New York Attorney General Letitia James is facing renewed criticism from Republicans after the Trump administration suspended federal funding for the state’s Medicaid Fraud Control Unit (MFCU), citing years of poor criminal enforcement performance and leadership decisions that federal officials say left fraud investigations lagging.
The federal action gives Republicans a new line of attack against James as she campaigns for re-election. Republican challenger Saritha Komatireddy has made the state’s struggling Medicaid Fraud Control Unit a key issue in the race, arguing James failed to aggressively prosecute fraud. Federal watchdogs’ findings now lend new weight to those claims.
“Letitia James ran New York’s Medicaid Fraud Unit into the ground, and now we know why: a deliberate leadership choice to open fewer cases and let them drag on for years,” Komatireddy said in a statement to Fox News Digital.
“This means New York taxpayers are losing their hard-earned money to fraudsters, and patients and seniors are being hurt or neglected, and no one is holding them accountable.”
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The Republican Attorneys General Association also chimed in on the funding freeze, arguing it reflected broader differences between Republican and Democratic attorneys general in combating fraud.
“While Republican attorneys general are aggressively fighting fraud, waste, and abuse, Democrat AGs like Keith Ellison in Minnesota and Letitia James in New York knowingly aid and abet scams and fraud in their states,” RAGA Executive Director Adam Piper said in a statement.
“Republican AGs are thrilled to roll up our sleeves and work with JD Vance, Republican AG staff alum Andrew Ferguson, Scott Brady, and the White House Task Force to save taxpayers billions of dollars and deliver maximum accountability.”
In a June 30 letter denying the unit’s annual recertification, Health and Human Services Office of Inspector General (OIG) officials concluded that New York’s Medicaid Fraud Control Unit had become the lowest-performing large state unit in the nation for criminal Medicaid fraud enforcement despite receiving roughly $60 million annually in federal funding and employing more than 270 staff members.
“The New York MFCU is not effectively prosecuting criminal Medicaid fraud,” the letter stated. “The Unit reported only 53 fraud convictions from 2023 to 2025. This is by far the lowest among similar-sized Units; the next lowest number of reported fraud convictions for this period was 129.
“Enough is enough.”
The report also found New York ranked last in criminal indictments, securing fewer than 10 fraud indictments in four of the past five years.
Federal officials further found that 34% of the unit’s open cases were more than three years old, while 69% of referrals from the state’s Medicaid Program Integrity Unit had remained pending for at least two years, contributing to a growing investigative backlog.
The HHS letter concluded that the unit’s poor performance stemmed in large part from “a deliberate leadership choice” to prioritize high-impact civil fraud cases over criminal prosecutions, finding that strategy had left the office ineffective at pursuing criminal Medicaid fraud despite its size and resources.
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While federal officials acknowledged the state’s fraud unit remained competitive in civil recoveries, they said those results did not outweigh the decline in criminal enforcement.
“The Unit has sacrificed its ability to effectively fight criminal fraud to obtain civil recoveries that are largely in line with its peers,” the report stated.
James blasted the funding freeze, accusing the Trump administration of targeting New York for political reasons.
“This administration’s unprecedented attack on New York is another political distraction,” James said in a statement to Fox News Digital. “During my time as attorney general, my office has recovered more than $627 million for Medicaid and was recognized by this very administration for leading the nation in anti-fraud efforts.”
James’ office noted that HHS highlighted New York as one of four states responsible for half of all civil recoveries nationwide in fiscal year 2025. The attorney general also pointed to several recent Medicaid fraud prosecutions, including multimillion-dollar fraud cases announced in recent weeks.
“The only people this decision benefits are the criminals we investigate every day,” James said. “We are considering all legal options to stop this outrageous action.”
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Meanwhile, federal prosecutors in New York said they are expanding efforts to investigate Medicaid fraud and patient abuse.
“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,” First Assistant U.S. Attorney John A. Sarcone III, who is spearheading the revival of the NDNY Health Care Fraud Task Force, said in a statement.
Sarcone noted that the New York MFCU averaged just nine criminal indictments a year between 2021 and 2025, compared with more than 100 annually during the three years preceding James’ tenure.
“Public benefits fraud and Medicaid fraud did not abruptly stop in 2019,” Sarcone added. “Instead, under the failed leadership of AG James, criminal Medicaid fraud in New York State has been ignored.”
The suspension took effect July 1 and remains in effect through Sept. 30 unless New York completes a series of corrective actions ordered by HHS, including reducing case backlogs, increasing criminal indictments and improving coordination with federal investigators. If those deficiencies are not corrected, the Office of Inspector General warned New York it could lose its federal Medicaid Fraud Control Unit grant for fiscal year 2027.