The Trump administration has paused more than $1 billion funding to California and Minnesota, citing suspected fraud and noncompliance. This comes following 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 (HHS), said at a press conference on Tuesday. Kennedy also added that officials relied on AI to identify potential fraud. “We used AI, advanced analytics, and other cutting-edge tools to identify suspicious activity and potential fraud,” he added.
The pause includes more than $867 million for California and about $200 million for Minnesota, according to a report by The Guardian. Kennedy added that in California, most of the suspected fraud was in in-home services. Kennedy has repeatedly singled out at-home care services, which has caused worry since disabled individuals often depend on those.
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In March, Vice President JD Vance threatened to withhold funding to states if they did not cooperate with a new fraud taskforce, headed by Vance and established by a White House executive order. Kennedy said the health department is also expanding its exclusion authority in order to override states and remove “bad actors” from federal healthcare programs and even permanently ban them from receiving federal funding.
Payments had been used to “pad the pockets of criminals,” said Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services (CMS) at the press conference. “No más, no more. It stops.” Oz also said the government has identified potential areas at high risk of fraud, but claimed that “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 anymore.”
Oz said that in-home care for persons with illness and disability “often these are services that your family would typically have provided for you” – a program which “can be abused.” In March, Minnesota sued HHS for withholding funds.
Oz said that the deferrals are pauses, not permanent cuts, and do not affect benefits or eligibility. States recover the funds by showing claims meet federal requirements; Minnesota has already returned documents that CMS is reviewing.
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According to Reuters, Minnesota Governor Tim Walz rejected the administration’s move, saying it is political retribution against Minnesota. Walz said that the administration was punishing children, seniors and people with disabilities rather than fraudsters. He said it “is cutting more money in healthcare than they’ve prosecuted for fraud.”
California Governor Gavin Newsom called the move a recycled political stunt and said in a post on X that California was being targeted for political reasons. He said the state opposes fraud and would “collaborate with CMS in good faith efforts to combat fraud,” arguing its in-home program saves money by keeping seniors and disabled people out of costlier nursing homes.