The Centers for Medicare and Medicaid Services (CMS) announced Tuesday it is deferring more than $1 billion in federal Medicaid funding to California and Minnesota. The agency is withholding $867 million from California and $199 million from Minnesota based on claims submitted during the previous quarter. CMS Administrator Mehmet Oz stated the deferrals are necessary to investigate potential fraud, particularly within home-based personal care services.
In Minnesota, CMS officials cited concerns regarding claims linked to 3,000 providers who were recently disenrolled following a state audit. While CMS stated the funds will remain frozen until the state provides documentation verifying the legitimacy of the claims, Minnesota officials noted that some provider terminations are currently being appealed. This marks the third funding suspension for Minnesota this year, bringing its total deferred amount to approximately $550 million.
Minnesota Governor Tim Walz (D) and California Governor Gavin Newsom (D) characterized the federal actions as politically motivated. Walz stated that the administration's actions affect services for seniors and children, while Newsom's office argued that California's in-home care programs are cost-effective alternatives to nursing homes. Both states' human services departments reported a lack of detailed data from CMS explaining how the specific deferral amounts were calculated.
CMS officials stated that previous funding suspensions for both states remain active as documentation reviews continue. Agency representatives described the move as part of a broader national effort to monitor government health program spending and reduce improper payments. The administration suggested that states may use reserve funds to maintain services while the federal claims are under review.