CMS suspends more than $1 billion in Medicaid dollars to Minnesota and California over suspected fraud

The Trump administration is withholding more than $1 billion in Medicaid funding to California and Minnesota over what it deems suspect claims.

Tuesday's funding suspension is the latest action by the Centers for Medicare and Medicaid Services to target Medicaid funding in the two states. More than $2.5 billion has been deferred from them due to fraud concerns this year.

“If it smells like fraud, we are not paying for it anymore,” CMS Administrator Mehmet Oz said during a Tuesday event announcing the deferrals.

The agency is deferring $867 million in Medicaid funding to California and $199 million to Minnesota for claims the states spent in the previous quarter. Oz said the money could be unlocked, but only if the states can prove it was used for legitimate services.

The funding targeted Tuesday is linked to services at high risk for fraud, such as personal care services delivered in the home, Oz added.

In Minnesota, Oz said, some of the deferred funding was linked to more than 3,000 providers who were disenrolled from Medicaid after a state audit.

“This raises questions about the claims tied to the providers before they were removed,” said Oz, noting that the majority of the $199 million in question was linked to the disenrolled providers.

However, providers in the state charge that some of the terminations were made in error. The state is enabling providers to continue to bill for Medicaid services while they appeal.

This is the third time the administration has suspended funding in Minnesota, with previous actions totaling $351 million in Medicaid dollars. Vice President JD Vance has said the state can rely on its rainy day fund to make up the difference while it proves the claims are legitimate.

However, Governor Tim Walz, a Democrat, says Minnesota is being politically targeted.

“The Trump Administration is cutting more money in healthcare than they’ve prosecuted for fraud. The math doesn’t add up,” Walz told POLITICO in a statement. “They’re not punishing fraudsters, they’re punishing children, seniors, working families, and people with disabilities."

The state's Department of Human Services, which manages Medicaid, is also concerned about a lack of transparency into the deferrals.

"CMS touts their new fraud-detection capabilities, yet has not provided data or explanation on how the deferral amount was calculated or what it was based on," said Commissioner John Connolly in a statement.

It's the second time the administration has deferred California’s funding, with a previous deferral resulting in more than $1 billion in suspended funds. The latest deferral focuses on California’s claims for in-home care programs, where CMS said spending growth has outpaced national trends.

"Today’s announcement from Dr. Oz is the same recycled political stunt we’ve seen before," the press office for California Gov. Gavin Newsom wrote on the social media site X on Tuesday.

"We are being targeted for political reasons — and because Dr. Oz doesn’t understand that we are *SAVING* taxpayers money by keeping seniors and people with disabilities out of far more expensive nursing homes!"

Money from previous deferrals remains frozen while the states work with CMS, said Dan Brillman, director of Medicaid and the Children’s Health Insurance Program, during the press conference.

“We hope to return funds as soon as they submit the documentation, but those are still ongoing,” he said.

Tuesday's actions are the latest development in a nationwide crackdown by the Trump administration, which has homed in on fraud as a priority ahead of the 2026 midterms.