Cuts $1.3 billion in Medicaid

White House cuts $1.3 billion in Medicaid payments to California

CMS Administrator Mehmet Oz has repeatedly targeted the state over hospice care.

By Robert King

The Trump administration is withholding $1.3 billion in Medicaid reimbursements to California for failing to combat fraud, escalating a feud with the state over its management of hospice care.

“The state of California has not taken fraud very seriously,” said Vice President JD Vance during a press conference Wednesday at the White House.

Though the administration has repeatedly criticized California’s fraud oversight, this is the first time the Centers for Medicare and Medicaid Services has targeted payments to the state. In recent months it has withheld more than $300 million in Medicaid reimbursements to Minnesota for suspect claims.

Medicaid is a joint federal-state partnership. California has already paid providers serving the low-income patients in the program. CMS will not pay the federal government’s share unless the state meets the agency’s requirements for showing eligible patients actually received services. The state did not immediately return a request for comment on CMS’ action.

CMS Administrator Mehmet Oz said at the press conference the $1.3 billion is the agency’s largest deferral ever, though it’s a small portion of California’s total federal Medicaid funding. CMS reimbursed California more than $92 billion in fiscal 2024, according to the most recent data.

“We would like the state to come to the table to explain to us how these outlier payments have been generated,” he said.

Oz has repeatedly targeted hospice fraud in California, especially in Los Angeles. “There aren’t that many people dying in Los Angeles,” he said. “We believe half of the hospices in the entire area around Los Angeles are fraudulent.”

CMS recently suspended payments to 800 hospice facilities in California and less than 20 have complained, which Oz said means his agency is “on the right track.”

What’s next: CMS earlier on Wednesday announced a six-month moratorium on adding new hospice and home health providers to Medicare, which serves seniors.

The agency is also asking every state’s Medicaid fraud control unit to detail their actions combating fraud. Vance said units in some states are not doing enough to combat fraud, despite getting federal funding.