Power Grab/Fire anyone who can stop him
HHS defers $867.5 million in federal Medicaid payments to California and $199 million to Minnesota pending a fraud review
The department called them deferrals, not permanent cuts. Both states are Democratic-led, and both have been the target of earlier federal funding threats.
What happened
On July 21, 2026, HHS and the Centers for Medicare & Medicaid Services deferred more than $1 billion in federal Medicaid matching payments to California and Minnesota. About $867.5 million went to California, over claims for certain in-home care programs whose spending growth CMS said far exceeded national trends.
CMS deferred about $199 million to Minnesota across 14 service areas it called high-risk. It said it found claims linked to providers flagged in program-integrity reviews and others with eligibility or billing concerns. HHS said both states could submit documentation to release the funds.
Secretary Robert F. Kennedy Jr. said that when states cannot show every dollar meets federal requirements, the department will not release federal funds until they do. CMS Administrator Mehmet Oz said the agency was done trying to chase down stolen and misused funds after they had already left the building.
Who benefited
The White House gained leverage over two states at odds with it on immigration enforcement. Both had been subject to federal troop deployments or threatened funding cutoffs. HHS and CMS leadership could show record savings from program-integrity actions.
Who wanted something
Kennedy and Oz announced the deferrals and credited Trump’s leadership. The administration had pursued Minnesota since late 2025 over Medicaid and child-care fraud allegations. In January, CMS told Minnesota it intended to withhold $515 million a quarter from 14 Medicaid programs.
Who lost out
Medicaid beneficiaries in California’s in-home supportive services program, largely elderly and disabled people and their caregivers, face delay. So do providers in Minnesota’s affected programs, who wait on federal reimbursement. The two state governments must cover the gap or cut services while they produce documentation on the federal government’s timeline.
Why it matters
Deferring Medicaid matching funds is a lawful program-integrity tool, and HHS applied it at the scale of $1 billion to two states the administration was already pressing. In January HHS had halted child-care funds to five Democratic-led states over unspecified fraud suspicions, and a court paused that move.
Sources U.S. Department of Health and Human Services (primary)NBC News / Associated Press