Health and Human Services Secretary Robert F. Kennedy Jr. announced Tuesday that the Trump administration is deferring more than $1 billion in Medicaid payments to California and Minnesota after federal officials identified what they describe as high-risk claims during an expanded effort to combat fraud.
According to the Department of Health and Human Services, the Centers for Medicare and Medicaid Services (CMS) is withholding approximately $867.5 million from California and another $199 million from Minnesota. The administration emphasized that the funds are being deferred rather than permanently withheld. Both states can still receive the money if they provide documentation demonstrating the claims comply with federal Medicaid requirements.
“States that receive federal Medicaid funding must demonstrate that every dollar meets federal requirements,” Kennedy said. “When they cannot, we will not release federal funds until they do.”
Speaking at a news conference, Kennedy singled out California Gov. Gavin Newsom and Minnesota Gov. Tim Walz, arguing that resolving the issue should be straightforward if the claims are legitimate.
“All they have to do is provide the documentation,” Kennedy said, describing the request as a matter of basic accountability. He also said the administration relied on artificial intelligence and advanced data analytics to identify spending patterns that warranted additional scrutiny.
CMS Administrator Dr. Mehmet Oz said the agency is shifting its strategy from recovering taxpayer dollars after fraudulent payments have already been made to preventing questionable claims from being paid in the first place.
“CMS is done trying to chase down stolen and misused funds after they’ve already left the building,” Oz said. He added that stopping fraud “before the check clears” has produced record levels of savings for taxpayers.
HHS is taking another major step to protect taxpayer dollars.
Under President Trump’s leadership, HHS and @CMSGov are deferring more than $1 billion in federal Medicaid payments to California and Minnesota while high-risk claims undergo additional review.
Medicaid exists to… pic.twitter.com/JZolfRjzoO
— HHS (@HHSGov) July 21, 2026
According to HHS, investigators identified unusually rapid growth in California’s in-home care programs compared with national spending trends. In Minnesota, officials flagged claims across 14 high-risk service categories involving providers who had previously drawn attention during program integrity reviews.
The department also said that, under Kennedy’s direction, HHS and the Office of Inspector General are making broader use of their authority to exclude providers found to have engaged in fraud from participating in Medicare and Medicaid, with some permanently barred from returning to the programs.
The announcement follows a major Justice Department enforcement action in April known as “Operation Never Say Die.” Federal prosecutors charged eight defendants in an alleged $50 million health care fraud scheme involving sham hospice providers that billed Medicare for patients who were not terminally ill.
According to court documents, one hospice operator in Anaheim reported a non-death discharge rate of roughly 85 percent—nearly five times the national average—while investigators alleged beneficiaries received cash kickbacks delivered in envelopes.
Tuesday’s action also marks the second time this year the administration has targeted California and Minnesota over Medicaid spending. In February, Vice President JD Vance announced a separate $259 million funding pause affecting Minnesota as part of what the administration described as a nationwide effort to combat fraud.
Walz criticized that earlier decision, arguing the administration was unfairly withholding funds that support children, seniors, and people with disabilities rather than targeting those responsible for fraudulent activity.
Federal officials have defended the strategy as necessary to safeguard taxpayer dollars.
