By Ahmed Aboulenein
WASHINGTON, July 21 (Reuters) - The Trump administration is pausing $1 billion in Medicaid payments to California and Minnesota over "suspected fraud and noncompliance," U.S. Health Secretary Robert F. Kennedy Jr. said on Tuesday.
"If those states want that money they need to provide documentation that these payments are legitimate," Kennedy said at a news conference alongside U.S. Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz.
CMS is deferring approximately
$867.5 million in federal Medicaid payments to California and $199 million to Minnesota, according to the U.S. Department of Health and Human Services.
The pause is the latest in a series of payment suspensions mostly in Democratic-run states as Vice President JD Vance, Kennedy and Oz lead a campaign the White House has called an "unrelenting" war on fraud.
Kennedy said the administration suspects much of the questionable California spending involves in-home services. The Minnesota deferrals target 14 high-risk areas the state's own legislative auditor identified as vulnerable to fraud.
"If it smells like fraud, we're not paying for it anymore," Oz said. He and Kennedy cited data anomalies and outlier billing patterns but offered no proof of fraud.
Minnesota Governor Tim Walz rejected the move as political retribution against Minnesota, saying the administration was punishing children, seniors and people with disabilities rather than fraudsters. He said it "is cutting more money in healthcare than they've prosecuted for fraud."
California Governor Gavin Newsom called the move a recycled political stunt and said in a post on X that California was being targeted for political reasons. He said the state opposes fraud and would "collaborate with CMS in good faith efforts to combat fraud," arguing its in-home program saves money by keeping seniors and disabled people out of costlier nursing homes.
The deferrals are pauses, not permanent cuts, and do not affect benefits or eligibility. States recover the funds by showing claims meet federal requirements; Minnesota has already returned documents that CMS is reviewing, Oz said.
Kennedy said he was also expanding exclusion authority to CMS and the HHS inspector general, letting them remove "bad actors" from federal healthcare programs and potentially ban them permanently.
(Reporting by Ahmed Aboulenein; Additional reporting by Susan Heavey in Washington and Puyaan Singh in Bengaluru; Editing by Shinjini Ganguli, Chizu Nomiyama and Andrea Ricci )
