Trump Admin Withholds $1.3 Billion In Medicaid Funds To California

WASHINGTON, DC- The Trump administration has withheld $1.3 billion in federal Medicaid reimbursements to California, escalating its clash with the state over alleged fraud in its healthcare system, particularly in hospice care.

The move marks the largest payment deferral ever imposed by the Centers for Medicare and Medicaid Services (CMS) and the first time the agency has taken such action against California. The administration recently withheld more than $300 million in Medicaid reimbursements to Minnesota over suspicious claims.

Speaking at the White House on May 13, Vice President JD Vance accused California of failing to aggressively address fraud in the Medicaid program. “The state of California has not taken fraud very seriously,” Vance said, adding that some state Medicaid fraud control units were not doing enough despite receiving federal funding.

CMS Administrator Mehmet Oz said the agency wants California officials to explain what he described as “outlier payments” tied to questionable claims. He identified hospice care in the Los Angeles area as a major concern for federal authorities.

Under the Medicaid system, states initially pay healthcare providers and later receive reimbursement from the federal government. California has already paid providers serving low-income patients, but CMS said it will withhold the federal share until the state demonstrates that eligible patients actually received services.

Although the $1.3 billion freeze is unprecedented, it represents a small portion of the more than $92 billion California received in federal Medicaid reimbursements during fiscal year 2024.