HHS and CMS are deferring more than $1 billion in federal Medicaid funds to Minnesota and California, agency officials confirmed July 21.
The agencies said they are deferring approximately $867.5 million in payments to California and $199 million to Minnesota after financial reviews flagged claims that require additional assessment before the release of matching funds. The states need to submit further documentation to validate high-risk Medicaid claims. The withheld funds are not permanent cuts, an HHS news release said.
“If it smells like fraud, we’re not paying for it anymore,” CMS Administrator Mehmet Oz, MD, said during a press conference. Dr. Oz also cited Minnesota’s recent disenrollment of more than 3,000 Medicaid providers following an audit. Those providers’ billing is a major driver of the $199 million deferral, he said.
Dr. Oz said California’s spending on in-home supportive services programs jumped 24% over the past two federal fiscal years, exceeding the 12% national trend. Minnesota’s funding involves 14 high-risk service areas. The review identified claims with possible eligibility or billing concerns.
HHS added that it is also expanding its exclusion authority.
“Both CMS and the Office of Inspector General will be able to use that authority to remove bad actors from federal healthcare programs, and in many cases, to permanently ban them from returning,” HHS Secretary Robert F. Kennedy Jr. said.
The latest fraud, waste and abuse prevention efforts build upon earlier actions from the federal government targeting state Medicaid programs. The Trump administration previously froze $1.3 billion in Medicaid funds to California in May. The Minnesota Department of Human Services said the state has faced quarterly deferrals of roughly $260 million and $91 million in the past. In July, Minnesota continued a Medicaid provider enrollment pause across 12 high-risk services.
“CMS touts their new fraud-detection capabilities, yet has not provided data or explanation on how the deferral amount was calculated or what it was based on. I respectfully ask the federal government to partner with us and share any information about their methods to identify potentially fraudulent providers in Minnesota,” John Connolly, the temporary commissioner of the Minnesota Department of Human Services, said in a July 21 statement. “Today’s actions show that the federal government is acting again in unprecedented and punitive ways as part of their war on Medicaid and its recipients. Partnership — not politics — is required to stop criminals and protect services for the people who need them.”
Becker’s contacted California’s Department of Health Care Services for comment and will update this story if more information becomes available.
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