Vice President JD Vance announced Wednesday that the Trump administration is blocking $1.3 billion in Medicaid payments to California and threatening to cut federal funding across all states unless they crack down harder on program fraud.
In his role as the administration's fraud czar, Vance singled out California for what he characterized as lax oversight, claiming taxpayers are being victimized by fraudulent claims and unnecessary prescriptions. "There are California taxpayers and American taxpayers who are being defrauded because California isn't taking its program seriously, but also you have people who have been prescribed medications that they don't even need," Vance said at the White House.
The payment suspension represents the second major action against a state Medicaid program, following a similar move against Minnesota in February. The administration is now notifying all 50 states that federal funding for Medicaid Fraud Control Units could be eliminated if states fail to aggressively pursue fraud cases. These units, which operate in every state, are responsible for investigating and prosecuting provider fraud.
"We are going to turn off the money that goes to these anti-fraud units," Vance said, adding that additional Medicaid resources could be frozen if problems persist. He acknowledged that some states, both red and blue, pursue fraud cases vigorously, but suggested others do not take the issue seriously enough.
Dr. Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, provided specifics on California's case. He said state Medicaid records have raised major concerns, citing $630 million in billing that requires clarification, $500 million in home health services flagged for review, and $200 million in what he called questionable expenditures linked to coverage for undocumented immigrants, who are ineligible for Medicaid.
"It's the largest deferral we've ever made," Oz said. "We're making it for a good reason. We'd like the state to at least come to the table and explain to us how these outlier payments have been generated."
Offices for California Governor Gavin Newsom and Attorney General Rob Bonta, both Democrats, did not respond to requests for comment on the announcement.
The administration also announced a six-month pause on new Medicare enrollment for hospices and home health agencies as part of its broader fraud-fighting push. During the moratorium, the Centers for Medicare and Medicaid Services said it will intensify investigations, deploy advanced data analytics, and accelerate the removal of providers suspected of fraud from the Medicare program.
Author Sarah Mitchell: "Vance's move is bold but requires California to actually show up and defend its spending, not just absorb the penalty."
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