The Trump Administration Launches Sweeping Medicaid Fraud Crackdown

The Trump administration has initiated a comprehensive effort to address fraud, waste, and abuse in Medicaid, with the Centers for Medicare and Medicaid Services (CMS) implementing significant financial and procedural measures. These actions include deferrals of federal funds, provider revalidation requirements, and heightened scrutiny of state Medicaid Fraud Control Units (MFCUs), according to official documents and state responses.

Major Financial Actions in Minnesota and California

CMS has deferred $350 million in federal Medicaid funding for Minnesota and $1.3 billion for California, marking the largest such actions in the agency’s history. The deferrals, which pause payments for past expenditures, require states to demonstrate the “allowability” of claims. In Minnesota, a $515 million quarterly federal funding withholding was initially threatened but resolved after the state submitted a corrective action plan, according to a court filing. California’s deferral includes $1.1 billion tied to home care services, with CMS citing “significant growth” in claims relative to other states.

Both states have challenged the deferrals in court. In Minnesota, a District Court ruled the deferral “historically unprecedented” but compliant with regulations, while California alleges CMS’s estimation methods for the home care deferral were flawed. The states argue that the funding pauses threaten program stability, particularly as Medicaid budgets face historic federal cuts.

State-Specific Program Integrity Reviews

CMS has sent detailed requests to California, Florida, Maine, and New York for information on Medicaid program integrity, fraud prevention, and provider oversight. These inquiries follow concerns about “high-risk” services such as home care, behavioral health, and non-emergency medical transport. States like California and Maine have emphasized that rising service usage reflects policy choices, not fraud, and highlighted robust internal safeguards.

The agency also mandated immediate revalidation of “high-risk” Medicaid providers, requiring states to submit two-year revalidation strategies. High-risk categories include providers without National Provider Identifiers (NPIs), which CMS says are vulnerable to fraud. States like New York and Florida have pledged to accelerate revalidations, though some express concerns about resource constraints.

HHS-OIG Intensifies MFCU Scrutiny

The HHS Office of the Inspector General (HHS-OIG) is reviewing all 53 state Medicaid Fraud Control Units (MFCUs) ahead of their annual recertification. In June 2026, HHS denied Hawaii’s