The HHS Office of Inspector General sent a letter June 30 informing New York officials that federal grant funds to the state’s Medicaid fraud control unit are suspended effective July 1.
New York gets roughly $60 million in taxpayer dollars per year for the unit, according to the letter, adding the unit has been “the poorest performing” compared to peers from 2023 to 2025. The unit reported 53 fraud convictions from 2023 to 2025. Out of similar-sized units, the next lowest number of reported fraud convictions for that window was 129.
The returns on investment for every dollar spent on the New York unit fell below returns across all units. For example, New York returned $1.84 per $1 spent in 2025, versus all units bringing in $4.64 per $1.
The letter said, based on a 2026 OIG review, a leadership decision to target civil “high-impact, complex fraud cases” — not criminal cases involving Medicaid fraud — affected results.
New York Attorney General Letitia James called the move “another political distraction” in a June 30 news release, adding that her office has recovered more than $627 million for Medicaid since 2019. In June, the state arrested and indicted someone accused of stealing more than $2.5 million from Medicaid, as well as someone who was accused of stealing more than $9 million from the program.
The move comes shortly after Hawaii’s fraud unit faced a similar fate. Hawaii requested reconsideration, and New York can do the same. New York’s suspension runs through Sept. 30. If there is no corrective action by then, OIG will not supply federal grant funds for fiscal 2027.
“We are considering all legal options to stop this outrageous action,” Ms. James said.
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