NY Loses Federal Medicaid Fraud Funding After Years of Letitia James Failure [WATCH]

The U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) has denied the recertification of the New York State Medicaid Fraud Control Unit (MFCU), suspending the unit’s federal funding effective July 1, 2026, following a review that cited years of weak criminal enforcement and operational deficiencies, as reported by Townhall.

According to HHS-OIG, the New York MFCU has repeatedly recorded the lowest levels of criminal Medicaid fraud enforcement among large states despite receiving approximately $60 million in federal funding annually and employing more than 270 staff members.

The federal review found that during fiscal years 2023 and 2025, the unit secured only eight to nine criminal indictments each year.

HHS-OIG reported that other states of comparable size generated criminal enforcement results numbering in the hundreds during the same period.

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Federal officials also found that the unit obtained only four convictions involving patient abuse or neglect while receiving more than 2,000 referrals involving those allegations each year.

According to HHS-OIG, several longstanding issues contributed to the unit’s performance, including slow case progression, a significant backlog of investigations, and deficiencies involving referral processing and case tracking under New York Attorney General Letitia James.

As a result of those findings, HHS-OIG formally denied the unit’s recertification, making it ineligible to continue receiving federal funding beginning July 1.

Federal officials also said the U.S. Attorney’s Office for the Northern District of New York, together with the Northern District of New York Healthcare Fraud Task Force, has continued expanding federal enforcement efforts involving Medicaid fraud, patient abuse, and related offenses.

Statement on Federal Decertification of the New York Medicaid Fraud Control Unit
The Department of Health and Human Services Office of Inspector General (HHS-OIG) has formally denied the recertification of the New York State Medicaid Fraud Control Unit (MFCU) and suspended its… pic.twitter.com/1yD0WqQXs3

— U.S. Attorney NDNY (@NDNYnews) July 2, 2026

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Those efforts, officials said, are intended to protect the integrity of the Medicaid program while pursuing criminal investigations involving healthcare fraud and public benefits.

First Assistant U.S. Attorney John A. Sarcone III criticized the New York Medicaid Fraud Control Unit’s performance following the federal action.

“Attorney General James’ apparent inability to explain the New York MFCU’s indefensible criminal enforcement performance is not a political distraction, as she puts it,” Sarcone said.

“Instead, based on its own reported statistics, the New York MFCU—despite having a staff of 272 employees and a $60 million budget—has failed to address public benefits crime in any meaningful way. According to the data, the unit is required to report to the HHS-OIG for annual recertification, the New York MFCU averaged only nine criminal indictments per year from 2021 to 2025. Yet between 2016 and 2018—just prior to Ms. James taking office—the unit averaged more than 100 indictments per year.”

Sarcone also challenged arguments emphasizing civil recoveries rather than criminal prosecutions.

“Public benefits fraud and Medicaid fraud did not abruptly stop in 2019. Instead, under the failed leadership of AG James, criminal Medicaid fraud in New York State has been ignored. Highlighting civil recovery data—figures that may or may not combine New York’s results with those of other states to create an impression of financial success—only serves to gloss over and obscure the unit’s dramatic failure to enforce criminal law. Rather than spending resources ‘assessing legal options,’ the New York MFCU would better fulfill its mandate by focusing on investigating and prosecuting crime, as it is both required and funded to do.”

The federal review cited years of declining criminal enforcement activity as the basis for denying New York’s recertification.

According to HHS-OIG, investigative delays, case backlogs, and deficiencies in referral and tracking systems contributed to the decision to suspend federal funding.

Meanwhile, the U.S. Attorney’s Office for the Northern District of New York and its Healthcare Fraud Task Force said they will continue pursuing investigations involving Medicaid fraud, patient abuse, and related offenses as federal enforcement efforts move forward.

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