The White House has escalated its campaign against alleged public benefits fraud by withholding billions of dollars in Medicaid funding from the state of California, accusing state authorities of failing to adequately tackle fraudulent practices within federal healthcare programmes.
The move was announced by JD Vance, who leads a federal anti-fraud task force established by President Donald Trump. Vance said the administration’s decision was based on what it described as California’s weak response to alleged widespread fraud involving Medicaid and other federal healthcare services.
Speaking at a press conference on Wednesday, Vance argued that taxpayers across the United States were the real victims of the fraud, insisting that California had not taken sufficient steps to protect public funds.
He said the state’s failure to act left the federal government with no option but to freeze a significant portion of its Medicaid allocations pending further review.
Officials from the federal government said approximately $1.3 billion in funding had been suspended.
The administration cited concerns over alleged abuse in hospice care and home healthcare services, with Mehmet Oz claiming that a large concentration of federally funded hospice providers was located in Los Angeles, which raised red flags for investigators.
The administration’s decision marks another major confrontation between the Trump White House and Democratic-led states over federal oversight of welfare programmes.
It follows a similar funding freeze imposed on Minnesota, where authorities are already battling the federal government in court over withheld healthcare funds tied to anti-fraud investigations.
California Governor Gavin Newsom strongly rejected the allegations, accusing federal officials of misrepresenting the situation.
In statements posted by his office, Newsom argued that the targeted programmes help elderly people and individuals with disabilities remain outside institutional care facilities and said the action was politically motivated rather than evidence based.
His office stated that while California supports efforts to eliminate fraud, the administration’s measures were punishing vulnerable residents rather than addressing criminal wrongdoing.
State officials also accused federal authorities of exaggerating the scale of potential abuse in order to justify the unprecedented funding cut.
The dispute reflects a broader strategy by the Trump administration to use fraud investigations as grounds for pausing federal support to states. Officials describe the process as a “deferral,” meaning funds are temporarily withheld while federal agencies conduct compliance reviews. While the mechanism itself is not new, analysts say the scale of the current suspensions is unlike anything previously seen.
In Minnesota, a federal judge recently refused to order the immediate release of $259 million in frozen Medicaid funds after the state sued the federal government. Although the court acknowledged that the size and timing of the withholding were extraordinary, it ruled that the federal agencies appeared to be acting within existing regulations.
Minnesota officials have complained that even after complying with federal recommendations and strengthening anti-fraud safeguards, the funds remain blocked. State Auditor Julie Blaha said the federal government had failed to restore funds despite evidence that corrective measures were underway.
The White House has not specified exactly what California must do to regain access to the withheld money. However, officials said all 50 states’ Medicaid Fraud Control Units are now being audited, while new enrolments for certain home healthcare and hospice providers have also been temporarily suspended nationwide.
The action is likely to deepen tensions between the Trump administration and several Democratic-controlled states, including California, New York and Minnesota, which have repeatedly faced threats of federal funding cuts since Trump returned to office. Critics say the strategy is increasingly being used as a political tool, while the administration insists it is necessary to protect taxpayers and reduce abuse in public welfare programmes.
