New York’s Medicaid fraud unit defunded by OIG following investigation

The U.S. Department of Health and Human Services’ Office of Inspector General (OIG) has accused New York state of failing to "effectively fight Medicaid fraud and protect patients from abuse and neglect," something it is required by law to do if it receives federal funding for fraud enforcement. The agency said it will be withholding future money to the state until it can show results.

In the letter addressed to state Attorney General Letitia A. James and Amy Held, the director of the Medicaid Fraud Control Unit in New York, federal officials with the OIG said the $60 million in federal funds makes the staff of 270 people at the fraud unit possible.

Despite having the money and the staff, the OIG claims that New York’s fraud unit isn’t meeting benchmarks designed to prove it’s working on its “vitally important mission” to “root out fraud for one of the largest Medicaid programs in the country.”

Roughly 7 million people in New York rely on Medicaid coverage to access healthcare services.

According to the OIG, New York’s Medicaid fraud division "was the poorest performing unit by a wide margin" when compared to similarly sized units in other states. Its analysis is based on data from 2023 to 2025.

The OIG explained that its decision to pull funds comes after it conducted an on-site investigation in June to assess the reason for the unit’s unsatisfactory performance, particularly the low number of indictments. According to the OIG, states with fewer people on Medicaid and smaller fraud units are prosecuting more people, leaving the agency seeking an explanation. 

After its investigation, the OIG said it has determined that "a major factor of the New York MFCU’s performance was a deliberate leadership choice that led the Unit to focus on high-impact, complex fraud cases." 

"This decision has shifted focus from criminal fraud and patient abuse and neglect to civil fraud cases, even though the relevant statutes and regulations make clear that State Medicaid Fraud Control Units are expected also to prosecute criminal cases," the agency wrote in its letter. "This shift in focus has not resulted in the New York Medicaid Fraud Control Unit achieving significantly improved results for its civil cases." 

It went on to further accuse the state of allowing a “leadership failure and poor decision making” to push the Medicaid fraud unit into a rank of third out of five in total dollars recovered, when compared to similar states.

As a result, the OIG said New York will lose federal funding meant for the unit for a full quarter, from July 1 to Sept. 30.

It isn't exactly clear what that amounts to in dollars, as the letter does not specify.