Health and Human Services Secretary Robert F. Kennedy Jr. did something Washington bureaucrats almost never do this week. He looked at two states with a documented history of Medicaid fraud and told them the taxpayer spigot is closed until they prove they deserve to keep drinking from it.
On Tuesday, Kennedy announced that the Centers for Medicare and Medicaid Services are freezing more than $1 billion in federal Medicaid funding to California and Minnesota. The breakdown is stark. California is being cut off from roughly $867 million. Minnesota is losing access to more than $200 million. Both states now have to produce real documentation proving the services they billed taxpayers for actually happened and happened legally, before a single additional dollar moves.
Kennedy did not mince words at the press conference announcing the freeze. He said if Governor Gavin Newsom or Governor Tim Walz wants the money released, all they have to do is provide basic documentation showing the services were legitimate. He called that common sense. It is hard to argue with him. Taxpayers should not have to take a state government’s word for it when billions of dollars are on the line.
The numbers behind this decision are not small technicalities. In Minnesota, HHS official Dr. Mehmet Oz revealed that at least $3 million of the funds in question were tied to reimbursement claims for deceased individuals. Dead people do not need healthcare services, yet somehow the state’s Medicaid system generated billing activity connected to them. The bulk of the remaining Minnesota funds under review trace back to nearly 3,000 healthcare providers the state itself was forced to disenroll from the program last month over fraud concerns.
California’s numbers are just as troubling. Oz pointed to $391 million of the frozen funds tied to in-home supportive services, a category that covers things like driving a patient to a doctor’s appointment or helping with basic daily tasks. Another $250 million comes from claims tied to providers California itself has flagged as high risk, providers the state could not adequately document when federal auditors came calling.
Oz summed up the administration’s posture in one blunt line. If it smells like fraud, the federal government is not paying for it anymore. That is not a slogan. It is a policy shift years overdue in a program that has become a magnet for waste under Democrat-run state bureaucracies more interested in maximizing enrollment numbers than protecting the people who actually need care.
This is not the first time Minnesota has felt this kind of pressure. The state has already had $243 million in Medicaid funding frozen since February, a freeze connected to an earlier fraud scandal involving autism therapy providers and housing stabilization services that drained hundreds of millions of dollars with little oversight. California, for its part, has had $1.3 billion in funding withheld since May over similar documentation failures. Tuesday’s announcement stacks another billion on top of that already staggering total.
Kennedy did not stop at simply pausing payments. He also announced HHS is expanding its exclusion authority, giving both CMS and the HHS Office of Inspector General new power to permanently remove individuals and entities caught committing fraud from federal healthcare programs. Some offenders will now face lifetime bans from ever billing Medicare or Medicaid again. That is the kind of consequence that has been missing from Washington’s approach to healthcare fraud for far too long.
The administration is not stopping with just these two states either. HHS has confirmed it is also withholding roughly 10 billion dollars in broader federal funding for social service programs across five Democrat led states, including Minnesota, California, New York, Illinois and Colorado, after those states failed to produce workable plans for eliminating fraud when asked. Kennedy told CBS News the issue is not partisan politics but simple cooperation, or the lack of it, from state governments that would rather stonewall than clean house.
Kennedy has also been blunt about how this mess was allowed to happen in the first place. He pointed directly at the previous administration’s staffing decisions, revealing that under former HHS Secretary Xavier Becerra, the program integrity office responsible for guarding against fraud across all fifty states and five territories had been gutted down to a skeleton crew. By the time Kennedy took over, the unit tasked with protecting hundreds of billions of dollars in taxpayer healthcare spending had been reduced to just six people.
Federal Trade Commission Chairman Andrew Ferguson joined Kennedy at the announcement and offered a broader diagnosis of what years of lax oversight have cost the country. Ferguson argued that a healthy society depends on trust, and that trust has eroded because too much taxpayer money has been allowed to flow to people gaming the system rather than the vulnerable Americans the programs were designed to serve. His remedy was simple. If someone commits fraud, they should be held accountable, up to and including jail time.
Predictably, the freeze has drawn criticism from the left, with some commentators framing it as a politically motivated attack on blue states. That criticism conveniently ignores the actual documentation gaps HHS has laid out in detail, gaps that include billing for dead people and hundreds of millions of dollars tied to providers the states themselves had already identified as high risk. Fraud does not become acceptable because the state committing oversight failures happens to vote Democrat.
It is also worth noting that HHS has used artificial intelligence and advanced data analytics to identify much of the suspicious spending flagged in this latest action. That represents a meaningful shift in how Washington polices these programs. For years, federal regulators were stuck playing catch up, chasing down stolen money long after it had already left government accounts. Oz explained that the new approach is designed to catch fraud before the check clears rather than trying to claw back funds after scammers have already cashed in.
Minnesota’s own Department of Human Services has acknowledged the scope of the problem, even as state officials publicly resist federal scrutiny. State data shows that between last October and this past spring, Minnesota terminated more than 18,000 provider agencies as part of a corrective action plan with CMS, none of which had billed Medicaid in the past year. That is not evidence of a state with a minor paperwork problem. That is evidence of a Medicaid system that had ballooned with inactive and potentially fraudulent providers under the previous administration’s watch.
California has its own history to reckon with as well. State officials have acknowledged suspending roughly 5,000 providers over fraud concerns in the past five years, while claiming more than a billion dollars in recovered fraudulent payments over the past three years. Those numbers sound impressive until you consider the sheer scale of the additional fraud federal auditors are now uncovering, fraud state officials apparently missed or chose not to pursue aggressively enough.
Kennedy was explicit in placing responsibility for this mess where it belongs, squarely on the shoulders of Democrat leadership in Sacramento and St. Paul. He accused the previous administration and the state officials who enabled it of failing in their most basic duty to safeguard taxpayer money. Instead of protecting the public’s funds, he said, they opened the floodgates to theft. That is a serious charge, but it is one backed by hard numbers rather than partisan talking points.
Some in the media have tried to spin this as cruelty toward vulnerable populations who rely on Medicaid. That framing gets it exactly backward. Every dollar stolen by a fraudulent provider or misused through sloppy state oversight is a dollar that does not reach a disabled senior, a low income family, or a child who actually needs care. Protecting the integrity of the program is not an attack on the people it serves. It is the only way to make sure the program still exists for them in the long run.
It is also worth remembering that this deferral is not a permanent cut. HHS has been clear that the money can be released the moment California and Minnesota produce adequate documentation proving their claims were legitimate. The ball is entirely in the states’ court. If Newsom and Walz are confident their systems are clean, there should be no reason they cannot quickly satisfy federal auditors and get the funding flowing again.
The fact that they have not already done so, given how much time these states have had to get their houses in order, speaks volumes. Minnesota has been under scrutiny since at least February. California has faced federal pressure since May. Neither state has managed to resolve the underlying documentation problems in the months since, which raises legitimate questions about just how deep the dysfunction runs within their respective Medicaid bureaucracies.
Kennedy’s approach represents a broader philosophy that has taken hold across the Trump administration’s health agencies, one built around the idea that taxpayer trust has to be earned through transparency and accountability rather than assumed by default. After years of Washington treating entitlement spending as an untouchable third rail, immune from real scrutiny, it is refreshing to see an HHS secretary willing to draw a hard line and stick to it.
