The Trump administration has moved to suspend millions of dollars in federal funding for New York's Medicaid Fraud Control Unit (MFCU), the state agency tasked with investigating healthcare provider fraud and patient abuse in Medicaid-funded facilities.
In a letter sent Tuesday to state officials, Health and Human Services Inspector General T. March Bell accused the unit of failing to secure enough criminal indictments, arguing it is not adequately protecting taxpayer dollars. “Enough is enough,” Bell wrote. “The New York MFCU has failed to comply with the terms and conditions of its MFCU grant award.”
Bell described New York's unit as the poorest performer among similar-sized units nationwide from 2023 to 2025, noting it secured only eight or nine criminal indictments in fiscal 2025 and fiscal 2023. By contrast, comparable units in other states secured hundreds of indictments, even while overseeing Medicaid programs half the size of New York's.
New York receives roughly $60 million annually from the federal government to combat Medicaid fraud, supporting a staff of more than 270 people. Bell said that funding would be frozen through at least September 30. The MFCU “must take immediate action to demonstrate that it is capable of effectively carrying out its statutory fraud fighting responsibilities” before the administration considers releasing additional funds, Bell wrote.
This is the second such suspension of a state Medicaid fraud unit this year, part of a broader push by the administration to crack down on alleged Medicaid fraud nationwide. Earlier this month, the administration took similar action against Hawaii. President Trump launched an anti-fraud task force in April, placing Vice President Vance at the helm. The task force's efforts have so far focused primarily on states led by Democratic governors.
New York Attorney General Letitia James, a Democrat, dismissed the move as a “political distraction.” In a statement, James noted that her office has recovered more than $627 million for Medicaid during her tenure and was recognized by the same administration for leading the nation in anti-fraud efforts. “We are considering all legal options to stop this outrageous action,” she said.
Bell's letter to James and MFCU Director Amy Held criticized the state for moving too slowly to clear cases. “The Unit must reassess its approach and determine what needs to change or improve so that it can make progress on its cases,” Bell wrote. He pointed to a deliberate leadership decision to prioritize “high-impact, complex fraud cases” over individual criminal fraud and patient abuse cases as a major factor in the unit's poor performance. “This shift in focus has not resulted in the New York MFCU achieving significantly improved results for its civil cases,” Bell added.
The funding freeze is part of a broader pattern of the Trump administration targeting state-level fraud units, echoing its recent moves against birth tourism fraud and other healthcare-related schemes. Critics argue the administration is using anti-fraud rhetoric to pressure blue states, while supporters say it is necessary to protect federal funds.
