Vice President JD Vance announced that the Trump administration will defer $1.3 billion in Medicaid reimbursements to California while federal officials investigate suspected fraud and questionable billing practices. The administration also warned every state that federal support for Medicaid fraud units could be suspended if anti-fraud enforcement is deemed insufficient.
The move marks one of the administration’s most aggressive actions yet in its expanding campaign against alleged fraud in public healthcare programs. California officials rejected the accusations and argued the state was being politically targeted.
The announcement came during a White House event led by Vance and Centers for Medicare and Medicaid Services administrator Dr. Mehmet Oz. According to NBC News, Vance said California had failed to take Medicaid fraud seriously and claimed fraudulent providers were prescribing unnecessary medications to patients.
According to The New York Times, the administration also launched a review of state Medicaid Fraud Control Units, which are responsible for investigating and prosecuting fraud involving Medicaid providers. Federal officials sent letters to state attorneys general demanding proof that their units were “effectively and aggressively” pursuing fraud cases.
California Becomes Latest Target in Federal Anti-Fraud Campaign
Dr. Oz described the California action as “the largest deferral we’ve ever made” and said federal officials needed clarification on several spending categories flagged during internal reviews. According to CNN, the administration questioned approximately $630 million in billing, $500 million in home health services, and another $200 million tied to what officials described as questionable expenditures involving undocumented immigrants.
California’s Medicaid system, known as Medi-Cal, is one of the largest public healthcare programs in the country. The state’s total Medicaid spending is expected to reach roughly $222 billion in the upcoming fiscal year, combining state and federal funding.
Federal officials argued that several California billing patterns significantly exceeded national averages. Oz said growth in home and personal care services had increased at roughly twice the national rate. According to the Associated Press, CMS officials claimed some providers submitted billing volumes “so big you can’t imagine anyone billing for these numbers of patients.”
California leaders strongly disputed the administration’s claims. Gov. Gavin Newsom’s office stated on social media that the state’s expanded home support programs were designed to reduce reliance on nursing homes for seniors and people with disabilities. California Attorney GeneralRob Bonta also criticized the move, saying the state appeared to be singled out “solely for political reasons,” according to NBC News.
The action follows a similar dispute earlier this year involving Minnesota, where the administration suspended hundreds of millions of dollars in Medicaid reimbursements over separate fraud concerns.
Medicare Enrollment Freeze Expands Nationwide
The administration simultaneously announced a six-month nationwide moratorium on new Medicare enrollments for hospice providers and home healthcare agencies. Existing providers will continue operating during the freeze, though federal officials said oversight and investigations would intensify.
According to CNN, Oz said federal authorities believe fraud has become widespread in parts of the hospice industry, particularly in Los Angeles. He stated that CMS had already suspended 800 hospice providers that collectively billed Medicare about $1.4 billion last year.
Federal agencies said the enrollment freeze would allow investigators to deploy expanded data analysis tools and accelerate the removal of providers suspected of fraudulent activity. According to the Associated Press, the temporary moratorium resembles earlier federal actions taken under previous administrations to address healthcare fraud concerns.
Industry groups raised concerns about possible unintended consequences. The National Alliance for Care at Home warned that limiting new enrollments could reduce healthcare access in rural or underserved communities where provider capacity is already limited. The administration said additional enforcement measures may follow if states fail to strengthen fraud investigations within their Medicaid programs.
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