Trump administration cuts off funding to New York fraud unit

The Trump administration announced Tuesday that it is cutting off federal funding for New York’s Medicaid Fraud Control Unit, arguing the office has failed to adequately prosecute Medicaid fraud despite overseeing one of the nation’s largest programs.

In a letter to New York Attorney General Letitia James, Department of Health and Human Services officials said New York’s anti-fraud unit has significantly underperformed compared with similar offices across the country.

“The New York MFCU was the poorest-performing Unit by a wide margin among similar-sized Units,” the letter reads. “The Unit only secured eight or nine criminal indictments while other similar-sized Units have secured hundreds, even though those other Units oversee Medicaid programs that are half the size of the New York Medicaid program.”

The department acknowledged that New York chose to prioritize large, complex fraud investigations over smaller individual cases but said that strategy failed to produce sufficient results to justify the lack of prosecutions.

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

James pushed back on the decision, noting that her office has recovered more than $627 million in Medicaid fraud cases since she took office.

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

The attorney general’s office announced just last week the arrest of a man accused of orchestrating a $9 million Medicaid fraud scheme. Overall, the state recovered $627.8 million in Medicaid fraud cases between 2019 and 2025.

Roughly 6.4 million New Yorkers are enrolled in Medicaid, the joint federal-state health insurance program for low-income earners. New York is the second state to lose federal funding for its Medicaid Fraud Control Unit this year. Earlier this year, HHS officials notified Hawaii that they would terminate the state’s grant after they said the unit went three years without securing a Medicaid fraud indictment or conviction.

The funding cut comes as the Trump administration has intensified its focus on combating fraud across the federal government, with Vice President JD Vance leading a government-wide task force aimed at rooting out waste, fraud, and abuse.