Trump Administration Withholds $1.3 Billion in Medicaid Funds from California Over Alleged Fraud

The Trump administration is withholding $1.3 billion in Medicaid reimbursement payments to California, alleging that state officials failed to adequately prosecute fraud within its Medicaid program.

“There are California taxpayers and American taxpayers who are being defrauded because California isn’t taking its program seriously,” said JD Vance, vice president and designated “fraud czar,” during a Wednesday announcement. “Fraudsters have actually encouraged false prescriptions and false administration of medications.”

Vance did not provide evidence of Medicaid fraud but criticized home care services, also known as home and community-based services. Since 1983, disabled individuals and aging adults on Medicaid have been eligible to receive these services at home, allowing them to live outside nursing homes and institutional settings.

“It provides everything from assistance with bathing, preparing meals, dressing, getting in and out of bed, shopping and even house cleaning, chores, laundry, etc.,” explained Lindsay Imai Hong, California Director of Hand in Hand: The Domestic Employers Network. “It’s enabled so many Californians to get the support they need to live in their homes and with their families.”

Dr. Mehmet Oz, administrator for the Centers for Medicare and Medicaid Services, claimed California must justify hundreds of millions in billing discrepancies related to in-home services for undocumented immigrants. However, undocumented immigrants are ineligible for Medicaid coverage.

California Responds to Allegations

On Wednesday, Gov. Gavin Newsom’s office posted on X that expanding home healthcare placements saves taxpayer money by keeping “more people OUT of far more expensive nursing homes.” Disability and care advocates are actively working to prevent cuts to Medicaid-funded home care in California, a move Newsom has previously attempted to block even before the passage of Trump’s One Big Beautiful Bill.

California Attorney General Rob Bonta posted on X that the Trump administration’s actions were “solely for political reasons.” United Domestic Workers executive director Doug Moore echoed this sentiment in a press release, stating, “The real scandal is the carelessness with which politicians disregard our community members in order to line the pockets of their billionaire friends.” He added, “Last year, the Trump administration and Republicans in Congress gave away $4.5 trillion in tax cuts to millionaires and billionaires by cutting vital social service programs like Medicaid and SNAP.”

Broader Implications and Historical Context

During his announcement, Vance also threatened to halt federal funding to all states that do not sufficiently pursue Medicaid fraud. The administration’s decision in California mirrors its earlier suspension of over $250 million in Medicaid funds from Minnesota, which was based on fraud claims targeting Somali communities and fueled unsubstantiated right-wing conspiracy theories.