Investigation into New York's Medicaid Fraud and Healthcare Funding

In early March, Dr. Mehmet Oz, directing the Centers for Medicare and Medicaid Services (CMS), initiated an investigation into New York’s Medicaid system. The probe aims to address potential fraud and inefficiencies, aligning with Minnesota's legal challenges against Oz, CMS, the U.S. Department of Health and Human Services (HHS), and Secretary Robert F. Kennedy Jr., over alleged withholding of Medicaid funds as political retribution.

This investigation is part of the Trump Administration’s February 2026 initiative to combat health care fraud, spearheaded by Oz and Kennedy. The strategy involves withholding $259.5 million in federal Medicaid funding to Minnesota for examining suspicious claims and includes a six-month suspension on new Medicare enrollments for certain medical equipment suppliers. Additionally, the CMS has launched the Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) program.

CRUSH Initiative and Stakeholder Engagement

The CRUSH initiative is engaging stakeholders to formulate strategies for preventing fraud, waste, and abuse in Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and health insurance marketplaces. Stakeholder feedback is due by March 30, 2026, underscoring a sustained effort to resolve these challenges, in line with a Presidential Memorandum.

Simultaneously, the U.S. Department of Justice (DOJ) is intensifying its focus on health care fraud, through the establishment of a Division for National Fraud Enforcement launched earlier this year. Since January 2025, investigations have increased, leveraging the civil False Claims Act among other legal tools to address issues of fraud.

Reports suggest Oz has requested comprehensive information from New York Governor Kathy Hochul regarding the Medicaid program's integrity and provider enrollment oversight. New York’s Medicaid program, with expenditures hitting $115.6 billion in FY 2025, covers one in three residents and features the highest per-person spending rate nationwide.

Governor Hochul has indicated that the investigation might not significantly affect health care coverage in the state. However, New York providers should prepare for increased scrutiny and potential enforcement from the Attorney General’s Medicaid Fraud Control Unit. At both the federal and state levels, the government remains poised to tackle health care fraud. Compliance programs are essential for healthcare providers as enforcement efforts continue to advance.