Trump Administration Suspends Federal Funding for New York's Medicaid Fraud Control Unit

Jun 30, 2026

The Trump administration freezes federal funding for New York's Medicaid Fraud Control Unit through September 30, 2026, citing low criminal conviction rates. New York Attorney General Letitia James vows to fight the suspension, highlighting over $627 million in Medicaid recoveries under her tenure. The freeze is part of a broader federal anti-fraud campaign targeting several states, which critics and Democratic officials characterize as politically motivated retribution.

New York MFCU funding freeze

▪U.S. Department of Health and Human Services Inspector General Thomas March Bell suspended New York's Medicaid Fraud Control Unit funding, citing insufficient criminal indictments and convictions.
▪The funding suspension for New York's Medicaid Fraud Control Unit can be lifted before September 30, 2026, if the state takes corrective action to remediate federal concerns.
▪On June 30, 2026, the Trump administration announced a freeze on federal funding for New York's Medicaid Fraud Control Unit through at least September 30, 2026.

Criminal conviction rate dispute

▪Inspector General Thomas March Bell asserted that New York's Medicaid Fraud Control Unit secured the lowest number of criminal fraud convictions between 2023 and 2025 compared to four similarly sized units.
▪New York officials defended their Medicaid Fraud Control Unit by stating it deliberately focuses on high-impact, complex cases involving company owners and corporations rather than smaller-scale cases.
▪A 2025 federal report noted that New York was one of four states that accounted for half of all civil Medicaid recoveries in that year.

Attorney General legal challenge

▪New York Attorney General Letitia James stated that her office has recovered over $627 million for Medicaid during her tenure.
▪New York Attorney General Letitia James vowed to fight the funding freeze and stated her office is considering all legal options to stop the action.

Trump administration anti-fraud campaign

▪The Trump administration has launched a series of anti-fraud actions in the healthcare sector, including a new task force, targeted investigations, and provider revalidation demands.
▪The federal government demanded that at least five states, four of which are led by Democratic governors, share information on their Medicaid fraud prevention methods.
▪Dr. Mehmet Oz, head of the Centers for Medicare and Medicaid Services, announced a six-month national moratorium on new enrollments for hospice and home care providers.

Hawaii MFCU funding cut

▪In June 2026, Inspector General Thomas March Bell cut off Medicaid fraud funding for Hawaii, citing a three-year period without any Medicaid fraud indictments or convictions.
▪The Department of Justice named the Medicaid Fraud Control Units of both Hawaii and New York as partners in a national healthcare fraud takedown in June 2026.

Minnesota California funding deferrals

▪Minnesota Governor Tim Walz accused President Donald Trump of cutting Medicaid funding as a form of political retribution.
▪The federal government withheld Medicaid funding from Minnesota and California over fraud concerns.