March 12, 2026
(5 Min. Read)
New York’s Medicaid program is currently facing heightened federal scrutiny as Congress, the Centers for Medicare & Medicaid Services (CMS), and potentially the U.S. Department of Justice (DOJ) review program integrity issues. These developments are unfolding as Albany enters the final stage of the FY 2027 state budget process and just as Megan Baldwin is set to assume the role of Deputy Secretary of Health for Governor Hochul next week.
While none of the federal actions are expected to immediately disrupt the state budget timeline, they may influence Medicaid budget negotiations.
This week, there were reports of two federal investigations of the NYS Medicaid program, and a report of a pending US Department of Justice lawsuit against the State. Although both the congressional inquiry and the CMS request focus on fraud, waste, and abuse (FWA) risks in the Medicaid program, they differ in purpose, authority, and potential policy implications.
On March 3, 2026, the House Energy & Commerce Committee sent a letter to Governor Kathy Hochul and New York State Health Commissioner James McDonald requesting extensive information relating to allegations of fraud, waste, and abuse (FWA) in the state’s Medicaid program. Click to see here.
It appears the inquiry is part of a broader congressional review of Medicaid program integrity nationwide. The Committee highlighted the size and growth of New York’s Medicaid program, which spent approximately $115.6 billion in FY 2025 and covers nearly 7 million beneficiaries.
The letter specifically identifies several program areas considered particularly vulnerable to fraud, including:
The Committee requested a detailed response by March 17, 2026, including information regarding audits, provider screening procedures, improper payment recovery efforts, and oversight of fiscal intermediaries.
This congressional inquiry is primarily oversight and investigatory in nature. While Congress does not directly administer Medicaid programs, the inquiry could inform future federal legislation, oversight hearings, or public scrutiny of state Medicaid operations.
Also on March 3, CMS Administrator Dr. Mehmet Oz sent a separate letter to Governor Hochul, the New York State Department of Health, and the Office of the Medicaid Inspector General requesting detailed information regarding program integrity and provider oversight in New York Medicaid. Unlike the congressional letter, the CMS request invokes statutory authorities under the Social Security Act and federal Medicaid regulations governing program integrity and provider enrollment oversight.
The letter cites concerns about New York’s oversight of several service categories, including:
CMS also raised concerns about potential billing anomalies, provider concentration, and overlapping provider activity between service categories.
The letter requests extensive documentation covering:
CMS requested that New York provide responses and supporting documentation by the first week of April.
Unlike the congressional inquiry, the CMS request reflects direct federal regulatory oversight of the Medicaid program. Depending on CMS’s findings, the agency could require corrective actions, program integrity improvements, or changes to state Medicaid operations affecting federal funding participation.
The NY Post reported this week that the U.S. Department of Justice may soon file a lawsuit against the State related to alleged bid-rigging related to the single statewide fiscal intermediary for the consumer directed personal assistance program. If filed, the lawsuit would represent a separate enforcement track from the congressional and CMS reviews but would contribute to the broader environment of federal scrutiny surrounding the state’s Medicaid program.
These developments are occurring as Albany enters a key stage of the FY 2027 budget process.
The Assembly and Senate released their one-house budget bills this week, outlining each chamber’s proposed changes to Governor Hochul’s Executive Budget. See Brown & Weinraub’s One-house Budget Summary. Click to read here. Negotiations among the Governor and legislative leaders now will intensify, with a targeted completion of the budget process by the beginning of the SFY 2026-27 April 1.
The federal inquiries are not expected to alter the budget timeline, but they may influence negotiations regarding Medicaid-related policy proposals.
Megan Baldwin will begin serving as Deputy Secretary of Health to Governor Hochul next week, a role responsible for coordinating health policy across the Governor’s office and state agencies. In this position, Baldwin likely will play a central role in coordinating the state’s response to the congressional inquiry and CMS information request; overseeing health and Medicaid policy negotiations during the state budget process; and managing federal–state policy coordination with CMS and other federal agencies.
Because she will assume the role during an active federal review and ongoing budget negotiations, Baldwin may become a key figure in shaping the administration’s strategic response to federal oversight and longer-term Medicaid policy reforms.
Updates, news, and information for your industries.
