California – The Trump administration is holding back $1.3 billion in Medicaid money from California, opening a new front in its broader campaign against suspected fraud in federal health programs and placing one of the nation’s largest Medicaid systems under sharper federal scrutiny.
Vice President JD Vance announced the deferral Wednesday at the White House, saying the move is part of an effort to protect taxpayer money and preserve health care resources for people who need them most.
Read also: GOP Rep. Hunt destroys Dems’ race-based gerrymandering in savage response to California lawmaker
Standing alongside Centers for Medicare & Medicaid Services Administrator Dr. Mehmet Oz, Vance framed the crackdown as both a fiscal and moral issue, arguing that fraud hurts taxpayers as well as the low-income families and patients the programs are designed to serve.
“How long are people going to pay into programs if they know that that money doesn’t go to a low-income kid who needs healthcare, but that money goes into a fraudster getting rich?” Vance said during the event, according to AP.
The California action is one of several steps now being pushed through the administration’s anti-fraud initiative, a task force created by President Donald Trump and led publicly by Vance.
Officials said the effort is meant to find questionable spending in Medicaid and Medicare, force states to take fraud investigations more seriously and stop suspect providers from entering federal programs while reviews are underway.
Oz said the $1.3 billion deferral is the largest Medicaid deferral the administration has made. He pointed to what he described as questionable expenditures and unusual patterns in California’s home care program, including growth that appeared higher than in other states.
However, he did not present specific examples of proven fraud during the announcement.
“We’d like the state to at least come to the table and explain to us how these outlier payments have been generated,” Oz said.
California officials pushed back quickly. The press office for Gov. Gavin Newsom, a Democrat, disputed the administration’s characterization and said the growth in the state’s home care program reflects California’s effort to keep more people out of far more expensive nursing homes.
In a post on X, the governor’s office wrote, “We hate fraud. But that’s NOT what this is.”
“Vance and Oz are attacking programs that keep seniors and people with disabilities OUT of nursing homes. Pretty sick. Why has IHSS grown in California? It’s simple: Because California is keeping more people OUT of far more expensive nursing homes!”
We hate fraud. But that’s NOT what this is.
Vance and Oz are attacking programs that keep seniors and people with disabilities OUT of nursing homes. Pretty sick.
Why has IHSS grown in California? It’s simple: Because California is keeping more people OUT of far more expensive… https://t.co/bzmHwR8IMi
— Governor Newsom Press Office (@GovPressOffice) May 13, 2026
The dispute comes as California prepares for a Medicaid program expected to cost about $222 billion in the budget year beginning July 1, including both state and federal funding.
The state’s Medicaid program, known as Medi-Cal, serves millions of residents, making any federal delay a potentially significant pressure point even if the administration says the action is aimed at oversight rather than cutting care.
At the same time, CMS announced a nationwide six-month moratorium on new Medicare enrollments for hospice and home health providers.
Existing providers will be allowed to continue operating, but new providers in those categories will be temporarily blocked from joining the Medicare program while the agency expands investigations and reviews.
“Today we’re shutting the door on fraud — preventing new bad actors from entering Medicare while we aggressively identify, investigate, and remove those already exploiting them,” Oz said in a CMS statement.
Read also: Prominent Democrat warns that Trump’s decline is ‘getting worse’, says he needs ‘child psychologist’
The agency said it plans to use targeted investigations, advanced data analytics and faster removal procedures for providers suspected of fraudulent activity.
Officials have pointed to hospice and home health care as areas where alleged fraud schemes have already led to prosecutions and where bad actors may shift from one region to another when enforcement increases.
Still, provider groups warned that broad measures can carry risks.
The National Alliance for Care at Home said it supports rooting out fraud but prefers targeted enforcement, arguing that sweeping restrictions may limit access to care, reduce competition and slow innovation among legitimate providers.
Read also: “Lie, lie, lie, and lie again”: Trump blasts Fox News, Democrat lawmakers, in savage weekend rant
The administration also escalated pressure on states Wednesday when the Department of Health and Human Services’ internal watchdog sent letters to state attorneys general warning them to vigorously investigate possible Medicaid fraud or risk federal funding consequences.
For Vance, the effort has also become a highly visible political assignment. He has promoted the anti-fraud task force while campaigning for Republican candidates and is expected to highlight the issue again in Maine, where closely watched primaries are scheduled for June 9.
The push is unfolding amid wider concerns over health costs and access to care.
While the administration says its fraud crackdown will preserve resources for vulnerable patients, critics and some state officials fear aggressive federal actions could punish law-abiding providers and complicate services for people who rely on Medicaid and Medicare every day.
