Vice President Vance defers $1.3 billion in Medicaid funds to California, citing fraud concerns

On May 13, 2026, US Vice President JD Vance announced that the federal government will defer, effectively postpone, $1.3 billion in Medicaid reimbursements to the state of California, citing significant concerns about potential fraud and misuse of federal health care dollars within the state’s Medicaid program.

At a White House briefing, Vice President Vance, who leads the federal Task Force to Eliminate Fraud, said the action was necessary because California had not taken fraud “very seriously”, according to his remarks. He argued that fraudulent health care providers were enriching themselves at the expense of taxpayers and patients, including instances where medications were prescribed unnecessarily.

Centers for Medicare & Medicaid Services (CMS) Administrator Dr. Mehmet Oz described the amount as the “largest deferral we’ve ever made” in Medicaid funding, noting that the rate of growth in certain parts of California’s Medicaid spending, particularly home care services, far outpaced other states. He said the federal government wanted California to explain anomalies in Medicaid billing patterns while the deferment was in place, reported 10 WLPG.


The $1.3 billion deferred funds represent a significant portion of federal Medicaid reimbursements that would normally flow to California, one of the largest recipients of Medicaid funds nationwide.

For context, California’s Medicaid program, known locally as Medi-Cal, was projected to have a total cost, including state and federal shares, of roughly $222 billion for the fiscal year beginning July 1, 2026.

The move comes after the federal government deferred over $300 million in Medicaid reimbursements from Minnesota.


The announcement also coincided with other federal measures:

• A six-month nationwide moratorium on new Medicare enrollments for hospice and home health care providers, aimed at preventing potentially fraudulent entities from entering the system.
  
• Federal warnings to all 50 states that failure to investigate Medicaid fraud aggressively could put federal money at risk.
  
• Recent suspensions of payments to hundreds of hospice and home care agencies in Los Angeles over alleged fraud, as part of wider CMS enforcement actions.
  

Reactions from California

The press office of Governor Gavin Newsom said the state’s increased home care spending was driven by efforts to keep people out of costlier nursing home care, not fraud, and that California “hates fraud” as much as the federal government.

California Attorney General Rob Bonta described the administration’s move as “unlawful,” adding that his office is closely examining all relevant details and is prepared to challenge any action that could jeopardize Californians’ rights or limit access to essential services, reported USA Today.