U.S. Withholds Over $1 Billion in Medicaid Funding From California and Minnesota Pending Documentation

HHS Secretary Robert F. Kennedy Jr. announced Tuesday that the Centers for Medicare & Medicaid Services is withholding roughly $867 million in federal Medicaid funding from California and more than $200 million from Minnesota until the states provide documentation showing the payments were legitimate.

Kennedy said during a press conference that the states would not receive the funds without basic documentation proving services are not fraudulent. He added that governors Gavin Newsom and Tim Walz need only supply such records to secure release of the money.

CMS Administrator Dr. Mehmet Oz said the review uncovered irregularities including claims for deceased beneficiaries and spending patterns that were significant outliers. "If it smells like fraud, we're not paying for it anymore," Oz said. Of the California amount, roughly $646 million is tied to in-home supportive services and another $221 million to claims involving individuals with unsatisfactory immigration status, according to CMS.

California’s spending on in-home supportive services rose 24 percent over the past two federal fiscal years, roughly double the national average. Minnesota was directed to review providers in 14 high-risk Medicaid service categories. The state recently disenrolled roughly 3,000 providers after failed background checks and site visits, prompting CMS to examine nearly $200 million in related claims.

Federal officials also cited millions of dollars billed for services allegedly provided after beneficiaries’ deaths. Kennedy announced that HHS is expanding exclusion authority to allow CMS and the HHS Office of Inspector General to remove individuals and entities found to have committed fraud from federal healthcare programs, with some facing permanent bans.

He said the prior administration weakened anti-fraud efforts by reducing program integrity staffing.

The administration said the withheld funds can be released once the states supply the required documentation.