CMS Chief Oz Accuses Blue States of Treating Medicaid Fraud as a 'Feature,' Singles Out Newsom

What Oz Said

Dr. Mehmet Oz, Administrator of the Centers for Medicare and Medicaid Services under President Donald Trump, told Fox News Digital that Medicaid fraud in certain states is not a government failure — it's intentional.

"Stealing money from Medicaid is not a flaw for a lot of states, it's a feature of the program," Oz said. "They call it 'Medicaid-ing it.'"

His argument works like this: a state creates a Medicaid-funded care program, pays workers through federal reimbursements, collects state income tax on those wages, and turns a net fiscal gain on federal dollars. Workers who would otherwise be unemployed get paid by Washington rather than by Sacramento or Albany. The state ends up richer.

The Political Layer

Oz went further, tying the arrangement directly to Democratic Party financing. He claims the home care workers in these programs get organized by service-industry unions, whose dues then flow into political action committees that fund Democratic candidates in local and state races.

"That party now has a lot of money coming in for local and state elections, and we are paying for it," Oz said.

This is a specific allegation. It is also an allegation — not a finding from a federal investigation, not a court judgment, and not a conclusion from an independent audit. No charges have been filed based on this theory.

Newsom Called Out by Name

Oz was most direct about California. He claimed Newsom received internal warnings from his own state auditors four years ago that Medicaid fraud was widespread enough to require serious intervention.

"He's embarrassed that four years ago, he was told by his own auditors that there was such widespread fraud in California that they had to take action and they sort of dabbled," Oz said. "They did some performative things, but they didn't actually do the important steps required to stop fraud in the state."

In response to California's failure to follow the federal government's lead in combating widespread fraud, the Trump administration cut over $1.3 billion in the state's Medicaid reimbursements. "We can't understand where the money's going," Oz said. "We have the responsibility to the federal taxpayer to make sure this is true."

The Strongest Counter-Argument

Critics of Oz's framing have a legitimate point. Building home-care jobs through Medicaid programs is a policy choice that many states have made deliberately. Advocates argue it reduces expensive nursing-home placements, keeps seniors and disabled individuals at home, and creates stable local employment. If the underlying policy has bipartisan roots, characterizing it wholesale as "fraud" conflates a legal program design with actual criminal billing abuse. These are different things, and Oz's sweeping language makes that distinction harder to parse.

The union-to-PAC pipeline he describes is also a legal activity. Workers organizing and contributing dues to political causes is constitutionally protected regardless of which party benefits. The fraud allegation and the political-financing allegation are separate claims, and blending them risks making the legitimate fraud concern look like a partisan hit.

What's Provable Right Now

What is documented in the sourced material: the Trump administration has cut over $1.3 billion in California's Medicaid reimbursements citing inability to verify how funds are being spent.

What is alleged but unproven: that state-level Medicaid program expansions are being run with deliberate intent to commit fraud, and that the fraud proceeds are being recycled into Democratic political infrastructure.

What is missing entirely from the available record: any on-record response from Gov. Newsom's office, any comment from the named unions, and any independent audit or law enforcement referral tied specifically to Oz's claims as stated in this interview.

Fox News Digital, which conducted and aired this interview, is the sole source for Oz's remarks. The coverage presents his claims without independent corroboration or a response from California's government. That's a material omission for a story making an accusation this specific against a sitting governor.

Where This Goes Next

Oz framed his comments as an appeal to Newsom and other Democratic governors to "join" the administration's anti-fraud push — suggesting the White House wants cooperation, not just conflict. Vice President JD Vance has also begun spearheading the administration's new anti-fraud task force, formed to enact federal oversight against exploitation of federal benefit programs. Whether California responds to that opening, or whether CMS pursues further enforcement action against the state, will determine whether this stays a TV news talking point or becomes a concrete federal-state legal fight.