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More than $1 billion in federal healthcare money stopped moving to two state governments this week. No court order. No congressional vote. Only a phone call away from two governors who now have to prove, in writing, that the money already spent was spent legally. The agency behind the freeze says artificial intelligence helped flag the problem. The states say they’re being targeted for political reasons.
Health and Human Services Secretary Robert F. Kennedy Jr. announced the freeze Tuesday at a news conference in Washington. The Trump administration is freezing more than $1 billion in federal Medicaid funding to California and Minnesota over suspected fraud, with California losing access to roughly $867 million and Minnesota losing access to about $199 million. Kennedy framed the decision as a matter of principle, not punishment.
“They violated the social contract that makes this country strong and makes our democracy function,” Kennedy said, according to The Center Square. Behind that statement sits a specific set of allegations: billing for dead patients, spending spikes with no clear explanation, and claims submitted more than a year after care was supposedly delivered.
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$3 Million Billed for a Dead Patient: The Numbers Driving Minnesota’s Freeze
Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz laid out Minnesota’s case first. He pointed to 14 high-risk programs, including personal care and home health services, where documentation gaps raised red flags. Roughly $3 million in flagged payments involved treatment billed for a person who had already died. Federal officials called it a symptom of a much larger pattern.
California’s numbers were harder to explain away. Oz said in-home care spending in the state jumped 24% over two years, double the national rate, accounting for $391 million of the money now frozen. Investigators also found claims billed more than a year after services were supposedly provided, and cases where providers billed for more than four patients at once.
Oz went further, telling reporters that a significant share of California’s flagged spending involved people with what he called “unsatisfactory immigration status.” “We can’t prove that they’re supposed to be in America and that they’re eligible for these services because this is an ongoing, massive problem for California,” he said. California has not conceded that point.
Newsom Calls It a “Political Stunt.” Kennedy Says the Documents Will Prove Him Wrong
Kennedy was direct about what would unfreeze the money. “If Gov. Gavin Newsom or Gov. Tim Walz wants this funding released, all they have to do is provide basic documentation showing that these services are legitimate and not fraudulent,” he said. According to CMS Deputy Administrator Dan Brillman, states must verify beneficiary eligibility, confirm services were delivered, and pursue improper payments themselves.
Newsom didn’t wait long to respond. “Today’s announcement from Dr. Oz is the same recycled political stunt we’ve seen before. California isn’t being targeted because Trump has evidence of fraud,” he wrote, adding that the state is “SAVING taxpayers money by keeping seniors and people with disabilities out of far more expensive nursing homes.” Minnesota, notably, has already begun submitting records.
Oz confirmed the difference himself: Minnesota’s documents are under review, while California’s case remains unresolved. “We’re still working many issues with California,” he said. “It’s a much bigger program, and lots of different kinds of issues happening.” That gap between the two states may decide which governor gets their funding back first.
HHS Just Gave Itself New Power to Cut Off Fraudulent Providers for Good
Kennedy paired the freeze with a bigger structural change: an expansion of HHS’s exclusion authority. The new powers would let the secretary block or permanently remove providers suspected of fraud from the Medicaid system entirely, not just delay their payments. It marks a shift from chasing stolen money after the fact to cutting off access before it happens.
Brillman framed the stakes in human terms. “Right now, there are hundreds of thousands of Medicaid beneficiaries waiting on what we call home and community-based services waitlists,” he said. “Every dollar lost to fraud is $1 that cannot pay for a child with complex medical needs, an adult with intellectual disabilities, or a veteran… waiting to receive services at home.”
Kennedy closed with a line meant to outlast the news cycle: “We have to end the fraud, waste, and abuse, and this administration will do whatever it takes to keep your taxpayer dollars out of the hands of criminals and fraudsters.” Whether that principle survives contact with California’s far larger, far messier Medicaid system is now up to the paperwork.