Letitia James Turns a Blind Eye to Welfare Fraud in New York

Under the leadership of Attorney General Letitia James, New York has deprioritized welfare fraud enforcement, costing taxpayers tens of billions of dollars and sending a signal to fraudsters that it’s open season, Republican Attorney General candidate Saritha Komatireddy argued in a recent interview with National Review.

With the national media spotlight focused on welfare fraud in Minnesota, the situation in New York has quietly spiraled out of control. Ahead of Tuesday’s election, Komatireddy is trying to wake voters up to the costs that follow when the state’s chief prosecutor turns a blind eye to fraud.

New York spends more than any other state on Medicaid and conducts almost no oversight.

Every state AG’s office is required to have a Medicaid Fraud Control Unit that submits annual data to the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG), which tracks performance, convictions, and financial recoveries. New York’s Medicaid Fraud Control Unit used to be the best in the country under previous attorneys general.

Under James, it dropped down to a ranking of 51st in indictments and convictions among 50 states and Washington, D.C.

“We used to get about a hundred criminal convictions a year; under her, it’s gone down to eight,” Komatireddy said. “We used to get about $250 million in fraudulent proceeds — money taken from criminals given back to taxpayers. Now, there was one year where she got 19 million. She does one-tenth of the work of previous Democratic AGs.”

James’s dereliction on the issue led to the New York Medicaid Fraud Control Unit being decertified by the Justice Department.

James has pushed back, insisting that she takes Medicaid fraud enforcement seriously  — but “you don’t get an A for effort when you’re an attorney general; you’ve got to actually look at results,” Komatireddy said.

Honest Medicaid beneficiaries in New York are harmed by fraud: The services they rely on are delayed or diminished due to the overhead associated with fulfilling false claims. New York taxpayers, who already pay more per resident than any other state in the country for Medicaid, also lose out.

New York, under Letitia James’s leadership, has feigned but never actually conducted real oversight, building verification systems and receiving audit recommendations that were never acted upon. The state built fraud controls in its claims system but never turned them on.

Due to the lack of oversight, no one knows exactly how much in New York Medicaid spending is being lost to fraudsters. Komatireddy believes the number is roughly $40 billion per year.

A new report from Open the Books and the State Financial Officers Foundation (SFOF) found that, of $31.5 billion in Medicaid personal care payments from January 2021 to March 2023, 46 percent, or $14.5 billion, had no matching Electronic Visit Verification record.

If those payments were fraudulent, the direct cost to taxpayers comes to $725 per person across New York’s 20 million residents, and $1,878 unverified per household across New York’s 7,722,646 households.

Of the unverified payments, two categories of claims look especially suspicious: Home visits conducted while the patient was hospitalized — payments for which amounted to $9.7 million  — and visits that lasted less than eight minutes, payments for which came to $11.6 million despite Medicaid rules barring payment for visits of that length.

The report points out that the state department of health opted against activating a feature in its claims-processing system that detects and prevents payments that lack matching electronic verification records.

There was also $1.2 billion spent on payments to people who were likely non-residents of New York.

The state also had its fair share of what looked like fraud in pandemic-unemployment payments. New York dished out 218 million unemployment payments from April 1, 2020, through March 31, 2021, totaling $76.3 billion, an increase of nearly 3,140 percent over the prior fiscal year.

But the situation was ripe for error or abuse because the unemployment insurance system was outdated. Auditors called it obsolete in 2010, and a subsequent audit in 2015 named specific vulnerabilities. When the claims arrived in April 2020, the state was still running the antiquated system, and Letitia James’s office never flagged it. Of the $76.3 billion in Covid unemployment payments, $11 billion (14.4 percent) has been estimated to be improper, according to the report.

As Komatireddy points out, James has the resources to crack down on fraud — she just chooses not to.

“Attorney generals make choices,” Komatireddy said. “It’s a huge office: there’s 2,000 people in that office, there’s more than 700 attorneys. It’s one of the largest law firms in New York—it’s bigger than Skadden. You have the choice of what you want to prioritize. We all know what Tish James prioritized: national politics.”