The Trump administration has paused more than $1 billion in Medicaid funding to California and Minnesota, citing “suspected fraud and noncompliance.”
The pause includes more than $867 million for California and about $200 million for Minnesota. This follows a $243 million pause in Medicaid payments to Minnesota earlier this year.
“If those states want that money, they need to provide documentation that these payments are legitimate,” said Robert F Kennedy Jr, Secretary of the Department of Health and Human Services, at a press conference on Tuesday.
How Fraud Was Detected
Officials relied on AI to identify potential fraud, Kennedy said. “We used AI, advanced analytics, and other cutting-edge tools to identify suspicious activity and potential fraud.”
In California, most of the suspected fraud was in in-home services, he said. Kennedy has repeatedly singled out in-home care provision, which can be a lifeline for disabled individuals — rhetoric that has worried families and angered lawmakers.
The Administration’s Argument
The health department is expanding its exclusion authority to override states and remove “bad actors” from federal healthcare programs, even permanently banning them from receiving federal funding, Kennedy said.
Payments had been used to “pad the pockets of criminals”, said Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services.
“No más, no more. It stops,” Oz said.
Oz claimed the government has identified areas at high risk of fraud, but said “states have not yet been able to document fully and acceptably to the federal government claims that are unresolved and claims that smell like fraud. And if it smells like fraud, we’re not paying for it any more.”
He also suggested that in-home care “often these are services that your family would typically have provided for you” — a program which “can be abused.”
The Political Context
Vice-President JD Vance threatened in March to withhold funding to states if they did not cooperate with a new fraud task force, headed by Vance and established by a White House executive order.
The pause has raised questions about whether the administration is targeting Democratic-run states. Minnesota sued the HHS in March for withholding Medicaid funds. California has not yet indicated whether it will take legal action.
The Bottom Line
The Trump administration has paused more than $1 billion in Medicaid funding to California and Minnesota, citing fraud concerns identified through AI. The pause targets in-home services in California. Health Secretary Robert F Kennedy Jr said states must provide documentation to prove payments are legitimate. The move follows a $243 million pause to Minnesota earlier this year and comes as the administration expands its authority to ban “bad actors” from federal healthcare programs.
