New York’s $124 billion Medicaid program is under investigation for fraud

CMS demands answers from Gov. Hochul

The Centers for Medicare and Medicaid Services (CMS) opened a fraud investigation into New York’s Medicaid program on March 4.

CMS Administrator Dr. Mehmet Oz sent a letter to Gov. Kathy Hochul demanding detailed information about fraud prevention and program integrity efforts. The state has 30 days to respond.

If it doesn’t, the federal government could start withholding Medicaid payments.

The probe is part of the Trump administration’s broader push against what it calls fraud in state Medicaid programs.

New York spends big on Medicaid

New York’s Medicaid program cost about $115.6 billion in the state fiscal year 2025, according to the state comptroller. About 6.9 million people are enrolled, which comes out to roughly 35% of the state’s population.

CMS says New York spends an average of about $12,528 per person on Medicaid, about 36% above the national average.

The federal government, state, and local governments all chip in to fund the program, making it one of the most expensive in the country.

Home care spending raised red flags

Oz’s letter zeroed in on what he called explosive growth in the home care workforce serving elderly New Yorkers. Payments for home health aide services jumped about 65% per year in both 2023 and 2024, according to CMS.

The agency also flagged concerns about personal care, adult day programs, non-emergency medical transportation, and behavioral health services.

CMS said the spending patterns and workforce growth far outpace national norms, which is what triggered the closer look.

Minnesota shows what could happen next

If New York doesn’t satisfy CMS within 30 days, the federal government could defer Medicaid payments. That’s not just a threat on paper.

In Minnesota, a similar process led to CMS freezing roughly $260 million in federal Medicaid funds.

CMS has also moved to withhold up to about $515 million per quarter from Minnesota, which could add up to more than $2 billion a year. Minnesota has sued the Trump administration over those deferrals.

Other Democratic states face similar scrutiny

New York isn’t the only state getting a letter from CMS.

Earlier in 2026, the agency sent demands to the governors of Maine and California asking for information or corrective action on alleged fraud.

Maine’s governor called the CMS demand a political attack and said she would not back down. So far, every state targeted has a Democratic governor.

The administration says the probes are part of a national effort to protect taxpayers and control spending.

Hochul calls the probe politically motivated

Hochul’s office pushed back hard. Her team said the governor had already been leading efforts to root out waste, fraud, and abuse before the Trump administration took office.

Hochul told reporters the administration is targeting a Democrat-led state for political reasons. She added that she would stand up and show the administration the facts.

Her office accused the federal government of using the probe to threaten health care for everyday New Yorkers.

New York Republicans welcome the probe

Not everyone in New York disagrees with the investigation.

Rep. Mike Lawler said the state’s Medicaid system has had very little oversight for decades and called for a complete audit. New York Republicans have raised concerns about Medicaid fraud for years.

The probe has even drawn bipartisan interest at the state level, with Democratic state senators also investigating related Medicaid issues on their own.

A troubled home care contract stirs controversy

New York recently consolidated its Consumer Directed Personal Assistance Program (CDPAP) from about 600 fiscal intermediaries down to a single company, Public Partnerships LLC.

The change was meant to save money on a program that grew from about $2.5 billion to roughly $9 billion over five years.

But state senators have released evidence suggesting the administration proposed naming PPL before the bidding process even started.

The Department of Justice has reportedly been investigating the contract award, and a lawsuit may follow.

Caregivers felt the fallout from CDPAP changes

CDPAP lets people who need help with daily tasks choose their own caregiver, even a family member.

But the transition to a single administrator caused payment delays and registration problems for caregivers across the state. Hochul’s administration says the reforms have saved over $1 billion.

Democratic state senators have questioned those claimed savings, adding another layer to the debate around how New York manages its home care spending.

Federal-state funding fights keep growing

The Medicaid probe fits into a bigger pattern. The Trump administration has sought to withhold funding from Democrat-led states multiple times in recent months, with disputes over child care subsidies, social services programs, and SNAP benefits in several states.

In many cases, judges have ruled the money must keep flowing while the fights play out in court. Vice President JD Vance has been tasked with leading the administration’s national fraud campaign.

Millions of New Yorkers wait for answers

More than one in three New Yorkers depends on Medicaid for their health coverage.

If the federal government defers payments, the state could face pressure to make changes to the program. CMS said making sure states follow federal rules is a core part of its oversight role.

The 30-day deadline falls in early April 2026, and both sides say they’re ready to defend their positions.

Both sides claim they want accountability

The administration says protecting beneficiaries and proper use of tax dollars sit at the center of the probe. Hochul’s office says the state will keep working with the federal government to identify bad actors.

The outcome could shape how CMS uses its enforcement powers against state programs going forward.

For now, the dispute reflects a growing national tension over the future of Medicaid spending and who gets to call the shots on oversight.

This article was created with AI assistance and human editing.

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