New York state halved Nassau University Medical Center's (NUMC) Disproportionate Share Hospital (DSH) funding year after year for two decades. Allegedly, more than one billion dollars were steered away from NUMC. NUMC sued New York state for $1.06 billion, alleging the state defrauded the hospital over the past 20 years. This redirected Medicaid matching federal funds to the state:
New York hospital staffers resign amid allegations state defrauded Medicaid in financial scheme
Last month, Rep. Eric Burlison, R-Mo., urged Attorney General Pam Bondi and FBI Director Kash Patel to investigate the matter.
By Charlotte Hazard - May 31, 2025Several hospital staffers at the Nassau University Medical Center (NUMC) have submitted their resignations effective in June amid investigations to examine if the State of New York has been defrauding Medicaid with what one lawmaker called "a large financial scheme" involving matching payments for hospitals totaling more than $1 billion.
The allegations that New York might be cheating Medicaid first surfaced a few months ago in civil litigation and in a New York Post column. State legislators increased pressure for an investigation and resolution, and staged a rally at the State Capitol.
Claims going back 20 years
A hospital staffer who had first-hand information but chose to remain anonymous told Just The News that the hospital completed an extensive review and assessment of all books and records last summer, and brought questions to an outside law firm.
The staffer said they received a legal opinion and, after reviewing documents filed by the New York State Department of Health (NYSDOH) to CMS in June 2024, they learned that NYS [New York state] halved the hospital's DSH [Disproportionate Share Hospital] funding year after year for two decades. Allegedly, more than one billion dollars were steered away from NUMC.
They said they spent over a decade working with New York state for over a decade and neither the NYSDOH nor the governor's office have accepted initiatives to meet with them over the past three years.
In December 2024, it was reported by The New York Post that NUMC was suing New York for $1.06 billion, alleging the state has defrauded the hospital of financial resources over the past 20 years.
The staffer told Just the News that 80% of patients at the NUMC are ensured by Medicaid and Medicare. NUMC is the only public hospital in the county, and a large percentage of its 275,000 patients are low income, uninsured, as well as on Medicare and Medicaid. The hospital includes a nursing home and jail infirmary, Long Island’s only burn unit and its largest inpatient psychiatric treatment center.
A spokesperson for Democratic Gov. Kathy Hochul's office has denied these allegations, stating that they are "false claims."
Last month, Rep. Eric Burlison, R-Mo., urged Attorney General Pam Bondi and FBI Director Kash Patel to investigate the matter. "In what appears to be a large financial scheme uncovered by hospital leadership, the State of New York stands accused of violating the terms of federal contracts by failing to fund the state's share of Medicaid payments from authorized sources," Burlison wrote in a letter.
"Substantiated evidence shows the transferring of money from NUMC's own accounts to the state. By law, this then enabled matching federal funds to be sent to the state," the letter continued.
Burlison said NUMC stated that the funds were "transferred back to the state, requiring NUMC to effectively fund the State of New York's share itself."
NY state budget strips away local control, handed to governor
Earlier this month, New York lawmakers passed a $254 billion state budget for Fiscal Year 2026 that would impact NUMC by having the Nassau Health Care Corporation board structure be controlled by Hochul and state Democrats instead of Nassau County Executive Bruce Blakeman.
Hochul signed the state budget into law on May 9.
The unnamed hospital staffer told Just the News that this transfer of power led to multiple people at the hospital resigning. Just the News reviewed documents showing staffers submitting resignations that will be effective in June.
"The unprecedented passing of this NYS bill, which gives Albany control and not local control over the County’s only public hospital, coupled with the constant attacks in Newsday calling for my removal and the removal of my executive team, I believe caused staff to choose to leave," they said. "These are professionals who are experts in their fields, reside in our community and are dedicated to seeing NUMC thrive. This is a sad situation."
The staffer said they are uncertain what the future holds for the hospital, noting that NUMC will likely close most services, outsource medical services to clinics and slash significant staff numbers.
Hochul's office has not responded for comment at this time.
Red Jahncke, a national columnist writes about politics and policy. His columns appear in national publications as well as many Connecticut newspapers. Here he discusses the Medicaid services tax scam as practiced in Connecticut:
States Are Using Medicaid as a Slush Fund
By Red Jahncke - June 03, 2025Senator Ron Johnson and others gave The Big Beautiful Bill a cold reception when it arrived in the Senate, warning that the bill will balloon deficits and debt, which are already ginormous. Jamie Dimon, J.P. Morgan Chase CEO has predicted a crisis – not if, but as soon as six months from now.
There’s no greater contributor to the recent rapid growth in deficits and debt than Medicaid under the Democrats, and, thus, no more appropriate GOP target financially and politically.
Medicaid’s explosive growth results both from recently expanded enrollment and from long-running problems in the Medicaid provider tax scheme that forty-nine states employ.
The Bill controls enrollment somewhat by imposing work requirements on able-bodied single childless adults.
Yet, House Republicans punted on the Medicaid provider tax scheme, which a 2018 Senate report called a “shell game.” The House bill simply places a moratorium on new or increased provider taxes, which CBO estimates will save only $89 billion over ten years. That’s chump change, since these fasting growing taxes amounted to $37 billion per year seven years ago, when data was last collected.
The actual amount of money involved is not known, because the Center for Medicare and Medicaid (CMS), collects insufficient data about these taxes. The Government Accountability Office has criticized CMS repeatedly for this negligence. Nor is much known about the use of provider tax money; naturally, the assumption is that it funds only Medicaid. Not so.
Here’s how provider taxes work. States tax hospitals and send most of the tax money right back to the hospitals. When the money is returned, it is labeled “Medicaid supplemental payment.” This label triggers a federal matching payment to the states.
The scheme is inherently expansionary and unbalancing. The more that states tax providers, the more federal money they can obtain, the faster the Medicaid program grows and the more the balance between federal and state funding shifts to Uncle Sam, despite that Medicaid is supposed to be a joint federal-state program. Many GAO reports have warned about this.
What is little known is that the money generated by the scheme is being used outside of the Medicaid program.
Take Connecticut. Connecticut adopted a hospital tax in 2012. Connecticut gradually increased the tax and decreased the amount returned to hospitals until fiscal 2017, when the state faced a $2.2 billion budget deficit, and it roughly doubled the tax to $900 million. It returned only $600 million as supplemental payments, leaving hospitals $300 million to the worse and the state $300 million better off. And the state got $450 million in federal matching funds, leaving the state ahead by a cool $750 million.
The state did not use the money to fund Medicaid, but rather to close its huge budget deficit, as Connecticut hospitals charged in a lawsuit against the state. As both the payers of the provider taxes and the intended recipients of the federal money involved, the hospitals had the facts to back up their allegation. The state settled.
CMS took no action. Quite the opposite. It approved Connecticut’s scheme, which was so far above normal limits (see below) that special approval was required.
In 2020, GAO itself surveyed the states to gather data. It estimated that the states had doubled their provider taxes from 2014 to 2018 to $37 billion annually. Seven years later, that’s a very stale number.
GAO looked also at how the money was used. And here’s where it gets interesting, at least in Connecticut. GAO asked each state how much of its 2018 provider tax money was used to fund its state share of Medicaid spending. Connecticut responded that it used $690 million to make fee-for-service payments to providers, but zero to make supplemental payments to providers. Huh?
The logical interpretation is that Connecticut was using supplemental payment money for purposes other than Medicaid, as the state’s hospitals’ charged in their lawsuit.
It is a scandal that the Medicaid program supplies states untold billions to spend for non-Medicaid purposes. The scandal is ongoing because, without data, no one can prove misuse or abuse, and no one can be held accountable or culpable.
Fourteen states, including Connecticut (which just declared a financial emergency due to over-budget Medicaid spending), have expanded health care coverage to illegal immigrants. Inevitably they are using Medicaid money, some by adopting immigration-status-blind Medicaid eligibility policies and some by claiming that only state funds are used. Much of the “state money” is likely repurposed federal Medicaid money. These programs proceed with impunity, despite that it is illegal to provide federal benefits to non-citizens.
Yet, Congress itself is ultimately responsible. Congress abets the scam, with a law that directs CMS not to take enforcement action against a state if the state keeps its provider taxes below a threshold of 6% of providers’ “net patient revenues.”
If CMS does not keep proper records, how does it monitor the 6% safe-harbor threshold? It appears that CMS only approved Connecticut's overlimit tax after the hospital lawsuit. In turn, how can Congress exercise oversight?
The Senate should mandate that CMS collect data and exercise oversight. But, right now, the Senate knows enough to institute reforms: the 6% threshold should be reduced and made a hard cap, and a mandate adopted that federal Medicaid funds be used exclusively to fund Medicaid with strict reporting and penalties for violation.
Medicaid is out of control, having exploded from $600 billion to $870 billion from 2017 to 2023. Reform of the provider tax scam could potentially save many tens of billions every year, likely without hurting Medicaid. If the fourteen sanctuary states want to provide free health care to illegal immigrants, they should actually use state funds; and if states want to expand state government, they should not use federal Medicaid funds to do so.
Working Americans struggling to pay for their own health insurance should not be paying taxes to fund Medicaid coverage for single able-bodied childless adults who refuse to work. Nor, certainly, to close state budget deficits or to finance health care programs in sanctuary states for illegal immigrants. All Americans should want federal spending brought under control before we reach a crisis.
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