U.S. Secretary of Health Robert F. Kennedy Jr. announced on July 21 that the Trump administration would suspend $1 billion in Medicaid payments to California and Minnesota, citing “alleged fraud and violations.”
“If these states want that money, they need to provide documentation that proves these payments are legal,” Kennedy said at a news conference alongside Dr. Mehmet Oz, director of the U.S. Centers for Medicare and Medicaid Services.
CMS is deferring about $867.5 million in federal Medicaid payments to California and about $199 million to Minnesota, according to the U.S. Department of Health and Human Services.
The suspension is the latest in a series of payment suspensions in primarily Democratic-run states as Vice Presidents J.D. Vance, Kennedy and Oz lead what the White House calls a “relentless” war on fraud.
Kennedy said his administration suspects that much of the questionable spending in California is related to home services. Minnesota’s postponement targets 14 high-risk areas that the state’s own legislative auditor has identified as vulnerable to fraud.
“If we smell fraud, we won’t pay for it anymore,” Oz said. He and Kennedy cited data anomalies and unusual billing patterns, but offered no evidence of wrongdoing.
The governors of California and Minnesota also responded.
Minnesota Gov. Tim Walz dismissed the move as political revenge against Minnesota, saying his administration was punishing children, the elderly and the disabled, not fraudsters. He said, “We are saving more in medical costs than we were charged with 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 will “work with CMS in good faith to combat fraud,” and argued that the state’s home-based program saves money by keeping seniors and people with disabilities out of expensive nursing homes.
A deferral is a temporary suspension, not a permanent reduction, and does not affect benefits or eligibility. Each state recovers the funds by demonstrating that the application meets federal requirements. Oz said Minnesota has already returned the documents and CMS is reviewing them.
Kennedy also said he would expand exclusion powers for CMS and HHS inspector generals, allowing them to remove “bad actors” from federal health care programs and, in some cases, permanently ban them.
