Vice President J.D. Vance announced Wednesday that the federal government is withholding $1.3 billion in Medicaid reimbursement payments to California, citing the state’s failure to rein in rampant fraud in its program.
The Department of Health and Human Services also suspended approximately 800 hospice programs in the Los Angeles area as part of the same crackdown, with officials saying the facilities appear to be fraudulent operations billing the government for end-of-life care that was never provided.
“We’re trying to save the Medicaid program from dysfunctional state bureaucrats,” Vance said at a Wednesday press conference.
Of the 800 Los Angeles hospice programs that were shut down, only 20 called to complain afterward, according to Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz. Officials said the silence from the other 780 suggests they were fraud mills with no legitimate patients to defend.
Oz said a California official had moved to block an anti-fraud regulation at the start of this year that would have restricted doctors to operating only one hospice. He said physicians who run multiple hospices are “taking bribes” and selling their licenses to criminal networks. “Someone very senior” in California killed that rule, Oz said.
Vance said the Los Angeles metro area accounts for a disproportionately large share of the nation’s Medicaid-funded hospice spending relative to how many people are actually dying there, a statistical anomaly officials say is a hallmark of fraud.
CMS Deputy Administrator Kim Brandt said the federal government has historically operated on a “pay-and-chase” model, distributing funds and then attempting to recover them after fraud is detected. She said the Trump administration stood up a dedicated anti-fraud war room last year and has since blocked $2 billion in improper payments before they went out the door.
Gov. Gavin Newsom’s office pushed back on the announcement, saying CMS had refused to share underlying data on the targeted hospice programs, preventing state authorities from independently investigating “bad actors.” The governor’s office said Newsom had proposed a nationwide moratorium on certifying new hospices in 2022 and credited CMS for recently adopting the measure.
Vance acknowledged fraud exists in both Republican- and Democrat-led states but said the most resistant states have been Democratic ones. He said Hawaii has gone years without bringing a single Medicaid fraud prosecution. States that fail to cooperate with anti-fraud detection programs could lose the federal funding that pays for those programs, he warned.
Last week, Vance said 168,000 people listed as deceased in government records are still receiving food stamp benefits, a figure he called evidence of organized benefit theft. Earlier this year, the administration withheld Medicaid funds from Minnesota; that state’s attorney general sued to halt the move and a federal judge ruled against the state.
President Trump has placed Vance in charge of the administration’s broader anti-fraud campaign, which officials say targets billions of dollars lost annually to opportunists, criminal syndicates, and foreign actors exploiting federal benefit programs.
