Health and Human Services Secretary Robert F. Kennedy Jr. announced Tuesday that the Trump administration is temporarily withholding more than $1 billion in Medicaid payments to California and Minnesota while federal officials review claims they consider high risk for fraud or improper billing.
According to the Department of Health and Human Services, the Centers for Medicare and Medicaid Services is deferring approximately $867.5 million in payments to California and another $199 million to Minnesota. Federal officials emphasized that the money has not been permanently eliminated. Both states can still receive the funds if they provide documentation showing that the disputed claims comply with Medicaid rules.
Kennedy said states receiving federal Medicaid dollars are responsible for proving that the money is being used properly. He argued that payments should not be released when state officials cannot verify that the claims meet federal requirements.
During a news conference, Kennedy directly addressed California Gov. Gavin Newsom and Minnesota Gov. Tim Walz. He said the states could resolve the issue by submitting basic records confirming that the services were legitimate. Kennedy described that expectation as common sense and said the administration had used artificial intelligence and advanced data analysis to identify unusual spending patterns.
CMS Administrator Dr. Mehmet Oz said the agency was changing how it approaches suspected fraud. Rather than trying to recover money after it has already been improperly paid, he said CMS intends to stop questionable payments before federal funds leave the government.
Federal officials said the California review focused partly on in-home care programs where spending had increased much faster than national averages. In Minnesota, investigators identified claims across 14 service areas considered especially vulnerable to abuse. Some of those claims were connected to providers that had already drawn attention during earlier program-integrity reviews.
HHS also said it is working with its Office of Inspector General to remove providers found to have committed fraud or serious misconduct. In some cases, those providers could be permanently excluded from participating in Medicare and Medicaid.
The latest action follows a Justice Department case announced in April involving an alleged $50 million health care fraud scheme known as “Operation Never Say Die.” Prosecutors charged eight defendants, including operators of hospice companies accused of billing Medicare for patients who were not terminally ill.
Court documents described one Anaheim-area operator with a non-death discharge rate of about 85 percent. That figure was nearly five times the national average. Prosecutors also alleged that some beneficiaries received cash kickbacks delivered in envelopes.
This is not the first time the administration has paused federal payments connected to Minnesota. In February, Vice President JD Vance announced a separate $259 million hold as part of a broader federal campaign against fraud.
Walz criticized the latest decision and described it as political retaliation. He argued that withholding Medicaid funds could harm children, senior citizens, and people with disabilities rather than the individuals responsible for fraudulent claims.
Federal officials, however, maintain that the payments are only being delayed until the states provide sufficient proof that the claims are legitimate. The U.S. attorney in Minnesota has estimated that fraud in the state could exceed $1 billion.
The dispute now centers on whether California and Minnesota can produce the documentation needed to satisfy federal investigators. Until then, the administration appears determined to keep the money on hold rather than risk releasing funds tied to potentially improper claims.
