By Philip Wegmann
WASHINGTON -- Vice President JD Vance has delivered an ultimatum to all 50 states: Fully comply with antifraud statutes or run the risk of losing federal Medicaid funding.
The Trump administration on Wednesday launched a nationwide audit of state Medicaid Fraud Control Units (MFCUs), watchdogs at the state level established and funded under federal law to ensure that divisions responsible for uncovering abuse are vigorously pursuing wrongdoing. States that fail to cooperate could see their Medicaid program fall out of compliance and federal funding put in jeopardy.
"Today, we are sending, across 50 Medicaid programs, letters that will require them to show that they are effectively and aggressively prosecuting Medicaid fraud in their states -- and, if they do not, we are going to turn off the money that goes to these antifraud units," Vance said at the White House.
Medicaid is a federal and state program that provides health coverage to millions of people including low-income people, pregnant women, children and people with disabilities. Reform was necessary, Vance said, because fraud in the system hurt two "victims" -- the taxpayers, and the beneficiaries who rely on the programs.
Federal Trade Commission Chairman Andrew Ferguson, who is helping lead the effort with Vance, warned states to "cooperate, or lose your funds, and we will do the job for you."
The aggressive move is the latest campaign in the ongoing "war on fraud" launched by President Trump earlier this year and quarterbacked by the vice president, whom Democrats quickly dubbed "the fraud czar." Vance said he has embraced the title.
With the vice president at the helm, the White House antifraud task force already targeted alleged misconduct in both Democrat and Republican states, taking actions like suspending payments to hospice services in California and durable medical-equipment suppliers in Florida.
Vance sidestepped questions about his political future Wednesday. Asked about Trump's speculation over who would be the Republican presidential nominee in 2028, the vice president told reporters: "If I was the American people, there are few things that I would hate more than a person who's barely been in one office for a-year-and-a half angling for a job two-and-a-half years down the road."
"Let's do a good job now," he added. "We just got to keep at it."
The administration also froze Medicare enrollments for new healthcare and home providers, alleging that the system is already rife with waste, fraud, and abuse. The task force cut off approximately 800 hospices suspected of fraud, withholding $1.4 billion in payments nationwide.
Dr. Mehmet Oz, the administrator for the Centers for Medicare and Medicaid Services, said that the Department of Health and Human Services is a frequent target for fraud, describing it as "a large rhino that can be stabbed effortlessly by foreign governments, syndicated criminal entities and smaller-time operators who can take advantage of a system." He estimated that at least half of the hospices in the greater Los Angeles area were "fraudulent."
California Gov. Gavin Newsom's press office said that the Trump administration was following the state's lead in implementing a moratorium on new Medicaid hospices. Representatives for the Democratic governor pushed back on Oz's claim about the 800 Los Angeles hospices, accusing him in a social-media post of "refusing to coordinate and share info".
Vance had been developing a plan with Ferguson to audit MFCUs long before the official launch of the antifraud task force in March, said senior administration officials who stressed that not all of the watchdogs were poor performers. As an example, the official pointed to charges filed this week by the Maryland attorney general against individuals allegedly engaged in a coordinated scheme to defraud that state's Medicaid program.
Asked if he was prepared to withhold Medicaid funding to states who refused to participate, Vance replied that the administration was "talking about withholding the Medicaid fraud enforcement payments that go to the state bureaucrats. We're not talking about withholding people's benefits."
But in a letter to all 50 states' attorneys general, which was reviewed by The Wall Street Journal, HHS Inspector General Thomas Bell warned that failure to cooperate could put their states' funds in jeopardy.
A senior White House official said before Vance's press conference that the administration is ready to help safeguard the distribution of taxpayer Medicaid dollars, but if states are unwilling to cooperate, the administration has other options, including pulling federal dollars.
Bell noted in his letter to state attorneys general that there were other less severe routes, including a corrective action plan and a reduction in funding of the MFCUs themselves. A senior administration official similarly stressed that freezing Medicaid payments to the states isn't the preferred outcome but said that the current system was unsustainable.
The administration halted nearly $260 million in Medicaid funding to Minnesota earlier this year in the wake of allegations that federal services were being wrongfully exploited by that state's Somali population. Democratic Gov. Tim Walz condemned the move as being part of a "campaign of retribution." Vance justified the pause as a necessary safeguard for taxpayer dollars. "It is disgraceful that fraudsters out there are taking advantage of programs like Medicaid," the vice president said at the time.
Write to Philip Wegmann at philip.wegmann@wsj.com
(END) Dow Jones Newswires
May 13, 2026 17:10 ET (21:10 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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