Vice President JD Vance announced Wednesday that the Trump administration is suspending $1.3 billion in Medicaid payments to California, accusing the state of failing to properly address fraud within its Medicaid system.
Speaking at the White House in his role overseeing anti-fraud initiatives, Vance said the administration is taking aggressive action against states that do not adequately investigate and prosecute Medicaid fraud cases.
“There are California taxpayers and American taxpayers who are being defrauded because California isn’t taking its program seriously,” Vance said. He alleged that fraudulent providers were prescribing unnecessary medications and improperly billing the Medicaid system.
The administration also warned all 50 states that federal funding for Medicaid Fraud Control Units could be frozen if state authorities fail to aggressively pursue fraud investigations involving Medicaid providers.
“We are going to turn off the money that goes to these anti-fraud units if they fail to do their job,” Vance stated, adding that additional Medicaid-related funding could also face suspension if problems persist.
The move follows a similar action taken earlier this year when the administration suspended Medicaid payments to Minnesota over alleged fraud concerns.
Mehmet Oz, who currently leads the Centers for Medicare and Medicaid Services, said California’s Medicaid records had raised “major red flags.”
According to Oz, federal officials are seeking clarification regarding approximately $630 million in billing records, $500 million connected to home health services, and another $200 million in expenditures the administration described as questionable. Officials also raised concerns about spending allegedly linked to healthcare coverage for undocumented immigrants.
“It’s the largest deferral we’ve ever made,” Oz said regarding the $1.3 billion suspension. “We’d like the state to at least come to the table and explain to us how these outlier payments have been generated.”
The offices of Gavin Newsom and California Attorney General Rob Bonta did not immediately respond to requests for comment.
As part of the broader anti-fraud initiative, CMS also announced a six-month freeze on new Medicare enrollments for hospice providers and home health agencies. Federal officials said the pause would allow investigators to intensify audits, deploy advanced data analysis tools, and remove providers suspected of fraudulent activity from Medicare programs.
The Trump administration said the crackdown is aimed at protecting federal healthcare programs from abuse while ensuring taxpayer dollars are properly managed.