HHS blocks $1B in Medicaid funds to California and Minnesota

Health and Human Services Secretary Robert F. Kennedy, Jr. told reporters Tuesday that California and Minnesota have failed to justify hundreds of millions of dollars in Medicaid payments in the last quarter of fiscal year 2026. Kennedy said federal investigators have used artificial intelligence and data analysis to find red flags in multiple programs, especially personal care and home-based services designed for the elderly and people with disabilities. Mehmet Oz, administrator for the Centers for Medicare and Medicaid Services, or CMS, said examples of potentially fraudulent claims include $3 million in services for deceased Medicaid recipients in Minnesota, to nearly $400 million in payments for home-based services lacking proper documentation in California. HHS previously deferred hundreds of millions of dollars in Medicaid reimbursements to California and Minnesota earlier this year, and on Tuesday announced a combined $1 billion deferral for payments from the last quarter.

What else is HHS doing? Kennedy announced he would expand exclusion authority to include the CMS. Until now, only the HHS Office of Inspector General has had authority to directly block individuals and entities that have been proven to commit fraud or abuse. The decision gives CMS more power to directly root out bad actors even in states where Medicaid fraud control units, or MFCUs, are not cooperating. In June, HHS decertified MFCUs in Hawaii and New York for low prosecution rates of suspected fraud.

Dig Deeper: Read Elizabeth Black’s report on the CMS’ request that all 50 states audit their Medicaid programs.