Oversight Committee Launches Investigation into New York’s Abuse of Federal Funds in Medicaid Program

Request documents and communications from Governor Hochul following reports that New York State is withholding and clawing back Medicaid funds from localities and low-income hospitals

WASHINGTON – House Committee on Oversight and Government Reform Chairman James Comer (R-Ky.), Representative Nick Langworthy (R-N.Y.), Subcommittee on Delivering on Government Efficiency Chairwoman Marjorie Taylor Greene (R-Ga.), and Representative Mike Lawler (R-N.Y.) are launching an investigation following reports that the State of New York has unlawfully abused taxpayer funds intended to ensure health care coverage for the most vulnerable. In a letter to New York State Governor Kathy Hochul, the lawmakers emphasized that New York State appears to have withheld and clawed back Medicaid funds from localities and low-income hospitals to shore up its struggling budget and are now requesting documents and communications related to the State’s Medicaid program and federal fund usage.

“The Committee on Oversight and Government Reform (the Committee) is investigating reports that the State of New York has been failing to abide by the law and match federal Medicaid funds. According to recent reports, the State of New York has been withholding or clawing back Medicaid funds from localities and low-income hospitals in order to buoy its failing balance sheet. As part of its investigation into these allegations of financial impropriety, the Committee requests documents and communications regarding the State of New York’s Medicaid program and use of federal funds,” wrote the lawmakers.

Medicaid is a joint state and federal program designed to provide healthcare for those most in need. The federal government reimburses states for Medicaid expenses through the Federal Medical Assistance Percentage (FMAP), which is calculated based on a state’s income relative to the national average. This reimbursement rate ranges from a minimum of 50% to a maximum of 83% of a state’s Medicaid costs. Prior to 2023, New York received federal matching funds and provided them to localities based on services rendered to Medicaid recipients. However, in 2023, a new budget proposed by Governor Hochul—and that was subsequently approved by the state legislature—resulted in withholding over $1 billion in federal Medicaid funds from localities, using these funds to address New York’s budget shortfall.

“This fiscal coverup has forced local governments to increase property taxes and cut local services. It is felt most acutely in small and mid-sized counties like Broome and Erie who do not have the enormous tax base to easily make up for the state’s clawbacks. Sadly, the State of New York’s abuse of the Medicaid system does not stop there. The Committee understands that the State of New York has concocted a scheme by which the State has forced a safety net hospital to reimburse the state’s portion of Medicaid match, despite telling the federal government the funds had gone to the hospital. The State has reportedly engaged in this behavior for more than 20 years, to the tune of more than $1 billion at just one hospital. The abuse of federal taxpayer funds intended to ensure health care coverage for the most vulnerable to coverup your state’s budget shortfall is unacceptable,” concluded the lawmakers.

Read the letter here.