Trump administration freezes Medicaid funding to California over ‘suspected fraud’

The Trump administration has frozen more than $867 million in California Medicaid dollars over "suspected fraud," U.S. Health Secretary Robert F. Kennedy Jr. announced Tuesday. 

Kennedy, alongside Medicare and Medicaid Administrator Mehmet Oz, did not provide specific examples or evidence of fraud when they announced the move but said the administration paused reimbursements because of "questionable spending." The administration also froze more than $200 million of Medicaid funds in Minnesota, another Democratic-led state that has become a regular target of Trump funding freezes. 

Tuesday's announcement is the latest in a series of antagonistic moves against California by the Trump administration in the name of waging a war on so-called fraud. Trump announced a fraud task force in March, without evidence or specifics, and said fraud in California is "10 times worse" than in other states.

California officials have denied the characterizations, but have agreed that there are issues with hospice fraud - especially in Los Angeles County, where state and federal agents have cracked down on fraudulent Medicaid reimbursements. 

Tuesday marked the second time this year the administration has threatened California Medicaid dollars, known as Medi-Cal in the state, over unproven fraud. If California and Minnesota want the payments to resume, "all they have to do is provide basic documentation showing that these services are legitimate and not fraudulent," Kennedy said.  

Oz said the majority of California's frozen funds - about $646 million - is tied to the administration's review of in-home service claims billed to Medicaid. At-home caregivers help patients manage everyday tasks such as bathing or meals. They often give respite to families looking after loved ones, coordinate medical care and can specialize in specific chronic conditions, such as dementia. 

Oz said while other states' in-home service programs increased spending at about 12% over the last fiscal year, California's spending increased about 24%. 

"California increased spending at twice the rate of the average of the rest of the entire nation," Oz said. "It doesn't make sense." 

"We believe in keeping people at home with dignity in place as a way of not only helping communities, families, seniors and those with disabilities, but also to save taxpayers money,"  Gov. Gavin Newsom said during Tuesday news conference, where he described Kennedy and Oz's actions as "exhausting" and "pure politics."  

The Trump administration had already deferred $1.3 billion in Medicaid payments over suspected fraud tied to in-home care and hospice services in May. 

Newsom's press office denied that spending constituted evidence of fraud and said the Trump administration was attacking programs that "keep seniors and people with disabilities out of nursing homes." 

The governor's press office said in-home services cost about $30,000 per person each year, compared with $137,000 per year at a nursing home.

"CMS is intensifying its actions against California's in-home care system, affecting children and adults with significant disabilities and seniors who rely on these services to remain safely at home," said California Department of Health Care Services spokesperson Anthony Cava. "Rather than identify any instances of fraud, waste, or abuse, CMS is punishing California for growing in-home care to serve the Californians who need it."

Historically, misspent Medicaid dollars are clawed back if state or federal agents discover fraud. Medicaid funding is provided by the federal government, but managed by state offices. The money covers care for those with lower incomes or disabilities. Those who provide the care bill a state Medicaid office to be reimbursed, similar to how care is billed to private insurance companies. 

Kennedy said under Trump, the Department of Health and Human Services is "restoring common sense" by not sending out Medicaid and Medicare dollars before they have "confidence they're being spent lawfully." 

Newsom said Tuesday that the state is already collecting information for the federal government related to suspicion of fraud because of the freeze announced in May. Those documents are due to the administration at the end of July and also pertain to the claims for in-home services made on Tuesday.  

"We take fraud seriously. We don't politicize it like these guys," Newsom said. "We have been working with them in good faith." 

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