HHS Suspends Funding for New York Medicaid Fraud Unit Over Performance Standards

Name: HHS Suspends Funding for New York Medicaid Fraud Unit Over Performance Standards
Uploaded: 2026-07-01T10:17:31.000Z
Description: The White House Task Force to Eliminate Fraud wrote, “If you fail to protect taxpayer dollars and the wellbeing of citizens, you will face consequences.”

The White House Task Force to Eliminate Fraud wrote, “If you fail to protect taxpayer dollars and the wellbeing of citizens, you will face consequences.”

Kelly McBride Ni

Published: 6/30/2026, 10:27:10 PM EDT

The U.S. Department of Health and Human Services (HHS) Office of Inspector General suspended federal funding for New York’s Medicaid Fraud Control Unit (MFCU), saying the state failed to meet performance standards for criminal Medicaid fraud cases, according to a June 30 letter to state officials.

The suspension, effective July 1 and running through to at least Sept. 30, was outlined in the letter to New York Attorney General Letitia James and Medicaid Fraud Control Unit Director Amy Held. It said funding could resume if New York addresses the concerns.

The White House Task Force to Eliminate Fraud posted the news on social media, writing, “If you fail to protect taxpayer dollars and the wellbeing of citizens, you will face consequences.”

The inspector general’s office wrote that New York’s unit “has been the lowest performing Unit in terms of both Medicaid fraud and patient abuse and neglect cases among similar-sized Units.”

It said New York ranked last among comparable large states in criminal Medicaid fraud convictions from 2023 through 2025, with 53 total convictions, compared with California (129), Texas (200), Florida (153), and Ohio (270).

The letter also raised concerns about case delays and staffing, noting that 34 percent of open cases were more than three years old and that many referrals remained unresolved.

It said 69 percent of referrals from the state Medicaid Program Integrity Unit had been pending at the New York fraud unit for two years or longer.

A June on-site visit found the unit’s leadership had chosen to prioritize “high-impact, complex fraud cases,” a strategy that shifted focus away from criminal prosecutions, criminal fraud, and patient abuse and neglect to civil fraud cases, it stated.

“As a result of this leadership failure and poor decision making—and with billions of dollars at stake and millions of people expecting safe care for their families—the New York MFCU has been ineffective in fighting criminal cases involving Medicaid fraud or abuse or neglect of Medicaid patients,” the letter said.

In Medicaid fraud cases, criminal prosecutions involve proving intentional deception and can result in prison time, fines, and restitution. Civil cases do not carry jail time but instead impose financial penalties, including settlements, fines, and treble damages.

New York Defends Record

James defended the unit’s performance, saying it has recovered more than $627 million for Medicaid since 2019 through fraud investigations and prosecutions.

“This administration's unprecedented attack on New York is another political distraction,” James said. “The only people this decision benefits are the criminals we investigate every day. We are considering all legal options to stop this outrageous action.”

Her office also pointed to federal reviews that recognize New York as a leading state in civil Medicaid fraud recoveries, including a March 2026 HHS Office of Inspector General report.

The report found that civil recoveries rose from $407 million in fiscal year 2024 to $706 million in fiscal year 2025, and that four states—Indiana, New York, Colorado, and Georgia—accounted for half of all civil recoveries that year.

Federal Fraud Enforcement

The funding cut is the latest move in a broader Trump administration effort to tighten Medicaid oversight nationwide.

In June, federal officials suspended funding for Hawaii’s Medicaid Fraud Control Unit over similar concerns involving criminal case volume.

The Centers for Medicare and Medicaid Services (CMS) Administrator Dr. Mehmet Oz said in April that CMS "asked all 50 states to conduct an assessment of their Medicaid providers at highest risk for waste, fraud, and abuse."

"After reviewing over 5,800 providers for revalidation, Minnesota disenrolled more than 3,400, roughly 58%, for failures to maintain required documentation, pass site visits, and clear background checks," he said. "This staggering number underscores the urgent need for stronger oversight of high-risk providers in order to protect taxpayers — and most importantly, our Medicaid beneficiaries."

On June 23, the Justice Department announced a nationwide healthcare fraud crackdown, charging 455 defendants in schemes involving more than $14.6 billion in losses. Officials said the coordinated effort included Medicaid Fraud Control Units (MFCU) working with federal agencies.

MFCUs operate in every state, investigating fraud by healthcare providers and cases of abuse or neglect involving Medicaid patients. They are funded by federal grants from HHS, along with federal requirements and oversight.