Federal Government Freezes Over $1 Billion in Medicaid Payments to California and Minnesota

Last updated: July 24, 2026

NewsWK — The U.S. Department of Health and Human Services, along with the Centers for Medicare & Medicaid Services (CMS), has announced a freeze on more than $1 billion in Medicaid payments to California and Minnesota. This decision is part of an ongoing effort to combat fraud in Medicaid, a health insurance program for low-income individuals, including the elderly and disabled.

Specifically, California will see over $867 million deferred, while Minnesota will face a hold on approximately $199 million. The federal government is requesting additional documentation from both states to support certain Medicaid claims that have been flagged as high risk for fraudulent activity.

This freeze follows a series of actions taken by the Trump administration aimed at identifying and addressing potential fraud in publicly-funded social service programs, particularly in states led by Democratic governors. Earlier this year, a fraud task force was established to investigate these concerns across various states, including California and Minnesota.

In Minnesota, this is not the first instance of deferred payments; the state has already experienced similar actions twice this year totaling nearly $400 million. The deferral process, which allows the federal government to withhold funding based on questioned claims, has been utilized more aggressively under the current administration. A recent letter from CMS indicated that much of the deferred funds were associated with providers identified as having high-risk billing practices.

Officials from Minnesota’s Department of Human Services expressed concern that these funding freezes could significantly impact the state’s Medicaid program, which serves a wide range of low-income residents. John Connolly, the state’s temporary commissioner, criticized the federal government’s actions as punitive and lacking transparency regarding how the deferral amounts were determined.

In response to these developments, California Governor Gavin Newsom described the withheld funds as a political maneuver, asserting that the freeze is a tactic to target his state. Similarly, Minnesota Governor Tim Walz rejected the characterization of the situation as fraud-related, suggesting it was more about federal budget cuts affecting healthcare for the vulnerable.

Despite the pauses in funding, CMS has clarified that they do not change eligibility for Medicaid services and are not permanent cuts. The agency aims to ensure that all federal funds are utilized appropriately.