The Trump administration is withholding more than $1 billion in Medicaid payments to California and Minnesota while federal officials review claims they say require additional documentation before taxpayer funds are released.
Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. announced Tuesday that the Centers for Medicare & Medicaid Services (CMS) would defer approximately $867.5 million in federal Medicaid payments to California and about $199 million to Minnesota while the states provide information showing the claims meet federal requirements.
Officials emphasized that the action is a payment deferral, not a permanent funding cut, and said the states can receive the money after submitting sufficient documentation.
“Medicaid exists to serve vulnerable Americans — not to bankroll unsupported claims,” Kennedy said.
He said the administration used artificial intelligence, advanced analytics, and other financial review tools to identify areas with suspected fraud and noncompliance.
Kennedy said states receiving federal Medicaid funds must demonstrate that payments comply with federal standards before funds are released.
Federal officials said California’s review centered on specific in-home care claims after CMS flagged unusually rapid spending increases and requested additional records.
In Minnesota, the agency examined claims across 14 service categories considered higher risk, including cases involving provider reviews and billing concerns.
CMS Administrator Dr. Mehmet Oz said the payment deferrals represent a shift toward preventing questionable payments before funds are distributed.
“CMS is done trying to chase down stolen and misused funds after they’ve already left the building,” Oz said, adding that the agency’s approach is focused on protecting taxpayer dollars and ensuring Medicaid funds reach eligible recipients.
During a press conference, officials said some of the concerns involved in-home services, which provide care for individuals with disabilities and other medical needs.
Oz said such programs can be vulnerable to abuse because they involve services that families might otherwise provide themselves.
Officials said additional documentation will be required before payments tied to certain high-risk claims are released.
The funding review follows broader efforts by the Trump administration to investigate potential fraud in federal programs.
Vice President JD Vance established a White House task force earlier this year focused on identifying waste, fraud, and abuse.
Kennedy said HHS is also expanding its exclusion authority, allowing federal officials to remove individuals or organizations considered “bad actors” from federal health care programs and potentially prevent them from receiving future federal funding.
The administration’s focus on Medicaid fraud comes as federal officials have continued investigating alleged misuse of public assistance programs.
CBS reported that the Justice Department (DOJ) previously announced charges against individuals accused in a health care and hospice fraud investigation involving more than $50 million in alleged losses.
Minnesota has also faced separate fraud investigations involving public assistance programs, including a pandemic-era fraud case involving hundreds of millions of dollars.
Officials said the states will have an opportunity to provide records supporting the questioned claims.
CMS officials said documentation can include proof that services were delivered, beneficiaries were eligible, and improper payments are addressed.
Dan Brillman, Medicaid and CHIP director, said the administration hopes to return funds once outstanding documentation issues are resolved.
The funding dispute has drawn attention from state officials and lawmakers as federal and state governments continue debating how to balance protecting taxpayer dollars with maintaining access to Medicaid services.
The administration has said its goal is to prevent fraudulent payments while ensuring resources are directed toward eligible Americans who rely on the program.
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