The Trump administration has frozen more than $1 billion in federal Medicaid funding to California and Minnesota while federal investigators examine what officials describe as potentially improper healthcare spending.
Health and Human Services Secretary Robert F. Kennedy Jr. announced Tuesday that the payments will remain on hold until both states provide documentation proving the questioned Medicaid claims comply with federal law.
According to Kennedy, protecting taxpayer dollars is the administration’s top priority.
Kennedy said the administration will withhold Medicaid payments until officials are confident the funds are being distributed lawfully and used appropriately.
Trump Administration Targets Medicaid Spending
Kennedy said California Gov. Gavin Newsom and Minnesota Gov. Tim Walz must provide records supporting the disputed claims before the federal government releases additional Medicaid funds.
The administration argues the review is part of President Donald Trump’s broader effort to eliminate waste, fraud, and abuse across federal programs.
Kennedy accused the previous Biden administration of allowing weak oversight that made Medicaid more vulnerable to improper payments.
He also criticized former HHS Secretary Xavier Becerra, arguing federal officials failed to stop billions of taxpayer dollars from flowing to questionable claims.
More Than $1 Billion Put On Hold
The Centers for Medicare and Medicaid Services (CMS) announced it is delaying approximately:
- $867 million in Medicaid payments to California
- More than $200 million in Medicaid payments to Minnesota
Federal officials said the money will remain frozen while investigators review high-risk claims and verify supporting documentation submitted by both states.
Why California Is Under Scrutiny
CMS Administrator Dr. Mehmet Oz said California’s Medicaid spending on in-home healthcare services has risen much faster than the national average.
According to CMS, spending in those programs increased 24% over the past two federal fiscal years, compared with a nationwide average increase of 12%.
Oz questioned why California’s spending has grown at roughly twice the national rate, saying the trend warrants closer examination.
Federal officials also said approximately $221 million in questioned California claims involve individuals whose immigration status does not meet federal eligibility requirements.
Investigators further reported finding millions of dollars in claims tied to services allegedly billed after Medicaid beneficiaries had died.
Minnesota Also Faces Review
Federal officials said Minnesota’s review covers 14 high-risk areas that investigators believe may be vulnerable to fraud or improper payments.
Oz said Minnesota has already begun providing requested records and is cooperating with federal investigators as the review continues.
Democrats Push Back
Minnesota Gov. Tim Walz’s office criticized the funding freeze, arguing the administration is withholding more healthcare funding than it has recovered through fraud enforcement.
California Gov. Gavin Newsom also rejected the allegations, calling the action a political move and insisting the state is being unfairly targeted rather than singled out because of legitimate fraud concerns.
AI Now Helping Detect Fraud
Kennedy said CMS is expanding beyond traditional auditing methods by using artificial intelligence, advanced analytics, and other technology to identify suspicious Medicaid claims more quickly.
Administration officials say these tools allow investigators to detect unusual spending patterns that may have gone unnoticed in previous years.
The announcement follows another major healthcare fraud crackdown. Last month, Acting Attorney General Todd Blanche announced criminal charges against 455 individuals accused of participating in healthcare fraud schemes totaling $6.5 billion.
Federal officials described that operation as the largest coordinated healthcare fraud enforcement action in U.S. history.
What Happens Next?
The Medicaid funds will remain frozen until California and Minnesota provide documentation supporting the questioned claims identified during recent federal reviews.
Federal investigators will determine whether the payments complied with Medicaid rules before deciding whether the funding can be released.