Vice President JD Vance said Wednesday the Trump administration is withholding $1.3 billion in Medicaid payments to California, escalating a fight over how aggressively states police fraud in their health programs. He said California is being singled out because it is not taking Medicaid fraud seriously enough.
Vance said the administration is warning all 50 states that their Medicaid Fraud Control Units could lose federal funding if they do not move harder against fraud, and that other Medicaid resources could be cut off if problems continue. "We are going to turn off the money that goes to these anti-fraud units," he said, adding, "And if we continue to find problems, we can turn off other resources within their state Medicaid programs as well."
The move comes after the administration suspended Medicaid payments to Minnesota in February. This time, California is the target, and Vance said the decision is driven by what he called fraud that hurts both taxpayers and patients. He said some people have been prescribed medications they do not need because fraudsters pushed false prescriptions and false administration of drugs.
Dr. Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, said California’s Medicaid records have "generated major red flags for us." He said the administration needs the state to explain $630 million in billing, $500 million in home health services and $200 million in questionable expenditures tied to coverage for undocumented immigrants. Oz said the $1.3 billion suspension is the largest deferral the agency has ever made, and added that CMS is also imposing a six-month moratorium on new Medicare enrollment for hospices and home health agencies.
The administration says California’s case is part of a broader push to pressure states into strengthening anti-fraud enforcement across Medicaid. Vance said the government wants states to use technology and other tools to root out abuse, and he named California among several states he said should work with federal officials. He said the latest step is meant to force compliance, not just to punish one state.
California Gov. Gavin Newsom’s office criticized Vance and Oz after the announcement, and California Attorney General Rob Bonta said the state appears to be targeted solely for political reasons. The dispute now turns on whether California can satisfy federal officials that its spending outliers are legitimate — or whether Washington will follow through on threats to freeze more money in more states.
