Federal health officials said questionable billing patterns uncovered through financial reviews and artificial intelligence must be explained before hundreds of millions of dollars in Medicaid payments are released.
By yourNEWS Media Newsroom
The Trump administration is withholding more than $1 billion in Medicaid payments to California and Minnesota after federal investigators identified billing activity they said could involve fraud, waste or improper claims.
Health Secretary Robert F. Kennedy Jr. announced the payment holds July 21, saying the Centers for Medicare and Medicaid Services had paused more than $867 million bound for California and more than $200 million intended for Minnesota.
Federal officials said advanced analytics, financial investigations and artificial intelligence systems flagged suspicious transactions and other potential irregularities in the states’ Medicaid programs.
“Every dollar the federal government allows to be lost to fraud, waste, and abuse is a dollar stolen from American patients and the American taxpayer,” Kennedy said during a news conference in Washington. “That’s money that should be going to legitimate health care.”
Kennedy said the funds would remain unavailable unless state officials could verify that the disputed claims were proper.
“If those states want that money, they need to provide documentation that these payments are legitimate,” he said.
The Democratic governors of California and Minnesota did not respond to requests for comment about the administration’s announcement.
Medicaid provides health coverage to low-income Americans and other eligible groups through a partnership between the federal government and individual states. Approximately 67 million people were enrolled in the program as of March.
States administer their own Medicaid systems but must comply with federal requirements. Program expenses are shared between state governments and Washington, making federal oversight central to determining whether claims qualify for reimbursement.
Dr. Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, said the administration wants California and Minnesota to demonstrate that the withheld money is supporting actual patients who received legitimate services.
Officials are seeking assurances that the funds are reaching “real people with real problems getting real care,” Oz told reporters Tuesday.
Among the irregularities identified were claims involving services reportedly provided to people who were already dead, Oz said.
Federal reviewers also found providers billing Medicaid for services more than a year after the treatment allegedly occurred.
Oz additionally pointed to a sharp increase in California’s spending on services intended to help people remain in their homes rather than enter institutional care.
California’s spending on those home-based support programs increased 24% in recent years, approximately twice the average growth rate recorded across other states, he said.
“If it smells like fraud, we’re not paying for it anymore,” Oz said.
The newly announced payment holds are separate from additional Medicaid funds that the administration stopped releasing earlier in the year.
Dan Brillman, director of Medicaid, said federal officials continue to withhold another $259 million from Minnesota and $1.3 billion from California.
Combined with the latest action, the administration is now holding back more than $2.6 billion from the two states pending further review and documentation.
Federal officials did not say how many individual claims were involved, identify the providers whose billing triggered the reviews or specify how long the states would have to respond.
The administration also did not announce whether the flagged claims had been conclusively determined to be fraudulent.
Instead, officials described the payment pause as a safeguard while California and Minnesota establish that the claims comply with federal law and Medicaid billing requirements.
The use of artificial intelligence and advanced data analysis is part of a broader federal effort to identify unusual payment patterns across large health care programs.
Such systems can compare billing histories, provider behavior, patient records and timing patterns to identify claims that differ sharply from established norms.
A flagged transaction does not necessarily prove misconduct, but it can trigger a request for supporting documents, an audit or a criminal investigation.
The administration’s Medicaid action comes as federal agencies expand efforts to prosecute health care fraud.
Federal Trade Commission Chairman Andrew Ferguson, who also serves as vice chairman of the White House Anti-Fraud Task Force, said the government is not limiting its response to withholding payments.
The administration is also seeking prison sentences for people who knowingly submit fraudulent claims, Ferguson said.
He cited federal prosecutions announced in June involving 455 defendants accused of participating in health care fraud and opioid-related schemes.
Those charged included 90 doctors and other licensed medical professionals, according to the administration.
The new payment holds could place pressure on health care providers and state agencies if the reviews are prolonged.
California and Minnesota rely on federal Medicaid reimbursements to help fund hospitals, physicians, home-care programs, nursing facilities and other medical services provided to eligible residents.
Federal officials framed the action as an attempt to preserve those resources for valid care rather than reduce legitimate coverage.
Kennedy said money lost through improper payments directly limits the funding available for patients and taxpayers who depend on the program.
The administration’s approach places the burden on the states to produce records demonstrating that the questioned claims involve eligible recipients, authorized providers and properly documented treatment.
Oz said the federal government would no longer continue releasing money when billing information suggests that services may not have occurred or may not meet Medicaid requirements.
The findings involving deceased patients and claims submitted more than a year after treatment raise questions about whether state review systems detected the irregularities before seeking federal reimbursement.
The unusual growth in California’s home-support spending will also receive additional scrutiny because it substantially exceeded trends elsewhere in the country.
Home- and community-based services can allow elderly people and those with disabilities to receive assistance without moving into institutional settings. Rapid increases in spending may reflect expanded enrollment or services, but federal officials said the scale of California’s growth requires supporting documentation.
No evidence provided in the announcement established that the entire amount withheld from either state was fraudulent.
The disputed totals represent payments paused while federal authorities verify the underlying claims.
California and Minnesota may recover the funds by supplying records that satisfy CMS reviewers, according to Kennedy.
The announcement signals that federal officials intend to use payment suspensions more aggressively when data systems identify possible irregularities.
It also demonstrates the administration’s growing reliance on artificial intelligence to screen government spending before federal money is released.
For California and Minnesota, the immediate issue will be whether they can document the claims quickly enough to avoid disruptions to Medicaid providers and beneficiaries.
Until that review is completed, more than $1 billion in newly identified payments — along with $1.56 billion withheld earlier — will remain in federal hands.
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