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The Trump administration has pulled funding from the state of New York’s Medicaid Fraud Control Unit because of the Unit’s laughable underperformance. HHS sent the letter [ [link removed] ] to New York Attorney General Letitia James and Medicaid Fraud Control Unit Director Amy Held, stating that the fraud task force was the lowest performing Unit when compared with other states.
New York receives $60 million from the federal government each year and maintains a staff of 270 employees for the sole purpose of preventing Medicaid fraud. Despite this, the Unit only successfully prosecuted “eight or nine criminal indictments while other similar-sized Units have secured hundreds.”
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The letter further pointed out that those other Units oversee programs that “are half the size” of New York’s. New York has one of the largest Medicaid systems in the country, costing over $100 billion per year for its coverage of 7 million people. The unit’s negligence has put billions of taxpayer dollars at stake, as the state’s unwillingness to investigate and prosecute fraud has opened the Medicaid system up to exploitation.
After an onsite review, HHS attributed much of the Unit’s failures to their leadership. Unit managers intentionally stopped looking into “criminal fraud”, “patient abuse”, and “neglect.” They claimed to be shifting their focus to “high-impact, complex fraud” and civil cases in defiance of regulations that required them to prosecute criminal fraud. The shift did not lead to an increase in prosecutions, but rather allowed them to become the lowest performing Unit from 2023 to 2025 by “a wide margin.” 34% of the Unit’s open cases were more than 3 years old, and 69% referrals had a ‘Pending’ status at the Unit for more than 2 years.
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In February and March of this year, a House committee began investigating Medicaid fraud in ten states, specifically to “ensure program integrity in states nationwide.” New York Governor Kathy Hochul accused Congressional Republicans of targeting Democrat-run states like New York and California, but admitted [ [link removed] ] that there was waste, fraud, and abuse in the system. Jessica Gay, a Certified Fraud Examiner, testified [ [link removed] ] before the House Energy and Commerce Subcommittee. She noted that “If a state isn’t monitoring [Medicaid programs] closely, they are likely missing a considerable area where fraud is committed.”
Gay also referenced the $68 million [ [link removed] ] adult day care Medicaid fraud scheme uncovered in 2024. Two individuals in Brooklyn engaged in a series of kick-backs and recruitment bribes that allowed them to defraud Medicaid, stealing millions from the system. New York’s Medicaid Fraud Control Unit does not appear to be listed in the investigation or prosecution of this corruption. The lead agencies include the DOJ, HHS-OIG, EDNY, and NYPD. They also do not appear on any court documents. The state’s own Fraud Control Unit didn’t participate in the discovery or prosecution of one of the largest fraud schemes in New York’s history.
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The Trump administration is clearly fed up with how the state has handled allegations of fraud, going so far as to file lawsuits against state agencies. In June, the DOJ filed a lawsuit [ [link removed] ] against New York state officials for enabling fraud. The civil case alleges that New York’s Department of Health and its state Medicaid Director are engaged in a backroom deal with Public Partnerships LLC, which has managed New York’s Consumer Directed Personal Assistance Program (CDPAP), a $10 billion Medicaid program for disabled individuals. The DOJ has alleged that the state engaged in a fake bidding process when they had pre-selected Public Partnerships. The arrangement allegedly allowed the private company to generate “millions of dollars in unauthorized profits funded by federal taxpayers in connection with its takeover of New York’s $10 billion-dollar CDPAP program.”
Healthcare fraud is usually estimated to be around 3-10% [ [link removed] ] of program spending. For New York’s $115 billion per year Medicaid system, this could account for as much as $11.5 billion per year, most of which goes unprosecuted. According to AG James, the state has only uncovered $627 million [ [link removed] ] in the six years between 2019-2025. This suggests that there could be as much as $10 billion in Medicaid fraud in New York state alone every year.
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