WASHINGTON — The Trump administration deferred about $1.07 billion in federal Medicaid payments to California and Minnesota on Tuesday, July 21, 2026, while federal officials review claims they described as high risk.
Federal Review Targets State Claims
Health Secretary Robert F. Kennedy Jr. announced the deferrals in Washington alongside CMS Administrator Mehmet Oz. Kennedy said the states must demonstrate that the payments were legitimate before the federal government releases them. The administration deferred about $1.07 billion after focused financial reviews identified claims needing further examination. Federal officials described the action as part of a broader campaign against fraud, waste and improper spending.
Kennedy linked the reviews to suspected fraud and noncompliance. However, he and Oz presented no public evidence proving that the specific claims under review were fraudulent. That distinction matters because an improper payment does not necessarily involve intentional deception. Missing documentation, eligibility errors and billing mistakes can also prevent a claim from meeting federal requirements.
California Claims Focus on Home Care
The California review centers on certain in-home care claims. CMS said spending in those programs grew much faster than national trends and that additional documentation was needed. The agency deferred about $867.5 million until California supplies information supporting the expenses. Federal officials did not identify individual providers or accuse every service under review of fraud.
California’s Medicaid program, known as Medi-Cal, pays for healthcare services for eligible low-income residents and people with disabilities. Its home-care programs help recipients with daily tasks so they can remain outside nursing facilities. California’s In-Home Supportive Services program serves about 900,000 residents, including older adults and people with disabilities. State officials have defended the program’s growth as an intentional expansion of home-based care.
They have attributed higher spending to a larger caseload, rising caregiver wages and increased service hours. California officials have also argued that rapid spending growth alone does not prove fraud. The latest deferral follows a separate action announced in May. Federal officials then withheld about $1.3 billion tied largely to home-care expenses and administrative claims while seeking more documentation.
Minnesota Review Covers 14 Service Areas
CMS said its Minnesota review covers claims in 14 service categories considered especially vulnerable to improper billing. The agency identified expenses involving providers flagged during program-integrity reviews and claims with possible eligibility or billing problems. The federal government deferred $199 million while that examination continues. HHS did not publicly list every provider or service category involved in Tuesday’s announcement.
Minnesota had already faced several federal Medicaid actions this year. In February, CMS announced an earlier $259.5 million deferral involving quarterly federal funding. The administration said Minnesota needed a corrective plan addressing weaknesses in fraud prevention and program oversight. State officials acknowledged fraud problems but disputed the federal government’s broader characterization of Minnesota’s Medicaid system.
States Must Submit Documentation
Medicaid operates through shared federal and state financing. States administer their programs, pay eligible claims, and request federal reimbursement for an approved share of those expenses. CMS can defer a payment when it needs more information to determine whether a claim qualifies for federal matching funds. A deferral can later be lifted, reduced or converted into a formal disallowance.
The immediate action does not end Medicaid coverage for individual recipients. However, a prolonged delay can pressure state budgets because California and Minnesota may already have paid providers for some questioned services. States can challenge a formal disallowance after the federal review. They may also submit additional records while CMS examines whether the spending complied with eligibility, billing and documentation standards.
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