HHS and CMS Withhold Medicaid Funds from Minnesota and California

July 23, 2026

On July 21, the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) announced that they are deferring more than $1 billion in federal Medicaid payments to Minnesota and California, in an effort to combat "fraud, waste, and abuse in Medicaid and safeguard federal taxpayer dollars." 

CMS is deferring approximately $199 million in federal Medicaid payments to Minnesota, and approximately $867.5 million to California, after focused financial reviews identified claims that require additional review before federal matching funds are released. These are payment deferrals (not permanent funding cuts), and both states will have the opportunity to provide documentation showing the claims meet federal Medicaid requirements. 

CMS reviewed Medicaid claims in 14 high-risk service areas in Minnesota. The review identified claims that require additional documentation, including expenditures linked to providers flagged through program integrity reviews, and other claims with potential eligibility or billing concerns. 

CMS also reviewed California’s claims for certain in-home care programs after identifying spending growth that far exceeded national trends, and other claims that require additional documentation.  

Minnesota Public Radio reported that the Minnesota Department of Human Services said that it has worked in good faith with the federal government to shore up program defenses, and avoid misuse of health dollars