The Centers for Medicare and Medicaid Services is withholding more than $1 billion in federal Medicaid payments to California and Minnesota after Health Secretary Robert F. Kennedy Jr. announced Tuesday that the administration suspects widespread fraud and noncompliance in both states.
California stands to lose more than $867 million. Minnesota faces a $200 million hold. Kennedy said the funds won’t move until the states prove they were legitimately spent.
“If those states want that money, they need to provide documentation that these payments are legitimate,” Kennedy said Tuesday. “All they have to do is provide basic documentation showing that these services are legitimate and not fraudulent, and that’s common sense.”
The announcement marks an escalation of the Trump administration’s crackdown on Medicaid waste. In February, the administration deferred roughly $260 million in quarterly federal Medicaid payments to Minnesota while investigators completed a separate fraud inquiry.
That investigation has already produced results. Federal authorities last year uncovered a large-scale fraud operation run through Somali-owned daycare centers in Minnesota, where Medicaid funds were systematically siphoned through fake child care and food program billing. Dozens of individuals have since been convicted.
Kennedy said his department has now identified $42 billion in Medicare fraud. A congressional watchdog report released in April put Medicare’s total improper payments at $57 billion for fiscal year 2025, with Medicaid’s improper payments at $37 billion.
The move puts Gov. Gavin Newsom of California and Gov. Tim Walz of Minnesota in a difficult position. Both have been vocal critics of the Trump administration’s Medicaid enforcement actions. Kennedy said the path to restoring the funds is straightforward.
“If California’s Governor Newsom or Minnesota’s Governor Walz want those funds released, they need to demonstrate the legitimacy of those programs,” Kennedy said.
