US freezes funds for New York Medicaid fraud prosecutors
Federal officials said New York’s Medicaid fraud unit had too few convictions; state officials called the funding freeze political and vowed to fight it.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
Federal health officials have suspended funding for New York’s Medicaid Fraud Control Unit, according to a Tuesday letter from U.S. Department of Health and Human Services Inspector General Thomas March Bell. The action withholds millions of federal dollars through at least Sept. 30 from the state office charged with investigating and prosecuting fraud in Medicaid.
Bell told New York Attorney General Letitia James and unit director Amy Held that the office had not produced enough criminal indictments and convictions. In the letter, Bell said New York recorded the fewest criminal fraud convictions from 2023 to 2025 when compared with four similarly sized Medicaid fraud units in other states.
The inspector general’s letter said New York had chosen to pursue “high impact, complex fraud cases” rather than smaller individual matters, but Bell said that strategy had not delivered adequate results. “Enough is enough,” Bell wrote, saying the unit had not met the conditions attached to its federal grant.
Bell said HHS could restore the funding before Sept. 30 if New York takes corrective steps that address the agency’s concerns. He said the freeze would continue if the state does not fix the problems identified by federal officials.
New York rejects the criticism
James, a Democrat, said she would fight the funding freeze. She said her office has recovered more than $627 million for Medicaid during her tenure and said the Trump administration had recognized the office for its anti-fraud work.
“We are considering all legal options to stop this outrageous action,” James said in a statement.
The New York attorney general’s office said its Medicaid fraud unit has been recognized as a national leader in investigating and prosecuting Medicaid fraud schemes. The office pointed to a 2025 HHS inspector general report that said New York was one of four states that accounted for half of total civil recoveries that year.
A spokesperson for the attorney general’s office said the unit’s criminal convictions often focus on company owners, executives and corporations, cases the office said can return large sums to Medicaid. New York health department spokesperson Cadence Acquaviva said the state, under Gov. Kathy Hochul, has taken concrete steps to root out waste, fraud and abuse in Medicaid.
Part of a wider federal push
The New York suspension is the second time this year the Trump administration has cut off funding to a state Medicaid fraud unit, the Associated Press reported. In June, Bell told Hawaii officials that federal funding would be halted there after a three-year period with no Medicaid fraud indictment or conviction, according to the HHS inspector general’s letter to Hawaii.
The Associated Press reported that the Trump administration has promoted a series of health care fraud actions, including a new task force, targeted investigations, funding deferrals and demands that health care providers revalidate their eligibility. Those actions have affected all states, with much of the focus on Democratic-led states, the AP reported.
The Justice Department last week named the Medicaid fraud units in New York and Hawaii as prosecutorial partners in a national health care fraud takedown, according to a DOJ news release.
Joan Alker, executive director and co-founder of Georgetown University’s Center for Children and Families, criticized the New York cutoff. She said the federal government was taking money from state fraud prosecutors while saying it wanted to fight fraud, and called the action “political theater” tied to Medicaid cuts before the midterms.
The Associated Press reported that the Trump administration previously acknowledged an error in figures used to support a fraud inquiry into New York’s Medicaid program. The administration has also sought fraud-related information from at least five states, withheld some Medicaid funding from Minnesota and California, and imposed a six-month moratorium on new enrollments for hospice and home care providers in Medicare, according to AP reporting.
This story draws on original reporting from Fortune.