Trump Administration Freezes $1 Billion in Medicaid Payments to California and Minnesota Over Fraud Concerns

Jul 21, 2026

The Trump administration has frozen over $1 billion in federal Medicaid payments to California and Minnesota, citing suspected fraud and documentation gaps. Led by HHS Secretary Robert F. Kennedy Jr. and CMS Administrator Dr. Mehmet Oz, the administration is holding back $867.5 million from California and nearly $200 million from Minnesota. Federal officials are utilizing AI and expanding exclusion authorities to block bad actors. While federal officials demand proof of legitimacy to release the funds, California Governor Gavin Newsom's office dismissed the move as a political stunt.

Federal Medicaid payment freeze

▪The Trump administration is pausing more than $1 billion in federal Medicaid payments to California and Minnesota over concerns of suspected fraud and noncompliance.
▪The Centers for Medicare and Medicaid Services is deferring approximately $867.5 million in Medicaid payments to California.

Trump administration fraud prevention efforts

▪The Trump administration is utilizing artificial intelligence, advanced analytics, and traditional financial reviews to identify suspicious spending in state Medicaid programs.
▪The Department of Health and Human Services is expanding its exclusion authority to allow the removal and potential permanent banning of bad actors from federal healthcare programs.
▪The Centers for Medicare and Medicaid Services deferred $1.3 billion in Medicaid funds to California in May 2026.

California Medi-Cal program impact

▪The federal funding freeze for California includes $221 million associated with claims involving individuals with unsatisfactory immigration status.
▪The federal funding freeze for California includes $391 million related to in-home supportive services, where spending grew 24% over the past two fiscal years.

Minnesota Medical Assistance program impact

▪The federal funding freeze for Minnesota includes reviews of claims tied to approximately 3,000 healthcare providers that the state disenrolled due to compliance and fraud concerns.
▪The federal funding freeze for Minnesota involves 14 high-risk service areas, including personal care and home-based services.

State responses to payment deferral

▪California Governor Gavin Newsom's office criticized the payment freeze as a recycled political stunt and stated that the state is ready to collaborate with federal officials in good faith.
▪The state of Minnesota filed a lawsuit against the Department of Health and Human Services in March 2026 over the withholding of Medicaid funds.