The Trump administration has deferred over $867 million in Medicaid payments to California, with HHS Secretary Robert F. Kennedy Jr. and CMS Administrator Dr. Mehmet Oz citing concerns over fraud, while Governor Gavin Newsom denounces the move as politically motivated.

Amidst ongoing tensions between California and the Trump administration, the Department of Health and Human Services announced a significant hold on federal Medicaid funding, impacting hundreds of millions designated for the Golden State. This action, portrayed by federal officials as a measure to combat waste and fraud, has drawn sharp criticism from California, which labels it a politically charged attack.

The Trump administration, through the Department of Health and Human Services (HHS), announced on July 21, 2026, a deferral of over $1 billion in federal Medicaid payments, including a substantial $867.5 million earmarked for California. An additional $199 million was withheld from Minnesota. HHS Secretary Robert F. Kennedy Jr. indicated the temporary holds were necessary for documentation review of "high-risk claims," stating, "Medicaid exists to serve vulnerable Americans — not to bankroll unsupported claims," as reported by AP News and an HHS press release.

CMS Administrator Dr. Mehmet Oz, appointed by President Trump in 2025, co-led the announcement, reinforcing the administration's stance on combating fraud. Dr. Oz was quoted in the HHS press release saying, "CMS is done trying to chase down stolen and misused funds after they've already left the building." Kennedy further emphasized, "If Governor Gavin Newsom or Governor Tim Walz wants this funding released, all they have to do is find basic documentation showing that these services are legitimate and not fraudulent, and that's common sense," according to Healthcare Dive.

California Governor Gavin Newsom swiftly condemned the action, asserting that the state is being targeted for political reasons. SFGATE reported Newsom's office implying the statements from federal officials could be seen as "racially charged." Healthcare Dive further quoted Newsom directly, stating, "California isn't being targeted because Trump has evidence of fraud. We are being targeted for political reasons — and because Dr. Oz doesn't understand that we are SAVING taxpayers money by keeping seniors and people with disabilities out of far more expensive nursing homes!"Similarly, Minnesota Governor Tim Walz accused the administration of using fraudulent claims to justify tax-cut-related reductions, as reported by Stateline.org.

The California Department of Health Care Services maintains that the growth in home-based care spending, which the federal government is scrutinizing, is both intentional and designed to be cost-effective, not an indicator of fraud. According to AP News, state officials argue that these programs prevent more costly institutional care. However, CMS has not publicly disclosed the methodology used to calculate the deferral amounts, a point of contention for Minnesota officials, including Temporary Commissioner John Connolly, as noted by Healthcare Dive. Advocacy groups like The Arc of California have also weighed in, with Executive Director Jordan Lindsey stating that portraying "statistical anomalies, documentation questions and administrative errors" as fraud is irresponsible, according to EIN Presswire. Providers are concerned about immediate disruptions to care access due to the holds.