The Trump administration suspended federal funding for New York’s Medicaid Fraud Control Unit on June 30, cutting off the state agency that has recovered more than $627 million in fraudulent Medicaid payments since 2019, according to NBC New York and a press release from the New York Attorney General’s office.
U.S. Department of Health and Human Services Inspector General Thomas March Bell sent a letter to Attorney General Letitia James and New York MFCU Director Amy Held accusing the unit of securing too few criminal indictments and convictions compared to four similarly-sized units in other states. Bell wrote that millions of dollars in funding would be suspended through at least September 30, and could be restored before that deadline if New York takes corrective action. “Enough is enough,” Bell wrote. “The New York MFCU has failed to comply with the terms and conditions of its MFCU grant award.”
Bell’s letter acknowledged that New York deliberately chose to focus on “high impact, complex fraud cases” rather than smaller-scale individual ones, but said that tradeoff did not produce sufficient results, NBC New York reported.
James immediately pushed back. “This administration’s unprecedented attack on New York is another political distraction,” she said in a statement from her office. “During my time as Attorney General, my office has recovered more than $627 million for Medicaid and was recognized by this very administration for leading the nation in anti-fraud efforts. The only people this decision benefits are the criminals we investigate every day. We are considering all legal options to stop this outrageous action.”
The freeze comes despite recognition from the Trump administration. The HHS Inspector General’s own 2025 report on state MFCU performance identified New York as one of four states that together accounted for half of all Medicaid civil recoveries in fiscal year 2025. The Department of Justice also named New York’s MFCU as a prosecutorial partner in a national Medicaid fraud takedown announced last week, NBC New York reported.
Joan Alker, executive director and co-founder of Georgetown University’s Center for Children and Families, called the move counterproductive. “If you want to fight fraud, don’t take away money from states’ fraud control units,” she told NBC New York. “I chalk this up to more political theater to distract voters from historic Medicaid cuts before the midterms.”
New York’s is the second state Medicaid fraud unit the Trump administration has cut off this year. In early June, Bell told Hawaii officials their funding would end after the state went three years without a Medicaid fraud indictment or conviction, NBC New York reported. The administration has pressured Democratic-led states for months: it has demanded at least five states, four of them with Democratic governors, share information about how they prevent Medicaid fraud, and has withheld Medicaid funding from Minnesota and California over fraud concerns.
The suspension came while James’s office was in the middle of active cases. The day before the cut, her office announced the arrest of a Long Island business owner for allegedly stealing more than $2.5 million through a fraud scheme that left children without nutritional supplements. Last week, the office announced the indictment and arrest of another fraudster for allegedly stealing more than $9 million from Medicaid in a years-long scheme. In 2025, a statewide investigation into medical transportation billing fraud produced ten criminal convictions and recovered more than $13 million for the Medicaid program, according to the AG’s office.
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