Trump Administration Freezes Over $1 Billion in Medicaid Payments to California and Minnesota Over Suspected Fraud

The Trump administration has deferred more than $1 billion in federal Medicaid payments to California and Minnesota, citing suspected fraud, noncompliance, and the need for additional documentation on high-risk claims.

The Centers for Medicare and Medicaid Services announced it is holding approximately $867.5 million in payments to California and $199 million to Minnesota. Health and Human Services Secretary Robert F. Kennedy Jr. and CMS Administrator Dr. Mehmet Oz framed the action as part of a proactive effort to stop improper payments before funds are disbursed rather than attempting to recover them after the fact.

In California, officials pointed to unusually rapid growth in spending on in-home care programs, which rose at roughly twice the national rate over recent years and accounts for a substantial portion of the deferred amount. Additional concerns involved claims that appeared to involve billing irregularities, such as charges long after services were rendered or for multiple patients simultaneously, along with difficulties verifying eligibility in some cases.

In Minnesota, the freeze targets 14 high-risk service categories, primarily long-term and personal care services for the elderly and disabled. CMS identified providers with aberrant billing patterns and said a portion of the funds relates to services delivered earlier in the year. Minnesota has already submitted some documentation that federal officials say they are reviewing.

Kennedy stated that states receiving federal Medicaid dollars “must demonstrate that every dollar meets federal requirements. When they cannot, we will not release federal funds until they do.” Oz emphasized a shift away from chasing funds after they leave the system, declaring that “if it smells like fraud, we’re not paying for it anymore.”

The deferrals are temporary holds, not permanent cuts, and do not affect individual eligibility or benefits. States can recover the money by providing proof that the claims are legitimate, including verification of beneficiary eligibility and confirmation that services were properly delivered. The administration also announced expanded authority for CMS and the HHS Office of Inspector General to exclude suspected bad actors from federal health programs.

California Gov. Gavin Newsom dismissed the action as a “recycled political stunt,” arguing that the state’s in-home services save money by keeping seniors and people with disabilities out of more expensive nursing homes. Minnesota Gov. Tim Walz called the freeze part of a broader campaign against the program and its recipients, asserting it was not truly about fraud.

The latest deferrals continue a pattern of heightened federal scrutiny of Medicaid spending in certain states. Earlier this year, CMS had already withheld substantial sums from both California and Minnesota over similar integrity concerns. Federal officials have linked the measures to a broader task force focused on waste, fraud, and abuse in public health programs.

State officials in both California and Minnesota have maintained they operate robust oversight systems and recover significant amounts of improper payments on their own. They have requested more detailed data from CMS on the specific claims and providers at issue so they can respond fully.

As the documentation review proceeds, the withheld funds remain unavailable to the states. The administration has signaled that similar scrutiny will continue across high-risk areas of Medicaid, with an emphasis on protecting taxpayer dollars and ensuring resources reach legitimate beneficiaries rather than fraudulent actors.