Trump administration says it's deferring $1B in Medicaid payments to
California and Minnesota
[July 22, 2026]
By ALI SWENSON
The Trump administration on Tuesday said it was deferring more than $1
billion in Medicaid payments to Minnesota and California because of
“suspected fraud and noncompliance,” the latest in a series of punitive
steps it has linked to allegations of fraud in mostly Democratic-led
states.
Health Secretary Robert F. Kennedy Jr. said the new actions — which come
after previously announced Medicaid funding deferrals in those states —
are part of the administration's strategy to “stop the fraud before it
happens” rather than claw back problematic spending after bad actors are
prosecuted, as previous administrations had done.
“We have a duty to stop the payments, demand answers and then follow the
evidence wherever it leads,” Kennedy told a news conference.
The tactic is part of the administration’s sweeping campaign to show
it’s cracking down on fraud and saving taxpayers money when rising
healthcare costs and other economic stressors have made affordability a
top voter concern in November’s midterm elections.
In March, Vice President JD Vance launched a new anti-fraud task force
at the request of President Donald Trump, bringing together officials
from various departments to use data and technology to identify and
investigate suspected wrongful use of federal dollars.
But the federal government hasn't provided “data or explanation on how
the deferral amount was calculated or what it was based on” to
Minnesota, said John Connolly, the temporary commissioner and state
Medicaid director for Minnesota's Department of Human Services.
“Today's actions show that the federal government is acting again in
unprecedented and punitive ways as part of their war on Medicaid and its
recipients,” he said in a statement. “Partnership — not politics — is
required to stop criminals and protect services for the people who need
them.”
Minnesota’s Democratic Gov. Tim Walz suggested the Republican
administration was deferring the funds to pay for Trump’s tax cuts to
wealthy Americans. California’s Democratic Gov. Gavin Newsom accused the
administration of targeting it for political reasons.
The Trump administration intensified anti-immigration efforts in
Minnesota earlier this year, sending in a robust force of Immigration
and Customs Enforcement officers whose actions there caused weeks of
counterprotests and included the shooting deaths of two civilians. Trump
himself has frequently denounced California as a badly governed state.
States are facing obstacles because of the actions
The strategy has led to some false starts and headaches for states.
In April, for example, the Centers for Medicare & Medicaid Services
acknowledged to The Associated Press it made a significant error in
figures it used to help justify a fraud probe in New York. Last month,
California's Medicaid director told a congressional committee that CMS
had not yet provided “any instances of fraud, waste or abuse” to the
state in its justification of a $1.3 billion Medicaid funding deferral
announced in May.
And in Minnesota, state officials have been executing a thorough
corrective action plan to defray CMS concerns that have led the agency
to defer some $260 million in federal money and to threaten future cuts.
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Centers for Medicare & Medicaid Services administrator Dr. Mehmet Oz
speaks before Vice President JD Vance at the Wisconsin Air National
Guard facility at Milwaukee Mitchell International Airport,
Wednesday, July 8, 2026, in Milwaukee. (AP Photo/Mark Schiefelbein,
Pool)
 “We have cooperated in good faith
and proactively engaged the Centers for Medicare and Medicaid
Services to first raise the alarm on fraud in Minnesota’s Medicaid
program, to effectively investigate fraud and to institute further
safeguards against future misuse of funds,” Connolly said.
Kennedy didn't specify in Tuesday's announcement whether the new
deferrals — $867.5 million in federal Medicaid payments to
California and $199 million to Minnesota — are in addition to, or
overlap with, earlier deferrals announced this year.
CMS Administrator Dr. Mehmet Oz didn't provide concrete examples of
fraud in the two states in justifying the deferrals. He did mention
some patterns the agency noticed that it found questionable,
including that some providers were billing for four or more patients
at the same time, or billing after the date of a Medicaid
beneficiary's death.
Oz also highlighted a fast rate of growth in California's home care
program as a reason for concern. California officials have disputed
that idea, explaining that the state's home care program has grown
because of an intentional strategy to keep people out of more
expensive nursing homes.
“In-home care growth reflects intentional, federally encouraged
expansion, not improper spending,” said Anthony Cava, spokesperson
for the California Department of Health Care Services. “California
is calling on CMS to stop threatening care for California’s most
vulnerable residents.”
Flow of money could be restored — with documentation
Kennedy and Oz said states could restart the flow of federal funding
by providing documentation proving the payments in question were
legitimate.
Officials in both states have previously acknowledged they are
working with the federal government to provide the requested
information. Oz said Minnesota had already returned documents to the
federal government and they were being “reevaluated very carefully.”
Kennedy also suggested Tuesday that he would extend the power to
exclude providers from Medicaid, Medicare and other federal health
programs to CMS. In the past, that authority has rested solely with
his department’s Office of the Inspector General.
“This is going to be a full force multiplier,” HHS Inspector General
Thomas March Bell told a news conference. “It's going to create
additional momentum, and it's going to exclude additional bad
actors.”
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