US pauses $1 billion in Medicaid payments to California, Minnesota

Minnesota Governor Tim Walz rejected the move as political retribution against Minnesota, saying the administration was punishing children, seniors and people with disabilities rather than fraudsters. He said it "is cutting more money in healthcare than they've prosecuted for fraud."

California Governor Gavin Newsom called the move a recycled political stunt and said in a post on X that California was being targeted for political reasons. He said the state opposes fraud and would "collaborate with CMS in good faith efforts to combat fraud," arguing its in-home program saves money by keeping seniors and disabled people out of costlier nursing homes.

The deferrals are pauses, not permanent cuts, and do not affect benefits or eligibility. States recover the funds by showing claims meet federal requirements; Minnesota has already returned documents that CMS is reviewing, Oz said.

Kennedy said he was also expanding exclusion authority to CMS and the HHS inspector general, letting them remove "bad actors" from federal healthcare programs and potentially ban them permanently.

CMS is deferring approximately $867.5 million in federal Medicaid payments to California and $199 million to Minnesota, according to the U.S. Department of Health and Human Services.

Kennedy said the administration suspects much of the questionable California spending involves in-home services. The Minnesota deferrals target 14 high-risk areas the state's own legislative auditor identified as vulnerable to fraud.

"If it smells like fraud, we're not paying for it anymore," Oz said. He and Kennedy cited data anomalies and outlier billing patterns but offered no proof of fraud.