As the Trump administration cracks down on fraud, waste and abuse in Medicaid, New York is a logical place to start.
New York spends far more per capita on the safety-net health plan than any other state, and its enrollment level has strayed far above the poverty rate – warning signs cited Dr. Mehmet Oz, head of the Centers for Medicare & Medicaid Services, in a recent demand letter to Governor Hochul and other state officials.
“Heart surgeons are trained to look at the numbers,” Oz, who was a star surgeon at NewYork-Presbyterian Hospital before becoming a TV host, said in a video announcing the inquiry. “Right now, the numbers coming out of New York’s Medicaid program don’t add up.”
Hochul has portrayed the probes by Oz’s agency and the House Energy & Commerce Committee as politically motivated, since the investigations have mostly targeted blue states. But that concern cuts both ways, because the governor and other top state officials rely heavily on political support – and campaign donations – from Medicaid-funded health-care interests.
Hochul also said that she’s prepared to work with federal investigators: “Where there is fraud, I will help them fight it.”
If state and federal officials are looking for fraud, waste and abuse – and generally improving management of a crucial program – here are a few of the places they might find it, as highlighted previously by the Empire Center:
Outlier spending and excessive enrollment
As Oz noted in his inquiry letter to Hochul, New York’s Medicaid program is the costliest in the U.S. In 2024, the program spent $4,492 per state resident, which was 77 percent above the national average and 24 percent higher than the runner-up, Kentucky. New York could have shed $18 billion from its program and still ranked No. 1.
The state’s Medicaid enrollment is also unusually high. A 2024 analysis found that under-65 enrollment was more than twice the non-elderly population living under the income eligibility threshold (138 percent of the federal poverty level).
Explosive growth of personal care
Another red flag is the rapid rise in demand for Medicaid-funded personal care, which covers non-medical services, such as help with bathing and feeding, provided to disabled people in their homes. Because most personal care is delivered in private residences by unlicensed workers, federal watchdogs have long raised concern about the potential for fraud and patient harm in this category of service nationwide.
Between 2015 and 2021, New York’s spending on the benefit soared by 178 percent, to $12.8 billion, a rate that was 10 times faster than the growth of its elderly population.
New York’s per capita employment of home health aides is by far the highest in the U.S. according to data from the Bureau of Labor Statistics. Home health aides accounted for two-thirds of the state’s net job growth from 2012 to 2022 and now outnumber the combined total of retail clerks and fast-food counter workers.
Labor subsidies
A growing share of Medicaid’s budget flows to expenditures that are not directly related to providing care for the needy.
Over the past decade, for example, hundreds of millions in Medicaid funds went toward subsidizing medical insurance for members of 1199 SEIU, the state’s largest union for health-care workers.
Most of the money came from the Advanced Training Initiative, a Health Department program that was supposed to teach nursing home workers how to spot early signs of trouble in patients under their care.
Instead, the money flowed into a pair of 1199-affiliated benefit funds, staving off deficits and saving money for nursing homes’ owners.
While these subsidies were flowing, the union agreed in contract negotiations to “divert” money out of one of the benefit funds to other purposes, including a joint union-management lobbying operation called the Healthcare Education Project. This organization is known in Albany for sponsoring multi-million-dollar ad campaigns in favor of higher Medicaid spending.
In effect, Medicaid dollars have been indirectly financing lobbying for more Medicaid dollars.
Hospital bailouts
A growing share of New York’s Medicaid budget is earmarked to support “distressed” hospitals that are losing money and struggling to pay bills. Rather than compensating hospitals for care provided to specific individuals – which is Medicaid’s core mission – these payments go toward general operating expenses.
While some institutions use the grants for temporary help, and return to fiscal health over time, others seem to become dependent on Medicaid-funded bailouts as a regular source of income.
In 2023, for example, it was revealed that the One Brooklyn Health network was running a half-billion-dollar deficit even though it had received hundreds of millions of dollars per year in distressed-provider grants over the previous decade.
Political favoritism
Another questionable use of distressed-provider funding took the form of a $29 million grant to Somos Community Care, a politically connected medical group in the Bronx, in 2022.
Founded as part of a Medicaid reform program, Somos does not directly care for patients. Instead, it provides information technology and other back-office services to a network of physicians.
The organization’s expenses have included $51 million in consulting fees paid to Henry Munoz, a former vice chair of the Democratic National Committee with no previous background in health care.
In the 2022 election cycle, Munoz and other Somos-linked individuals and organizations contributed more than $400,000 to the campaign accounts of Hochul and her running mate, and another $150,000 to the state Democratic Party.
Hidden profits
It’s increasingly common for nursing homes chains – in New York and other states – to outsource parts of their operations to separate companies with the same or overlapping ownership.
These “related companies” can turn hefty profits even as the nursing homes themselves barely break even or lose money.
A 2022 analysis found that the co-owners of a 17-home chain netted at least $13.8 million in profits and salaries in 2020, the worst year of the pandemic. The same owners later paid $12 million to settle charges of neglect and fraud at their Syracuse facility.
Also in 2020, a 360-bed Queens facility paid $11.4 million in rent to a realty company owned by the same person. Of that amount, $7.7 million or 66 percent was reported as profit.
Underpowered enforcement
The lead state agency for anti-fraud enforcement is the Medicaid Fraud Control Unit, or MFCU, which is based in the attorney general’s office.
Given the scale of New York’s Medicaid program – which is projected to spend $111 billion this fiscal year – the number of investigations conducted by the unit is proportionally low.
An analysis of nationwide MFCU records from 2020 through 2024 shows that New York’s unit completed an average of eight investigations per billion dollars spent, which was the third-lowest rate among the 50 states and 63 percent below the U.S. average.
Attorney General Letitia James should be challenged to explain that statistic – and what it would take to increase the unit’s productivity.
Meanwhile, the state Senate’s draft budget includes a proposal that would constrain – and arguably hamstring – operations of the Office of the Medicaid Inspector General, which is empowered to audit hospitals, nursing homes and other Medicaid-funded providers.
Any effort to reduce fraud should seek to strengthen that agency, not weaken it.
