Trump Administration Halts Over $1 Billion in Medicaid Funds to California and Minnesota Pending Fraud Review

The Trump administration announced Tuesday it is temporarily blocking more than $1 billion in federal Medicaid funding designated for California and Minnesota as federal officials investigate allegations of fraud and documentation failures. The freeze will remain in place until state officials can demonstrate through proper paperwork that the disputed payments were used for legitimate services, according to HHS Secretary Robert F. Kennedy Jr.

The Centers for Medicare & Medicaid Services is withholding approximately $867 million from California and over $200 million from Minnesota while investigators examine high-risk claims and identify gaps in state record-keeping. Kennedy stated at a Tuesday press conference that governors Gavin Newsom and Tim Walz need only submit documentation proving services were legitimate and compliant with federal law to unlock the withheld funds.

Federal officials said they deployed artificial intelligence systems and advanced financial analytics alongside conventional audit methods to flag suspicious expenditures across both states. CMS Administrator Dr. Mehmet Oz reported discovering recurring irregularities, including billings for deceased beneficiaries, providers previously identified through fraud detection systems, and spending patterns that deviate substantially from national norms.

California’s in-home supportive services spending surged 24 percent over the past two federal fiscal years—roughly double the national average—while the state has failed to adequately document hundreds of millions in associated claims. Oz stated the state also submitted $221 million in claims involving individuals with what he described as “unsatisfactory immigration status.”

Minnesota officials recently disenrolled approximately 3,000 providers after discovering failed background checks, unsuccessful site inspections, and other compliance violations. Federal investigators are now reviewing nearly $200 million in claims connected to those disenrolled providers across 14 high-risk Medicaid service categories including personal care and home-based services.

Kennedy announced that HHS is expanding its exclusion authority, permitting both CMS and the HHS Office of Inspector General to permanently ban individuals and organizations found guilty of healthcare fraud from participating in federal healthcare programs. The secretary criticized the Biden administration’s Medicaid oversight, asserting that former HHS Secretary Xavier Becerra weakened anti-fraud protections by reducing program integrity staffing levels.