Trump Administration Withholds $1.3 Billion in California Medicaid Funds Over Hospice Fraud

The Trump administration is withholding $1.3 billion in Medicaid funding from California amid concerns over fraud in the state's hospice and home health agencies. The deferral was announced Wednesday by an anti-fraud task force. It follows the recent suspension of licenses for 447 hospice facilities and 23 home health agencies in the state for suspected fraudulent billing.

A senior Trump administration official said the move reflects a zero-tolerance approach. Officials are conducting a full accounting of hospice and home health agencies nationwide to protect taxpayer dollars. The announcement expands a broader initiative that includes a nationwide six-month moratorium on new Medicare enrollments by hospice and home health providers.

Existing providers may continue operating during the pause while officials intensify investigations using data analytics. Officials cited systemic fraud in which bad actors allegedly exploit vulnerable patients. The moratorium aims to block new fraudulent entities while accelerating removal of those already under suspicion.

February the administration withheld more than $250 million in Medicaid funds from Minnesota and gave the state's governor 60 days to submit a corrective action plan. Months later an additional $91 million was deferred citing serious vulnerabilities to fraud.

Investigations have targeted at least five states. Officials have also required all 50 states to outline plans for revalidating high-risk Medicaid providers within 10 days and a two-year review strategy within 30 days. In California multiple probes uncovered suspicious facilities and networks of doctors linked to tens of millions in questionable billing.

One doctor's Medicare billing license was revoked and dozens of agency licenses suspended.

Some providers and states have pushed back arguing aggressive tactics could harm legitimate operators serving patients. One error in figures used to justify a fraud probe in New York prompted an admission from officials and criticism of the administration's methods.

A six-month moratorium is not unprecedented. One research organization noted that a previous Democratic administration imposed a temporary pause on home health agencies for similar reasons. Hospice spending has grown rapidly. Nationally the number of providers increased by an average of 7.8 percent per year between 2019 and 2023 while Medicare expenditures for the benefit reached $28.3 billion in 2024.

“We’ve seen systemic and deeply troubling fraud in the hospice and home health space, with bad actors exploiting some of our most vulnerable Medicare patients and stealing money from the American taxpayer.”

House Republicans separately launched an oversight task force focused on alleged Medicaid fraud in Ohio home health companies. The panel is seeking documents related to reports of hundreds of providers sharing addresses in questionable locations that billed more than $250 million between 2018 and 2024.

Mississippi officials will audit Medicaid providers as directed by the federal initiative. The fraud crackdown spans both Medicare and Medicaid programs across the country.