HHS-OIG Decertifies New York Medicaid Fraud Control Unit, Escalating Federal Scrutiny of State Medicaid Fraud Enforcement
The Administration has taken another significant step in its effort to increase pressure on state Medicaid Fraud Control Units (“MFCUs”). On July 2, 2026, the United States Attorney’s Office for the Northern District of New York announced the U.S. Department of Health and Human Services Office of Inspector General (“HHS-OIG”) denied recertification of New York’s MFCU and suspended its federal funding effective July 1. The decision follows the Administration’s announcements earlier this year that it would closely scrutinize state MFCU performance, including through funding consequences for states perceived as failing to aggressively investigate and prosecute Medicaid fraud, which we previously covered here.
In its recertification determination, HHS-OIG concluded that New York’s MFCU had been the “lowest performing” similarly situated MFCU in terms of criminal Medicaid fraud and patient abuse and neglect enforcement from 2023 through 2025. According to the agency, New York secured only eight or nine criminal indictments in certain recent fiscal years, while comparable states obtained substantially more criminal enforcement results despite overseeing smaller Medicaid programs. The agency also cited a relatively small number of criminal convictions involving patient abuse and neglect.
HHS-OIG attributed these outcomes in part to what it described as a leadership decision to prioritize complex, high-impact civil fraud matters over criminal investigations. While acknowledging that New York pursued significant civil fraud recoveries, the agency concluded that this strategic emphasis did not satisfy the federal grant requirements governing MFCUs, which contemplate robust criminal enforcement in addition to civil recoveries. HHS-OIG also identified operational issues, including slow case progression, investigative backlogs, and deficiencies in referral processing and case tracking.
The agency suspended New York’s federal funding through September 30, 2026, while indicating that the suspension could be lifted if the state demonstrates sufficient corrective action. Otherwise, New York risks losing future federal MFCU grant funding altogether.
New York Attorney General Letitia James sharply criticized the Administration’s decision, characterizing it as politically motivated and arguing that it undermines efforts to combat healthcare fraud. The Attorney General emphasized that New York’s MFCU recovered more than $627 million for the Medicaid program between federal fiscal years 2019 and 2025 and noted that HHS-OIG’s own 2025 annual report recognized New York as one of four states responsible for approximately half of all nationwide civil Medicaid fraud recoveries during that fiscal year.
The decertification of New York’s MFCU reinforces that the Administration intends to use MFCU certification and funding authority as a meaningful enforcement tool rather than simply a routine administrative process.
It also serves as a reminder that the Department of Justice may pursue what could have otherwise been prosecuted as state-level MFCU criminal cases in certain regions to underscore its messaging around states failing to adequately address criminal government program frauds.
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