The Trump administration is threatening to withhold Medicaid funds from all fifty states if they fail to comply with federal anti-fraud statutes, marking the latest escalation in a battle over healthcare dollars.
The ultimatum comes in the form of a letter sent by US Department of Health and Human Services Inspector General T. March Bell to attorneys general in every state. It follows earlier Trump administration pressure on states for failing to take action over Medicaid fraud, a back and forth that has made its way into federal court.
As part of the effort, the federal government will audit state Medicaid Fraud Control Units across the country. That, according to Bell’s letter, puts state Medicaid programs at risk of noncompliance, jeopardizing federal funds.
“Some MFCUs have performed well and have been good stewards of the millions of taxpayer dollars they receive,” Bell said in the letter. “It has become clear, however, that many MFCUs have been happy to rake in taxpayer dollars without fighting fraud.”
“HHS will protect American taxpayer dollars by requiring every single MFCU to comply with all of their obligations under Federal law in order to receive their MFCU funds. And not just that. Noncompliance with your MFCU obligations can take your State’s entire Medicaid program out of compliance.”
Medicaid fraud has been a major focus for the Trump administration. Maine and New York are among the states previously targeted for Medicaid program oversight. The administration launched a task force targeting federal benefits in March led by Vice President JD Vance.
Vance at a press conference on Wednesday announced the government was deferring $1.3 billion in Medicaid reimbursements from California over fraud.
Last month, Centers for Medicare & Medicaid Services Administrator Mehmet Oz announced sweeping arrests and criminal charges in California over health-care fraud.
Minnesota, meanwhile, sued the Trump administration for trying to withhold funding, accusing it of having “weaponized” Medicaid.
The CMS on Wednesday separately announced a six-month moratorium on Medicare enrollment for hospices and home health agencies in an effort to crack down on alleged rampant fraud across the service category.
Bell’s nomination to the HHS watchdog seat was controversial. Democrats accused him of being a partisan, who at earlier stops in his career inappropriately handled taxpayer dollars.