California officials are accusing the Trump administration of using healthcare fraud investigations to politically target Democratic-led states after Vice President JD Vance announced the federal government would defer $1.3 billion in Medicaid reimbursements to California.
The dispute marks a major escalation in the ongoing conflict between California leaders and the White House over healthcare funding, federal oversight, and social services programs. While the administration framed the move as part of a broader crackdown on Medicaid and Medicare fraud, California officials said the action threatens healthcare access for seniors and people with disabilities while disproportionately focusing on states that did not support President Donald Trump.
“Political retribution, plain and simple,” Sen. Alex Padilla said after the administration’s announcement.
Vance, joined by Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz, said California Medicaid records had raised concerns involving hundreds of millions of dollars in spending. Administration officials said they were seeking clarification regarding approximately $630 million in billing concerns, $500 million spent on home healthcare services, and another $200 million in expenditures that Oz described as “questionable expenditures,” which he claimed had been used to provide coverage for undocumented immigrants who are not eligible for Medicaid.
Standing beside Oz during the announcement, Vance accused California of failing to properly police fraud within its Medicaid system.
“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’ve been prescribed medications that they don’t even need,” Vance said. “Sometimes they’ve had drugs put into their bodies that they don’t need because fraudsters have actually encouraged false prescriptions and false administration and medications.”
The administration also announced a six month moratorium on new Medicare enrollment for hospice and home health agencies. Oz claimed fraudulent activity was especially concentrated in the Los Angeles region, where federal officials had already suspended hundreds of providers.
“A third of all these programs in the entire country are in Los Angeles. Ask yourself, how is that possible? It’s not,” Oz said. “They’re not that many people dying in Los Angeles. We’re not talking about California, just Los Angeles.”
Oz further claimed federal officials had determined that “at least half of the hospices, in the entire area around Los Angeles, are fraudulent,” adding that the administration had shut down 800 providers that “charged the federal taxpayer $1.4 billion,” which “will no longer be paid.”
The administration’s anti-fraud task force had previously suspended licenses for nearly 450 hospice care facilities and 23 home health agencies in the Los Angeles area. The latest announcement significantly expanded the administration’s healthcare enforcement efforts while signaling that other states could face similar consequences.
Vance warned that all 50 states could lose federal support if they fail to aggressively prosecute Medicaid fraud.
“We can turn off other resources within their state Medicaid programs as well,” Vance said.
He also said states that fail to “effectively and aggressively prosecute Medicaid fraud in their states” could face cuts to federal funding for Medicaid Fraud Control Units.
The confrontation comes as California’s Medi-Cal program remains one of the largest public healthcare systems in the country. California’s Medicaid program is expected to cost roughly $222 billion during the upcoming budget year, including state and federal funding. Approximately 15 million Californians receive healthcare coverage through Medi-Cal, representing more than one-third of the state’s population.
California officials strongly rejected the administration’s characterization of the disputed spending and argued the White House was attacking programs designed to keep vulnerable residents out of institutional care facilities.
Gov. Gavin Newsom said the administration was “attacking programs that keep seniors and people with disabilities OUT of nursing homes,” arguing that home healthcare programs ultimately reduce costs for taxpayers.
“MAGA hates in-home support programs—which help people stay out of costly institutional settings like nursing homes and get the care they deserve, typically from loved ones,” Newsom said.
The disagreement focused heavily on California’s In-Home Supportive Services program, which provides assistance to elderly and disabled residents with activities such as bathing, cooking, laundry, transportation to medical appointments, and medically directed care. According to a 2020 report by the California state auditor referenced by Newsom’s office, nearly three-quarters of caregivers in the program assist family members.
Newsom’s office argued the program saves substantial amounts of money compared with nursing home placements. Officials said in-home care costs roughly $30,000 annually per person while nursing home care costs approximately $137,000 annually.
Newsom said the expansion of the program has saved taxpayers “$107,000 per person” by reducing reliance on nursing homes.
California Attorney General Rob Bonta suggested the state may pursue legal action if the administration proceeds with the funding deferral.
“Once again, California appears to be targeted solely for political reasons,” Bonta said. “The Trump administration is planning to defer over $1 billion in Medicaid funding for vital programs that helps seniors and people with disabilities remain safely in their homes.”
“My team is carefully reviewing all available information. We have not hesitated to challenge unlawful actions by the Trump administration, and we will continue to act whenever Californians’ rights or access to critical services are threatened,” he said.
The administration’s healthcare investigations have increasingly focused on Democratic-led states. In addition to California, federal officials previously launched investigations into healthcare programs in Minnesota, New York, Maine, and Florida.
Earlier this year, the White House suspended approximately $243 million in Medicaid payments to Minnesota over fraud concerns involving the state’s social services system.
Federal officials have also faced criticism regarding their methods. The Centers for Medicare & Medicaid Services previously acknowledged using incorrect figures during a separate fraud probe in New York, raising concerns among critics about the accuracy of the administration’s investigations.
Vance nevertheless defended the administration’s approach and linked fraud concerns to Democratic governance.
“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,” Vance said.
California Democrats argued the administration’s actions threaten healthcare access for millions of residents who rely on Medicaid services.
Rep. Sydney Kamlager-Dove said 56 percent of her constituents depend on Medicaid coverage and warned that withholding reimbursements would worsen strains already created by Republican-backed cuts to Medicaid funding in the “One Big Beautiful Bill Act” last year.
“Withholding reimbursements only further hurts patients, strains providers, and drives up costs,” Kamlager-Dove said. “We will fight this with everything we’ve got.”
Rep. Jimmy Panetta said more than 120,000 residents in his district rely on Medicaid services.
“This administration needs to stop playing politics with people’s health and lives,” Panetta said. “When people commit fraud, they should be punished accordingly. However, this administration continues to punish California for political purposes, including penalizing innocent people by taking their healthcare away.”
The administration’s healthcare crackdown comes amid broader criticism that other Trump-backed healthcare policies have already reduced access to care nationwide. Critics have pointed to cuts to Affordable Care Act subsidies and new Medicaid work requirements that are expected to increase financial strain on hospitals and contribute to millions of people losing coverage.
Fraud within California’s hospice industry has remained a documented issue for years. State officials pledged reforms after a 2020 investigation revealed that providers were billing Medicare for hospice services and equipment for patients who were not terminally ill, contributing to rapid growth in the industry.
The Trump administration has repeatedly cited those scandals while defending its current actions. California officials, however, argue the White House is using legitimate fraud concerns to justify broader punitive measures that could affect vulnerable residents far beyond any alleged wrongdoing.
Vance denied the administration’s actions amounted to political retaliation.
“We don’t want to turn off any money. What we want to do is ensure that people are taking fraud seriously. We want to protect Medicaid, we want to protect Medicare,” Vance said. “But we can’t do that if the states that are administering those programs are allowing those programs to be fleeced by fraudsters.”
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