The Trump administration announced Tuesday that it is cutting off federal funding to New York’s Medicaid fraud unit, claiming the unit has fallen short on performance — a decision that could threaten the state’s ability to receive federal healthcare funding for low-income residents.
In a letter sent to Attorney General Letitia James, the U.S. Department of Health and Human Services stated that New York has trailed behind other large states in the number of criminal cases pursued in recent years.
James is responsible for overseeing the Medicaid Fraud Control Unit, which investigates and prosecutes fraud committed by healthcare providers.
While HHS acknowledged that the unit has performed well in civil cases and shown some recent improvement in criminal cases, the department concluded that the progress was insufficient and denied the unit its federal certification.
Vice President JD Vance is leading the interagency effort to crack down on fraud that resulted in this decision. The former Ohio senator is considered a potential contender for the Republican presidential nomination in 2028.
New York is not the only state facing this situation. Earlier this month, HHS also pulled funding from Hawaii’s Medicaid fraud unit. Hawaii has since requested that the decision be reconsidered.
States that lose their federally certified Medicaid fraud units risk losing access to their broader Medicaid funding altogether.
Approximately 6.4 million New Yorkers are currently enrolled in Medicaid, the federal-state health insurance program designed to assist low-income Americans.
Just last week, James announced the arrest of a man accused of carrying out a $9 million Medicaid fraud scheme. Her office also reported that the state recovered $627.8 million through Medicaid fraud cases between 2019 and 2025.
