Vice President JD Vance announced Wednesday that the Trump administration is withholding $1.3 billion in Medicaid payments to California and is threatening to suspend federal funding to all states if they don’t aggressively prosecute fraud in their Medicaid programs.
As part of his role as the fraud czar, Vance said that the administration is targeting California because the state isn’t taking fraud seriously.
“There are California taxpayers and American taxpayers who are being defrauded because California isn’t taking its program seriously, but also you have people who have been prescribed medications that they don’t even need. They’ve had drugs put into their bodies that they don’t need because fraudsters have actually encouraged false prescriptions and false administration of medications,” Vance said at the White House.
The move is similar to the one the administration took in February suspending Medicaid payments to Minnesota.
Vance said that the administration is also notifying all 50 states that it could freeze funding to their Medicaid Fraud Control Units “if they do not aggressively prosecute Medicaid fraud.” The units, which exist in each state, investigate and prosecute Medicaid provider fraud. “We are going to turn off the money that goes to these anti-fraud units,” he said, if they fail to do their job.
He also warned, “And if we continue to find problems, we can turn off other resources within their state Medicaid programs as well.”
“Now, we have red states and blue states that go after fraud aggressively. But we also unfortunately have some states — mostly blue states, unfortunately — that do not take Medicaid fraud very seriously,” the vice president said.
“We want to protect Medicare. But we can’t do that if the states that are administering those programs are allowing those programs to be fleeced by fraudsters,” Vance said. “So we encourage, whether it’s California or New York or Maryland or Ohio, we encourage people to work with us. We want to help you use technology and other tools to get rid of the fraud, to get to the root of the fraud.”
Addressing the deferral of reimbursements to California, Dr. Mehmet Oz, the Centers for Medicare and Medicaid Services administrator, said that the state’s Medicaid records “have generated major red flags for us.” Oz said that the administration needs California to clarify $630 million in billing, $500 million in home health services and $200 million in “questionable expenditures” linked to coverage for undocumented immigrants, he claimed. They are not eligible for Medicaid, however.
“It’s the largest deferral we’ve ever made,” Oz said about the decision to suspend $1.3 billion in Medicaid payments. “We’re making it for a good reason. We’d like the state to at least come to the table and explain to us how these outlier payments have been generated.”
Democratic officials in California responded by bashing the Trump administration.
California Gov. Gavin Newsom’s office criticized Vance and Oz in a series of posts following the announcement, while state Attorney General Rob Bonta said in a separate post that, “Once again, California appears to be targeted solely for political reasons.”
In addition to seeking comment from Newsom and Bonta’s offices, NBC News reached out to California’s Department of Public Health.
Oz also announced as part of these anti-fraud actions that the CMS is imposing a six-month moratoria on new Medicare enrollment for hospices and home health agencies (HHAs). CMS said that during that period, it will “intensify targeted investigations, deploy advanced data analytics, and accelerate the removal of hospice and HHA providers from the Medicare program that are suspected of committing fraud.”
The White House and CMS didn’t immediately respond to requests for further comment.
