The federal government has frozen Medicaid payments to California and Minnesota, citing concerns over significant budget increases and inadequate oversight of the programs in those states. The move by the Trump administration is intended to bring greater accountability to Governors Gavin Newsom and Tim Walz, whose states have experienced substantial growth in Medicaid spending.
California's total spending has reportedly surged from approximately $209 billion at the start of Governor Newsom's tenure in 2019 to over $350 billion projected for the 2026-27 cycle. A significant portion of this increase is attributed to Medi-Cal, the state's Medicaid program, where total spending has roughly doubled. Growth rates in programs like in-home supportive services have been flagged by federal reviewers, with California reportedly showing 24% spending growth in key periods compared to a national average of 12%.
These spending increases have occurred despite persistent warnings from California's own audits. The state's auditor has kept the Department of Health Care Services on its high-risk list for years, citing concerns about eligibility verification and insufficient follow-up. Previous reports suggested that mismatches in payments could have contributed to at least $1.9 billion in questionable payments, with figures nearing $4 billion over several years. These discrepancies potentially allowed payments for individuals whose eligibility was unclear or invalid, with benefits sometimes continuing after eligibility should have ended. Concerns have also been raised about overbilling by hospice care providers, particularly in Los Angeles County, where audits have exposed issues such as shared addresses, low patient counts, and questionable terminal diagnoses, leading to federal spending estimates in the billions.
In Minnesota, Governor Walz's administration has also faced scrutiny over ballooning budgets and program expansions. While specific figures for Minnesota's Medicaid spending surge were not detailed in the provided notes, the federal action suggests similar concerns about fiscal management and oversight were present.
Officials in both states have characterized the federal decision as political theater. However, federal authorities maintain that the action is a necessary step to ensure fiscal responsibility. Governors Newsom and Walz are now tasked with substantiating their claims of increased caseloads and wages or risking the loss of federal matching funds. This situation highlights the challenges of managing large-scale public health programs and the ongoing tension between state autonomy and federal oversight in the administration of Medicaid.