The Trump administration is pausing federal Medicaid funding for Minnesota and California after months of uncovering billions of dollars in alleged fraud.
Health and Human Services Secretary Robert F. Kennedy Jr. announced that the department is pausing roughly $867 million to California and over $200 million for Minnesota after the states did not provide requested documentation for federal audits of their Medicaid programs, which provide health coverage for low-income and disabled people.
“We have a duty to stop the payments, demand answers, and then follow the evidence wherever it leads,” Kennedy said. “If Governor Gavin Newsom or Governor Tim Walz wants this funding released, all they have to do is provide basic documentation showing that these services are legitimate and not fraudulent, and that’s common sense.”
MediCal, California’s Medicaid program, covers roughly 15 million people, or about 38% of the state’s population. That includes 50% of the state’s children and about 40% of all births in the state.
Minnesota Medicaid covers 1.26 million people, about 22% of the state, and covers about 30% of all births in the state.
Centers for Medicare and Medicaid Services Administrator Mehmet Oz said the pause in funding came following a quarterly audit in which the states did not provide sufficient documentation of the legitimacy for fraud-prone areas like personal care facilities, in-home services, and medical devices.
Oz said that reviews of the past several years of audits from Minnesota and California “turned up the same recurring themes again and again” for high-risk categories. He added that the two states “have not yet been able to document fully and acceptably” that these patterns are legitimate.
Of Minnesota, Oz said $3 million of the federal funds were dedicated to deceased individuals and others with “documentation gaps.” Most of the remaining funds not allocated to Minnesota were reimbursement requests from the nearly 3,000 healthcare providers that the state last month disenrolled from the program due to concerns over fraud.
Oz said $391 million of the funding freeze for California came from in-home supportive services, which include activities like driving to a doctor’s appointment or basic tasks of daily living.
Another large chunk, $250 million, comes from claims in California tied to high-risk providers for which the state did not provide sufficient documentation.
“If it smells like fraud, we’re not paying for it anymore,” Oz said. “Today, we are deferring over $1 billion in federal Medicaid dollars to Minnesota and California until they can substantiate their claims from this past quarter’s audits.
The announcement comes as part of the Trump administration’s broader attempt to crack down on healthcare-related fraud.
Oz announced earlier this month, during a press conference in Wisconsin with the White House Anti-Fraud Task Force, that his agency identified a 7,100% spike in Medicare claims for skin substitutes in the past six years, uncovering billions in potential fraud.
Oz’s agency also found alleged fraudulent claims for durable medical equipment, such as wheelchairs, walkers, and hospital beds. According to CMS, payments have been suspended to 102 durable equipment suppliers, and billing privileges have been revoked for 725 suppliers.
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Last month, the Justice Department and HHS announced a nationwide crackdown on healthcare fraud, spanning 57 federal districts across 41 states and territories.
The investigation involved more than $6.5 billion in fraudulent claims and charges against 455 defendants, including 90 licensed medical professionals.
Andrew Ferguson, the chairman of the Federal Trade Commission and a member of the anti-fraud task force, said stopping Medicaid reimbursements to Minnesota and California is part of the broader strategy of preventing fraud rather than catching it afterward.
“We have to switch from the process of letting money flood out the door from the federal government into the world and then chasing it and hope we can get some of it back. It doesn’t work,” Ferguson said. “The way you stop fraud is you prevent money from walking out the door.”
Minnesota and California are not the only states to feel pressure from the federal government on healthcare fraud.
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T. March Bell, HHS inspector general, said during the press conference that he is meeting in person with every attorney general in the United States about bolstering anti-fraud programs at the state level.
“I’m getting a gentleman’s agreement from those attorney generals because they’ll be held accountable for that conduct,” Bell said.
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[ H/T Washington Examiner ]
