Trump administration cuts federal funding to New York Medicaid fraud unit

The Trump administration cut federal funding to New York’s Medicaid Fraud Control Unit on Tuesday, suspending millions of dollars through at least Sept. 30 and putting the state’s broader Medicaid support at risk. About 6.4 million New Yorkers are enrolled in Medicaid.

Letitia James, the New York attorney general who oversees the unit, said the only people helped by the decision are criminals and called it an outrageous action. Her office is weighing legal options. The Department of Health and Human Services told James that New York had lagged behind other large states in criminal cases, even though the state has focused on high-impact, complex fraud rather than smaller cases.

Medicaid Fraud Control Units investigate and prosecute provider fraud, along with abuse or neglect in health care facilities and other settings. HHS’s Office of Inspector General annually recertifies each unit and administers federal grant money for part of operating costs. The national system includes 53 units across all 50 states, Washington, D.C., Puerto Rico and the U.S. Virgin Islands. In fiscal 2025, the units recovered $4.64 for every federal and state dollar spent, almost $2 billion in combined recoveries, including $1.3 billion in criminal recoveries and $706 million in civil recoveries.

James said on June 30, 2026, that the state’s unit recovered $627,812,108 from federal fiscal 2019 through 2025. HHS’s 2025 report highlighted New York as one of four states that accounted for half of total civil recoveries that year. Recent enforcement actions include an arrest announced over an alleged $2.5 million Medicaid fraud scheme, another arrest the week before in an alleged $9 million scheme, and a 2025 investigation into medical transportation companies that led to 10 criminal convictions and more than $13 million recovered.

HHS’s letter said New York had the lowest number of criminal fraud convictions between 2023 and 2025 among four similarly sized states, while acknowledging the unit’s deliberate focus on larger, more complex cases. The funding cut is the second suspension of a state Medicaid fraud unit this year. The administration’s broader fraud crackdown includes a new task force, targeted investigations, funding deferrals and provider revalidation demands.