The Trump administration has paused more than $1bn in Medicaid funding to California and Minnesota, citing “suspected fraud and noncompliance” – withholding of funding that follows a $243m pause in Medicaid payments to Minnesota earlier this year.
“If those states want that money, they need to provide documentation that these payments are legitimate,” said Robert F Kennedy Jr, secretary of the Department of Health and Human Services (HHS), said at a press conference on Tuesday.
Officials relied on AI to identify potential fraud, Kennedy said. “We used AI, advanced analytics, and other cutting-edge tools to identify suspicious activity and potential fraud.”
The pause includes more than $867m for California and about $200m for Minnesota.
In California, most of the suspected fraud was in in-home services, he said. Kennedy has several times singled out in-home care provision, which can be a lifeline for disabled individuals – rhetoric that has worried families and angered lawmakers.
Vice-President JD Vance threatened in March to withhold funding to states if they did not cooperate with a new fraud taskforce, headed by Vance and established by a White House executive order.
The health department is also expanding its exclusion authority in order to override states and remove “bad actors” from federal healthcare programs and even permanently ban them from receiving federal funding, Kennedy said.
Payments had been used to “pad the pockets of criminals”, said Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services (CMS), at the press conference. “No más, no more. It stops.”
Oz said the government has identified potential areas at high risk of fraud, but claimed that “states have not yet been able to document fully and acceptably to the federal government claims that are unresolved and claims that smell like fraud. And if it smells like fraud, we’re not paying for it any more.”
In-home care for persons with illness and disability “often these are services that your family would typically have provided for you” – a program which “can be abused”, Oz said.
In March, the state of Minnesota sued the HHS for withholding Medicaid funds.
