HHS withholds $867 million in Medicaid payments to California as part of ‘crackdown on fraud’

In the latest salvo in the war between the Trump administration and California, Health and Human Services Secretary Robert F. Kennedy jr. said Tuesday that his agency withheld $867.5 million in Medicaid payments to the state over concerns about fraud.

Kennedy also said his agency defered $199 million in Medicaid payments to Minnesota over similar concerns.

“If Gov. Gavin Newsom or Gov. Tim Walz wants this funding released, all they have to do is provide basic documentation showing that these services are legitimate and not fraudulent,” Kennedy said at a news conference.

Just under half of the funds withheld from California were in connection with in-home health services.

Dr. Mehmet Oz, the administrator for the Centers for Medicare and Medicaid Services, said California’s spending on in-home health services went up by more than double the national average over the last two fiscal years.

“That doesn’t make sense,” he said.

About a quarter of the funds withheld involved care provided to individuals with “unsatisfactory immigration status,” whose eligibility to be in the country and receive these services is in question, which Oz characterized as an “ongoing massive problem for California.”

The announcement by Kennedy and Oz on Tuesday comes two months after Vice President JD Vance announced that the administration would be deferring $1.3 billion in Medicaid payments over fraud concerns, largely connected to hospice services and in-home healthcare.

Newsom’s office, in a social media post, called the announcement a “recycled political stunt.”

“California isn’t being targeted because Trump has evidence of fraud,” the post said. “We are being targeted for political reasons — and because Dr. Oz doesn’t understand that we are *SAVING* taxpayers money by keeping seniors and people with disabilities out of far more expensive nursing homes!”

Newsom’s office also said that the state stands “ready to collaborate” with the Centers for Medicare and Medicaid Services “in good faith efforts to combat fraud.”

The office of California Atty. Gen. Rob Bonta said it is reviewing the deferral of payments and allegations of fraud.

“We have not hesitated to challenge unlawful actions by the Trump administration, and we will continue to act whenever Californians’ rights or access to critical services are threatened,” Bonta’s office said.

Despite Newsom’s claims that the accusations are political, the California state auditor has repeatedly flagged Medi-Cal eligibility discrepancies that have exposed the state to billions of dollars in questionable payments.

California Department of Healthcare Services spokesperson Anthony Cava noted, however, that a 2020 state audit of in-home care found “no program integrity concerns” and encouraged expansion of the program to reduce spending on institutional care.

Cava also pointed out that the federal government had previously approved California’s approach to in-home care.

Newsom and Oz have clashed before.

Newsom filed a civil rights complaint in January against Oz, after Oz posted a video to social media from Van Nuys in which he accused the “Russian Armenian mafia” of being a leading driver of $3.5 billion in fraud in hospice and home-care services.

Newsom said that Oz’s claims were “baseless and racist.”

The announcement by Kennedy and Oz on Tuesday is the latest effort by the Trump administration to crack down on suspected Medicaid fraud in numerous states across the country.