Trump Administration Suspends More Than $1 Billion in Medicaid Funding to California and Minnesota
In a major escalation of its campaign of administrative funding pauses targeting Democratic-led states, the Trump administration’s Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) announced a second massive round of Medicaid payment deferrals on July 21, 2026.
Citing "suspected fraud and noncompliance," CMS is withholding approximately $867.5 million in federal Medicaid payments from California and $199 million from Minnesota.1 This action brings the total deferred Medicaid payments this year to over $2.2 billion for California and more than $500 million for Minnesota.
The deferrals are part of a highly aggressive, proactive strategy orchestrated under CMS's new initiative, "Comprehensive Regulations to Uncover Suspicious Healthcare" (CRUSH). Rather than attempting to recover stolen or misused funds after they have been paid out, CMS is using its pre-payment review capabilities to pause federal reimbursements. CMS Administrator Dr. Mehmet Oz defended the proactive pauses, stating:
"CMS is done trying to chase down stolen and misused funds after they’ve already left the building... Claims that are unresolved and claims that smell like fraud. And if it smells like fraud, we’re not paying for it anymore."
The latest deferrals target services deemed at high risk for fraud, such as personal care and in-home support services. In California, Oz pointed to a 24% rise in spending on in-home programs over the past two years—double the national average—as evidence of systemic fraud. In Minnesota, the deferral is linked to billing by more than 3,000 providers who were recently disenrolled from the program.
Democratic governors have fiercely rejected the allegations, accusing the administration of weaponizing fraud claims for political retaliation. California Governor Gavin Newsom's office called the move a "recycled political stunt," arguing that the state's in-home care programs save taxpayers money by keeping seniors and disabled residents out of more expensive nursing homes:
"California isn’t being targeted because Trump has evidence of fraud... We are being targeted for political reasons — and because Dr. Oz doesn’t understand that we are SAVING taxpayers money by keeping seniors and people with disabilities out of far more expensive nursing homes!"
Minnesota Governor Tim Walz also condemned the action, stating, "They’re cutting more money in healthcare than they’ve prosecuted for fraud. The math doesn’t add up."
The crackdown is rapidly expanding to other states. On Monday, August 3, 2026, Dr. Oz traveled to Maine to investigate home support services, claiming that the vast majority of Maine's Medicaid payments were unjustified.
In response to the federal scrutiny and local scandals (such as the "Feeding Our Future" fraud), the Minnesota Sentencing Guidelines Commission published its 2026 guidelines over the weekend of August 1–2, 2026, establishing presumptive prison sentences for any Medicaid fraud exceeding $1 million.
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An instance of Federal agencies do not need legislation to starve state-level welfare and sanctuary networks. — The administration bypassed the legislature to starve progressive states of health funding by utilizing aggressive, proactive pre-payment audit withholdings. ↩︎