Trump Administration Defers $1.3 Billion in Medicaid Payments to California Over Fraud Concerns

Vice President JD Vance announced that the federal government is deferring $1.3 billion in Medicaid payments to California. The deferral targets reimbursements already earned but not yet paid, according to officials cited across multiple reports. Vance, who leads an anti-fraud task force, said the action is intended to pressure the state to strengthen its fraud controls.

Officials emphasized that the measure does not cut off current beneficiaries.

The administration also suspended about 800 hospice programs in the Los Angeles area that had billed taxpayers $1.4 billion. Fewer than 20 of the suspended providers contacted officials to inquire about the action. ” Los Angeles-area hospices were flagged because the volume of claims is disproportionate to local mortality rates.

One official noted that the area accounts for roughly one-third of all hospice programs in the country despite having a typical number of deaths.

In response to suspected migration of fraudulent operators, the administration placed a six-month nationwide block on new enrollments for hospice and home health agencies. The measure is intended to give the Centers for Medicare and Medicaid Services time to strengthen oversight.

Officials said fraudsters appear to be shifting activity to Nevada, Arizona and Texas, where hospice openings have risen sharply.

The broader initiative requires states to demonstrate that their Medicaid Fraud Control Units are aggressively pursuing cases or risk losing dedicated federal funding for those units. Some states with large programs have recorded low numbers of indictments relative to program size.

Vance singled out California, New York and Hawaii as examples of states with high fraud volumes and low prosecution activity. He said Hawaii has recorded zero indictments or convictions for Medicaid fraud in recent years.

Vance told reporters the fraud harms taxpayers who fund the programs and patients who rely on them for legitimate care. He said the problem exists in both Republican-led and Democratic-led states but has been most resistant to reform in certain blue states. “We’re trying to save the Medicaid program from dysfunctional state bureaucrats,” Vance said on May 13, 2026.

For decades the federal government has used a pay-and-chase model in which funds are disbursed and questionable claims are examined afterward. Last year the administration established a war room to intercept improper payments before they leave the Treasury, blocking $2 billion so far.

Officials said they are examining whether state or federal bureaucrats may be complicit in some schemes, though they stressed any potential prosecutions would rest on evidence of criminal violations rather than political affiliation.

One senior health official said California had been on the verge of issuing a regulation at the start of this year that would have limited doctors to ownership of a single hospice. The rule was scuttled by someone very senior in the state government, the official said. The state was also cited for allowing unnecessary prescriptions and hospice enrollments.