Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz sent letters Thursday morning to every governor in the country, directing them to identify and remove noncompliant Medicaid providers or face consequences from the federal government. The move marks the most aggressive step yet in the Trump administration's campaign to root out what Oz described as billions of dollars stolen annually from a program meant to serve the most vulnerable Americans.
Fox News Digital obtained a copy of the letter sent to Alabama. In it, Oz gave governors and state Medicaid directors just 10 business days to tell CMS whether they will commit to a swift "revalidation" of high-risk Medicaid providers and to submit a proposed timetable. A separate 30-day deadline requires each state to produce a broader two-year strategy outlining how it will review healthcare providers for legitimacy and compliance.
The message to state capitals was blunt: cooperate or be flagged. Oz warned that any state that refuses to commit to the revalidation plan will draw heightened federal scrutiny going forward.
The letters target providers CMS considers at "high risk of waste, fraud, abuse, and corruption", particularly those operating under less rigorous enrollment and billing requirements. States must also flag any provider operating without a National Provider Identifier, a basic credentialing step that legitimate providers routinely maintain.
Each state's proposal must include a methodology and timeline for off-cycle provider revalidation, metrics to measure progress with public reporting, processes for ongoing verification of provider information, strategies to ensure data consistency across fee-for-service and managed care systems, and coordination with law enforcement partners.
A second letter went to every state Medicaid director, reiterating the call for a revalidation strategy tailored to each state's specific risk profile.
In his letter, Oz laid out the stakes in plain terms. He wrote that corrupt actors are draining resources away from the people Medicaid exists to help:
"Corrupt individuals and organizations masquerading as health care providers are defrauding Medicaid, and American taxpayers, of billions of dollars each year, placing valuable resources out of reach for those the program was intended to serve: low-income senior citizens, children, and disabled individuals."
That framing matters. Every dollar siphoned by a fraudulent provider is a dollar that doesn't reach a disabled child, a low-income senior, or a pregnant mother who actually qualifies for care. The administration's effort to crack down on healthcare fraud schemes across the country has already produced federal arrests and enforcement actions in multiple states.
The CMS administrator described the fraud problem as systemic, not episodic. He told governors that CMS data points to an escalating pattern of organized criminal exploitation.
"Our analysis of national trends strongly suggests a persistent and growing Medicaid threat posed by sophisticated actors knowingly exploiting these complex systems for financial gain."
Oz called it "urgent that action be taken immediately" and said the revalidation process would "immediately deter criminal actors from continuing their fraud schemes, as the federal and state governments closely review and scrutinize the qualifications of providers to suspend or terminate clearly abusive actors from the program."
The warning carried teeth. Oz stated plainly that a governor's failure to commit would shape how CMS evaluates fraud risk in that state going forward, language that signals possible funding consequences or enhanced federal oversight for states that drag their feet.
The letters arrive against a backdrop of staggering fraud cases that have exposed just how porous state Medicaid systems have become. Minnesota's $250 million "Feeding Our Future" scheme, which surfaced in 2022, has led to a wave of convictions in recent years. But that scandal may have been only the surface.
A state-commissioned review of Minnesota's Medicaid program this year identified vulnerabilities across 14 high-risk services and estimated that up to $1.7 billion in payments over four years may have been improper. That is a single state. Multiply those kinds of numbers across all 50 states, and the scale of the problem begins to explain why the administration is moving with urgency.
CMS is also weighing Medicaid deferrals in California, New York, and Maine, a step that would hold back federal payments to states where fraud concerns are most acute. California's governor has already lodged a formal grievance against Dr. Oz over fraud-related actions, a move that looks less like principled objection and more like political deflection when set against the state's record.
New York faces its own reckoning. House Oversight Chairman James Comer sent a letter on January 16 to Oz seeking a briefing on allegations that the state improperly used Medicaid Disproportionate Share Hospital funds. The Washington Examiner reported that Comer alleged New York may have illegally forced public hospitals to cover the state's required Medicaid match while telling the federal government the money came from the state General Fund.
Whistleblowers and lawsuits tied to Nassau University Medical Center alleged the practice continued for more than 20 years and cost over $1 billion at that hospital alone. Comer wrote that the committee was "concerned that the State, and likely other states too, are failing to follow federal law by misrepresenting the source of the non-federal share that the State is responsible for providing to trigger federal dollars under the Medicaid DSH program."
Claims of retaliation against whistleblowers and a state takeover that led to lawsuits being withdrawn only deepen the picture of a system that has operated for decades without meaningful federal accountability. That is exactly the kind of entrenched dysfunction Oz's letters are designed to confront.
The broader pattern of fraud in healthcare extends well beyond Medicaid billing. Federal investigators have uncovered massive hospice fraud operations in Los Angeles that may have cost taxpayers billions, and a federal task force has already moved to suspend hundreds of suspect hospice providers in that city alone.
For years, Medicaid fraud has been treated as a cost of doing business, an unfortunate but tolerable leakage in a $900-billion-plus program. States collected their federal matching funds, providers enrolled with minimal scrutiny, and the money flowed. When fraud was discovered, it was usually after the fact, often by accident, and rarely with consequences for the state officials who let it happen.
Oz's letters change that equation. By demanding written commitments, imposing deadlines, and tying compliance to future federal evaluations, CMS is putting governors on record. A governor who refuses to act, or who slow-walks a response, will own that decision publicly.
The open questions remain significant. What specific enforcement action will CMS take if a state refuses? What is the legal basis for the Medicaid deferrals being weighed in California, New York, and Maine? How broadly will "high-risk" provider categories be defined? Those details will matter enormously as this initiative moves from letters to action.
But the direction is clear. The federal government is telling state leaders that the era of passive tolerance for Medicaid fraud is over. Governors who have built their budgets on a river of federal healthcare dollars now face a simple question: can you prove that money is going where it's supposed to?
Taxpayers have been footing the bill for this mess for decades. The least their governors can do is answer a letter.
