The Trump administration has halted more than $1 billion in federal Medicaid funding to California and Minnesota, citing concerns over potential fraud and insufficient documentation of how funds were spent. The Department of Health and Human Services (HHS) stated that financial reviews flagged claims requiring further scrutiny before federal payments can be released.
Officials have not accused either state of intentional fraud but indicated that spending patterns, such as a 24 percent increase in California's in-home care spending over two years—double the national average—and questionable providers billing for deceased beneficiaries in Minnesota, prompted the reviews. HHS Secretary Robert F. Kennedy Jr. stated that states receiving federal Medicaid funding must prove that every dollar meets federal requirements.
In California, $867.5 million is being withheld following an examination of in-home care claims. Minnesota faces a deferral of $199 million after a review of claims in 14 high-risk service areas. These actions are part of what HHS describes as a crackdown on 'fraud, waste and abuse' and an effort to restore accountability to public programs.
Medicaid serves approximately 71.4 million Americans, providing health and long-term care coverage to low-income families, children, pregnant individuals, seniors, and people with disabilities. In Minnesota, about 1.3 million people rely on the program, while nearly 15 million are enrolled in California's Medi-Cal program.
CMS Administrator Dr. Mehmet Oz described the payment deferrals as part of the administration's 'new approach to program integrity,' emphasizing that the agency aims to prevent misuse of funds. This move follows the establishment of a Trump administration anti-fraud task force earlier this year, which has targeted potential abuses in federal programs.
In April, the Justice Department announced charges against eight individuals in Southern California in connection with a healthcare and hospice fraud investigation, alleging more than $50 million was defrauded from the system. The administration had previously halted millions in federal funds to Minnesota in recent months due to similar fraud vulnerability concerns, including a $91 million deferral in April.
The pause in funding could strain state budgets and healthcare providers, as the federal government typically covers about half of Medicaid program costs. It remains unclear if beneficiaries in either state will face immediate disruptions in coverage. Both California and Minnesota have indicated they are working to provide the requested documentation.