The Trump administration on Tuesday said it would freeze federal funding for New York's Medicaid Fraud Control Unit, the state agency responsible for investigating and prosecuting fraud in the Medicaid program.

In a letter sent to New York officials, Department of Health and Human Services Inspector General Thomas March Bell accused the state of not securing enough criminal indictments and convictions and said millions of dollars in funding would be suspended through at least September.

The move is the second suspension of a state Medicaid fraud unit this year by the Trump administration, and part of a barrage of anti-fraud actions it has aggressively promoted in the healthcare sector. The actions have included the creation of a new task force, targeted investigations, funding deferrals, and demands for revalidation of healthcare providers that have touched all states but focused largely on Democrat-led ones.

The funding freeze also comes after the administration acknowledged a glaring error in figures meant to help justify a fraud inquiry into New York's Medicaid program earlier this year.

New York Attorney General Letitia James, a Democrat, vowed to fight Tuesday's funding freeze.

"During my time as Attorney General, my office has recovered over $627 million for Medicaid and was recognized by this very administration for leading the nation in anti-fraud efforts," she wrote. "We are considering all legal options to stop this outrageous action."

Bell's letter to James and Amy Held, New York Medicaid Fraud Control Unit director, argues that the unit is moving too slowly on cases and amassing too few indictments and convictions for wrongdoing in the Medicaid system. It notes that among five similarly sized state units, it secured the lowest number of criminal fraud convictions between 2023 and 2025.

The letter acknowledged that one reason the state has fewer criminal convictions than other states is that it made a deliberate choice to focus on "high impact, complex fraud cases" rather than smaller individual cases, but says that trade-off didn't produce sufficient results.

"Enough is enough," Bell wrote. "The New York MFCU has failed to comply with the terms and conditions of its MFCU grant award."

Bell said in the letter that the funding suspension could be lifted before Sept. 30 if New York takes corrective action, "showing it has remediated concerns that formed the basis for this suspension." He said if the state doesn't solve the problems, the freeze will continue.

New York's attorney general's office said in a statement that it has "long been recognized as a national leader in effectively investigating and prosecuting Medicaid fraud schemes," including by the HHS inspector general's office. A 2025 report from the office notes that New York is one of four states that made up half the civil recoveries that year.

A spokesperson for the attorney general's office said most of the unit's criminal convictions focus on company owners, executives, and corporations that would return large amounts to Medicaid.

"Under the leadership of Governor Kathy Hochul, New York State has taken concrete steps to root out waste, fraud and abuse in Medicaid," said Cadence Acquaviva, New York State Health Department spokesperson, in a statement. "We look forward to the day when these disingenuous attacks end."

The funding cutoff follows a similar move in Hawaii. In early June, Bell told Hawaii officials that Medicaid fraud funding would be cut off there, saying that it had a three-year stretch without a Medicaid fraud indictment or conviction.

Joan Alker, executive director and co-founder of Georgetown University's Center for Children and Families, said there's an irony in the federal government cutting off money intended for prosecuting fraud when its stated goal is to do just that.

"If you want to fight fraud, don't take away money from states' fraud control units," she said. "I chalk this up to more political theater to distract voters from historic Medicaid cuts before the midterms."

For months, the Trump administration has argued that states — especially some Democrat-led ones — have been lax about fraud in social safety-net programs, including Medicaid.

The administration has demanded at least five states, four of them governed by Democrats, share information about how they identify, prevent, and address Medicaid fraud.

The federal government has also withheld some Medicaid funding from Minnesota and California over fraud concerns. Minnesota Gov. Tim Walz, a Democrat who was Kamala Harris' 2024 running mate, accused Trump of making cuts because of retribution.

The fraud-busting efforts have also targeted Medicare programs. Dr. Mehmet Oz, who leads the federal Centers for Medicare & Medicaid Services, announced a six-month moratorium on new enrollments for providers of hospice and home care nationally.

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Associated Press writer Anthony Izaguirre contributed to this report. Mulvihill reported from Haddonfield, New Jersey.