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NEW YORK, June 30 (Reuters) - The Trump administration said on Tuesday it would cut off funding to New York's Medicaid fraud unit, accusing it of underperforming in a move that could jeopardize the state's eligibility to receive federal funding for low-income healthcare.
New York has lagged behind other large states in the number of criminal cases brought in recent years, U.S. Department of Health and Human Services wrote in a letter to Attorney General Letitia James.
James oversees the Medicaid Fraud Control Unit, a body that investigates and prosecutes fraud by healthcare providers.
The unit has achieved results in civil cases and shown improvement this year on criminal cases, HHS said, while concluding the improvement is not enough and denying it federal certification.
"The only people this decision benefits are the criminals we investigate every day. We are considering all legal options to stop this outrageous action," James said in a statement.
Vice President JD Vance is overseeing the interagency fraud crackdown that led to the move. The former Ohio senator is seen as a contender for the Republican presidential nomination in 2028.
HHS pulled Hawaii's Medicaid fraud unit funding earlier this month. The state has asked for reconsideration.
Without federally certified Medicaid fraud units, states' broader Medicaid funding could be in jeopardy.
Around 6.4 million people in New York are enrolled in Medicaid, the health program for low-income Americans.
James last week announced the arrest of a man accused of a $9 million Medicaid fraud scheme. The state recovered $627.8 million in its Medicaid fraud cases between 2019 through 2025.
(Reporting by Jody Godoy in New YorkEditing by Nick Zieminski and Chizu Nomiyama)
