4 million people statewide.

Bell accused the New York agency of switching its focus from prosecuting criminal fraud cases and patient abuse to pursuing civil fraud cases. In an analysis of fiscal years 2023 and 2025, the unit secured “eight or nine criminal indictments while other similar-sized Units have secured hundreds,” according to the inspector general.

James denied the accusations, touting the $627 million recovered by her state through the agency’s investigations since 2019.

“This administration’s unprecedented attack on New York is another political distraction,” James said Tuesday in a news release. “... The only people this decision benefits are the criminals we investigate every day.”

In March, the Trump administration launched a fraud probe into New York’s Medicaid program, expanding efforts to clamp down on states’ administration of the federal safety net. The Centers for Medicare & Medicaid Services froze $260 million in Medicaid funding for Minnesota in February over similar concerns about fraud.

A month after the administration announced the probe in New York, HHS officials acknowledged a significant error in the data used to justify the investigation, according to The Associated Press.

CMS Administrator Mehemet Oz inaccurately stated the percent of New York Medicaid enrollees who utilized personal care services, claiming the level of utilization added up to nearly nearly three-fourths of the total state population on Medicaid, when the correct figures placed it between 6% and 7% of total enrollees, the AP reported.

“That level of utilization is unheard of,” Oz said in a video at the time, before the administration admitted to the data blunder.

Trump has been aggressively targeting Medicaid spending in his second term. A coalition of 25 states and Washington, D.C., filed a lawsuit against the administration on Monday for its strict interpretation of new Medicaid work requirements included in the One Big Beautiful Bill.

New York joins a short list of other Democratic-led states including Minnesota and California targeted by the Trump administration over their administration of Medicaid programs. New York’s fraud unit will not receive federal dollars until at least after Sept. 30, when the unit’s grant period ends — though James committed to fighting the funding freeze.

“We are considering all legal options to stop this outrageous action,” James said.