Vice President JD Vance plans to warn all 50 states that failure to comply with federal anti-fraud laws could place Medicaid funding at risk, according to senior administration officials.
The Trump administration on Wednesday was expected to announce its plans to review state watchdog groups on state Medicaid Fraud Control Units (MFCUs), The Wall Street Journal reported.
The agencies are federally funded and tasked with investigating Medicaid fraud and abuse.
Thomas Bell, inspector general at the Department of Health and Human Services, told state attorneys general in a letter that states failing to cooperate could see their Medicaid programs deemed out of compliance.
“This means your failure to do your job has put all of your state’s Medicaid funds in jeopardy,” Bell wrote in the letter obtained by The Wall Street Journal.
Medicaid provides health coverage for millions of Americans, including low-income families, pregnant women, children, seniors, and people with disabilities.
The administration said the audit effort is aimed at ensuring taxpayer dollars are protected from fraud and abuse.
The move marks the latest escalation in President Donald Trump’s crackdown on government fraud, an initiative led by Vance, who has been labeled the administration’s “fraud czar” by Democrats critical of the effort.
The White House anti-fraud task force has already targeted alleged misconduct in Republican- and Democrat-led states.
Administration officials cited actions including suspending payments to hospice providers in California and durable medical equipment suppliers in Florida.
Senior administration officials said Vance worked with Federal Trade Commission Chairman Andrew Ferguson on plans to audit MFCUs before the White House formally launched its anti-fraud task force in March.
Officials stressed that not all state watchdog agencies were underperforming.
One administration official pointed to charges filed this week by the Maryland attorney general against individuals accused of operating a coordinated Medicaid fraud scheme.
The official said the case demonstrated the type of enforcement effort the administration expects states to pursue aggressively.
A senior White House official said the administration prefers to work with states to safeguard Medicaid funding, but warned there are consequences for noncompliance.
Bell’s letter outlined possible penalties ranging from corrective action plans to reductions in federal support for MFCUs.
The most severe option would involve withholding federal Medicaid funding from states found in violation.
Administration officials said freezing funds is not the preferred outcome but argued the current system is unsustainable without stronger enforcement measures.
The administration previously halted nearly $260 million in Medicaid funding to Minnesota following allegations that federal programs were improperly exploited by members of the state’s Somali community. Minnesota Gov. Tim Walz condemned the decision as a “campaign of retribution.”
Vance defended the action at the time as necessary to protect taxpayers. “It is disgraceful that fraudsters out there are taking advantage of programs like Medicaid,” the vice president said.