HHS Freezes Over $1 Billion in Medicaid Payments to California and Minnesota Over Suspected Fraud

The Trump administration is freezing more than $1 billion in federal Medicaid payments to California and Minnesota, saying both states failed to adequately document claims flagged as high-risk for fraud.

Health and Human Services Secretary Robert F. Kennedy Jr. announced the deferral Tuesday, telling reporters that the Centers for Medicare & Medicaid Services will hold roughly $867.5 million meant for California and about $199 million meant for Minnesota until the states prove the underlying services actually happened.

"If Governor Gavin Newsom or Governor Tim Walz wants this funding released, all they have to do is provide basic documentation showing that these services are legitimate and not fraudulent," Kennedy said, according to Fox News. "And that's common sense."

CMS Administrator Dr. Mehmet Oz said the review, which combined artificial intelligence, advanced analytics and standard financial auditing, turned up repeated red flags in both states, including claims tied to deceased beneficiaries and providers already flagged in prior fraud sweeps. "If it smells like fraud, we're not paying for it anymore," Oz said.

What's actually being withheld

Of California's total, CMS says roughly $646 million is tied to in-home supportive services and another $221 million involves claims tied to individuals with what Oz described as "unsatisfactory immigration status," according to Fox News. Oz said California's in-home supportive services spending grew 24% over the past two federal fiscal years, roughly double the national average, and the state has not adequately documented hundreds of millions of dollars in those claims.

In Minnesota, CMS reviewed claims across 14 high-risk service categories, according to Fierce Healthcare. Federal officials pointed broadly to in-home care, personal care facilities and durable medical equipment as categories showing abnormal spending growth or documentation gaps, per Ground News' aggregation of coverage.

HHS has been explicit that this is a pause, not a permanent cut. Kennedy wrote on X that CMS is "PAUSING" the funds, and Newsweek reported the money stays frozen "pending further review" until the states hand over documentation showing the payments comply with federal Medicaid rules.

Not the first freeze this year

This isn't CMS's first run at either state. Fierce Healthcare reported that CMS announced a $1.3 billion deferral targeting California back in May, which Oz called the largest deferral the agency had ever made, and that Minnesota faced a similar action in February. Fierce Healthcare said it had asked HHS to clarify whether Tuesday's $1 billion figure overlaps with those earlier actions or represents new money on top of them; that clarification has not been reported as of this writing.

Kennedy tied the announcement to broader Democratic governance in both states. "Instead of protecting your money, they open the floodgates to theft," Kennedy said, according to the New York Post. "They dismantle basic program integrity and oversight." The New York Post also noted the freeze follows an announcement last month, in which acting Attorney General Todd Blanche said 455 people were charged in healthcare fraud schemes totaling $6.5 billion.

Kennedy also said HHS plans to expand exclusion authority, giving both CMS and the HHS Office of Inspector General more power to remove suspected fraudulent participants from Medicaid programs, according to Fierce Healthcare.

What hasn't been shown yet

Newsweek's initial coverage noted HHS did not specify which specific Medicaid programs or individual payments are under review, nor did it detail the specific evidence behind the fraud and compliance concerns for either state. "Suspected fraud" and "documentation deficiencies" are not the same as adjudicated fraud, and no criminal charges or civil fraud findings against either state's Medicaid program have been announced alongside this freeze.

The administration's framing leans hard on the states' Democratic leadership. Both California and Minnesota are run by Democratic governors, and Kennedy's rhetoric, invoking Newsom and Walz by name, reads as much like political messaging as programmatic accountability. California's 24% growth in in-home supportive services claims over two years, against a national average roughly half that, is a legitimate red flag CMS is entitled to investigate. States exist to administer these programs lawfully, and a state that can't document how it spent federal money has a real problem regardless of who's governor.

The unresolved question is what happens next. Both states now have to produce documentation CMS finds sufficient, or the freeze holds indefinitely. Neither Newsom's nor Walz's office response was included in the available reporting as of Tuesday's announcement, and it remains unclear how long CMS expects the review process to take before funds are either released or the deferral becomes something more permanent.