The Trump Administration has launched a novel attack on Medicaid accusing blue state Attorneys General (AGs) of not cracking down on fraud — and using that as an excuse to cut funding for New York State’s Medicaid fraud agency, which has a strong record of stopping fraud.

To be clear, allegations of Medicaid fraud do not claim that individual Medicaid beneficiaries have cheated the government and enriched themselves. States have in place rigorous protocols for verifying the eligibility of individuals for enrollment in their Medicaid programs. While an individual who is not eligible may occasionally slip through and receive health care that they are not entitled to, this is fairly rare and does not result in cash payments to the individual.

The real Medicaid fraudsters are insurance companies whose Medicaid Managed Care Organizations (MCOs) overbill the Medicaid program, cheating states and the federal government to enhance corporate profits. And they are vendors and service providers that hatch schemes to falsely bill Medicaid to line their own profits. And by all available evidence, state Attorneys General – most notably New York’s – have successfully pursued these cases, returning billions in recovered funds to the Medicaid program. 

This type of corporate fraud is well-documented. Centene Corporation, the insurance company that is the largest provider of Medicaid MCOs by number of Medicaid recipients enrolled, has settled with at least 20 states that accused it of overbilling Medicaid for its in-house pharmacy benefit operations. Centene allegedly overcharged Medicaid for prescription drugs and, in some states, double-billed state Medicaid programs for fees and services related to dispensing the drugs. In total, Centene has settled these claims for more than $1 billion. California, which had the largest publicly reported settlement, recovered more than $215 million – more than twice the value of Centene’s inflated price charges – which it split with the federal government.

Molina Healthcare, the insurance company that enrolls the second largest number of Medicaid beneficiaries, has paid tens of millions of dollars to multiple states to resolve False Claims Act violations. Molina, which previously owned mental health services provider Pathways of Massachusetts, agreed to pay $4.6 million to resolve allegations that it wrongly submitted claims for services provided by mental health staff that were not properly licensed and supervised.  Texas Attorney General Ken Paxton brought an enforcement action against Molina for failing to assess Medicaid beneficiaries in the state who were eligible for services because they were blind, disabled or elderly and concealing its noncompliance so it could continue collecting payment for managing the care of these individuals. Molina settled these charges for $40 million.

Hospital and health system Universal Health Services (UHS) and its subsidiary Turning Point Care Center have settled with the Department of Justice for allegedly billing Medicaid inappropriately for inpatient behavioral health services that were not medically necessary while failing to provide needed services for adults and children treated in UHS facilities. UHS will pay $117 million to the federal government and states that participated in the settlement; Turning Point will pay $5 million. State Attorneys General, state Medicaid fraud agencies, and the Department of Justice participated in the investigation.

Vendors of durable medical equipment, suppliers of skilled nursing services, providers of nonresidential mental health services, personal care service providers or agencies, and even management consultant firms are examples of service providers who have been investigated for abuse of Medicaid patients or fraudulently billing Medicaid.

In the consulting company case, the Virginia Medicaid fraud unit (in collaboration with multiple federal agencies) pursued a criminal investigation. The global consulting firm had advised its client, an opioid manufacturer, about sales and marketing of the client’s extended release product. The firm was held to be criminally responsible for advice resulting in the commission of a crime by the client. The case led to a $650 million settlement.

Existing State Anti-Fraud Strategies Appear to Be Working

MCOs have been encouraged to report Medicaid fraud by providers to their state Medicaid fraud investigation agencies. In 2025, they reported 5,991 cases of suspected fraud; investigations were opened in 1,114 of these suspected cases. This is up from 2,971 suspected cases referred to state fraud units in 2021.

A total of $2 billion was recovered for Medicaid in 2025 by investigations conducted by state Medicaid fraud investigators, either on their own or in collaboration with other state and federal investigation units. Civil settlements accounted for $706 million, of which $506 million resulted from state investigations without federal participation. Indiana, New York, Colorado, and Georgia were responsible for half of the total civil settlements in 2025. Criminal investigations resulted in the recovery of $1.3 billion for Medicaid, $1.2 billion for fraud and $17 million for abuse and neglect. The $2 billion does not include the Centene settlements that were made between 2022 and 2024.

In New York, the AG’s Medicaid fraud unit has recovered almost $828 million for New York’s Medicaid program over 2019 through 2025 through its criminal and civil investigations. A statewide investigation into medical transportation companies in 2025 found that they used fake billing schemes to cheat Medicaid of millions of dollars. More than $13 million was recovered and there were ten criminal convictions. While the number of criminal indictments and investigations may be lower in New York than in some other states, this is the result of the state’s decision to focus enforcement on fewer but larger instances of fraud and recover large amounts of money for the state’s Medicaid program.

In light of the importance of New York’s AG and its Medicaid fraud unit in prosecuting major civil and criminal fraud cases, it is shocking that the Trump administration has accused the state of failing to secure enough criminal convictions. In a letter dated June 30, the administration announced its intention to suspend millions of dollars in funding for the state’s fraud investigation unit through at least September 30. This will have the effect of reducing criminal indictments and delaying recoveries of funds stolen from the state’s Medicaid program.

What could have motivated this action? It appears that a math mistake by Dr. Mehmet Oz, the administrator of the Centers for Medicare & Medicaid Services, may have set the stage for this ill-considered move to weaken New York’s prosecution of Medicaid fraud. In a formal letter sent to New York’s governor in March 2026, Oz claimed that New York’s Medicaid program provided some 5 million people with personal care services in the first six months of 2025, which clearly would have been fraudulent, and threatened to withdraw billions of dollars in federal matching funds from New York’s Medicaid program.

New York has 6.8 million Medicaid enrollees, so 5 million receiving personal care services would mean that agencies and providers billed Medicaid for providing these services to nearly 75 percent of Medicaid beneficiaries. But no corresponding evidence of this billing bonanza exists. The Fiscal Policy Institute provides an analysis of how the lack of familiarity with both the Medicaid program and Medicaid data led Dr. Oz to arrive at this faulty figure. The true number of New York Medicaid enrollees that utilized personal care services in 2025, as CMS acknowledged in April, was about 400,000. This is between 6 and 7 percent of enrollees, not 75 percent – a glaring error. But the damage was done.

The June 30 letter accuses New York’s Attorney General Letitia James of neglecting to ferret out instances of abuse and fraud in the state’s Medicaid program and denies the state’s request to recertify its fraud investigation unit, ending funding for the program until at least September pending evidence of remedial steps by the state. New York officials have said they will fight this denial, noting that New York is a recognized leader in investigating and prosecuting Medicaid fraud. The fraud unit’s criminal convictions focus on owners, executives, and corporations that yield large amounts of money recovered for Medicaid.

It is inescapable that Trump has been bashing states, especially those led by Democrats, claiming they are lax on fraud in Medicaid and other public programs. Four of the five states that have been asked to share information with CMS showing how they identify and address fraud – New York, Minnesota, Maine, California, and Florida – are governed by Democrats. Medicaid funding has been withheld in Minnesota and California. In Minnesota, the program has become chaotic. Medicaid beneficiaries are being denied essential health services as thousands of providers are unable to bill Medicaid pending the Trump administration’s revalidation of the program.

From the start, the administration’s plan to place Vice President JD Vance in charge of Trump’s new anti-fraud task force that will be investigating Medicaid fraud was intended as a political weapon to attack Democratic states. The administration is clearly seeking to counter voter disapproval of its handling of health care and distract from the administration’s deep cuts to Medicaid.