The Trump Administration has announced the withdrawal of over $1 billion in federal safety net funds from California and Minnesota, both staunchly Democratic states, citing fraud-related concerns.
The controversy stems from allegations that these states failed to provide adequate documentation to verify the legitimate use of the federal funds.
Officials from the Trump administration have not accused either state of deliberate fraud or described any specific fraudulent activity. Instead, the U.S. Department of Health and Human Services reported financial evaluations that identified claims requiring additional documentation prior to the release of federal payments.
Health authorities pointed out the notably high expenditure on in-home care services in California, which saw a 24 percent increase over two years, significantly surpassing the national average. In Minnesota, the flagged claims involve dubious providers, with some billing for services rendered to deceased individuals.
This move by the administration is framed as an initiative to combat ‘fraud, waste, and abuse.’ The suspension of funds is temporary, contingent upon the states providing the necessary documentation.
‘States that receive federal Medicaid funding must demonstrate that every dollar meets federal requirements,’ HHS Secretary Robert F Kennedy Jr told reporters Tuesday. ‘When they cannot, we will not release federal funds until they do.’
Approximately 71.4 million Americans — over one-fifth of the US population — depend on Medicaid for affordable health and long-term care coverage. In Minnesota, that number is about 1.3 million people and in California, nearly 15 million people are enrolled in Medi-Cal, the state’s specific Medicaid program.
The program serves low-income families, children, pregnant individuals, seniors and people with disabilities, providing comprehensive medical benefits, maternity care and nursing home coverage.
The Trump administration is holding back more than $1 billion in Medicaid payments to California and Minnesota over documentation concerns. HHS Secretary Kennedy says the funds will be released once the states prove compliance
‘Medicaid exists to serve vulnerable Americans — not to bankroll unsupported claims,’ Kennedy added in a statement. ‘Under President Trump’s leadership, we are restoring accountability across our public programs and protecting taxpayer dollars.’
The pause follows CMS reviews that flagged claims requiring further scrutiny before federal matching funds are released, according to HHS.
In California, the agency is withholding $867.5 million after examining in-home care claims and finding spending growth that outpaced national trends.
In Minnesota, CMS is withholding $199 million after reviewing claims in 14 high-risk service areas that require additional documentation.
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CMS Administrator Dr Mehmet Oz said the payment deferrals for California and Minnesota are part of the administration’s ‘new approach to program integrity.’
‘CMS is done trying to chase down stolen and misused funds after they’ve already left the building,’ he said in a statement.
The Trump administration launched an anti-fraud task force earlier this year targeting potential abuses in federal programs in California and other states.
In April, the Justice Department announced the arrest and charging of eight people in Southern California, including three nurses, a chiropractor and a psychologist, in connection with a healthcare and hospice fraud investigation.
Prosecutors say they defrauded the system of more than $50 million.
The Trump administration has also halted millions in federal funds to Minnesota in recent months as part of its broader crackdown on abuses in public assistance programs.
That included a $91 million deferral in April, when Oz cited ongoing concerns about fraud vulnerabilities.
Of that, $76 million was tied to 14 service categories Oz described as ‘highly vulnerable’ to fraud, including adult daycare services, nighttime supervision services for the elderly — both of which can be lifelines for seniors — and rehabilitative mental health programs for adults.
These cuts put a significant number of Americans at risk of disrupted coverage.
The deferrals affect two of the nation’s largest Medicaid programs — California’s Medi-Cal and Minnesota’s Medical Assistance.
Together, the programs provide health coverage to millions of low-income residents, including children, seniors, people with disabilities and low-income adults.
It remains unclear whether beneficiaries in either state will experience immediate disruptions in coverage or care.
States often have multiple funding streams available to administer their Medicaid programs, and both California and Minnesota have indicated they are working to provide the requested documentation.
However, Medicaid is jointly funded by the federal government and the states, and with the federal government covering roughly half of each state’s program costs, prolonged delays could put significant strain on state budgets and the healthcare providers that rely on these reimbursements.