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The Trump administration is suspending $1.1 billion in Medicaid funding from California’s home health program over fraud concerns, a move that state health officials and health advocates say could harm hundreds of thousands of seniors and people with disabilities.

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At the center of the dispute is California’s In-home Supportive Services, or IHSS, which helps about 900,000 older Californians and people with disabilities with daily activities so they can remain in their homes instead of institutional settings. 

Dr. Mehmet Oz, administrator of the U.S. Centers for Medicare and Medicaid Services, called it the “largest deferral we’ve ever made” at a Wednesday press conference. He said California is an outlier – its home health spending is growing at twice the rate of other states – and that the federal government will withhold Medicaid funds until the state can convincingly explain why. 

The suspension is part of the administration’s stated crackdown on Medicaid and Medicare fraud. Though Oz’s agency has raised concerns about “integrity” in California’s home health program, it has provided no supporting evidence, California health officials said.

State Medicaid director Tyler Sadwith said in a press release the program’s growth has been intentional. He attributed it to three factors: a larger caseload, higher hourly wages for home health workers, and more hours logged as workers serve more people with greater needs.

Between 2023 and 2025, caseload increased 17.5%, and the average hourly wage for home health workers grew from $19 to $21 according to the Department of Health Care Services, which oversees the state’s Medicaid program, better known here as Medi-Cal. 

Gov. Gavin Newsom, speaking at his budget presentation Thursday, argued the expansion should be celebrated not punished. In-home health services cost about $30,000 per person annually, Newsom said. Skilled nursing facilities can cost four to five times that. 

State health officials said they have a strong oversight system to weed out fraud in the home health care system, including “annual assessments, electronic timesheets, verification tools, and coordinated state-county review processes.”

In addition to the $1.1 billion deferral on home health, the federal government is withholding another $200 million tied to administrative claims the state said it expected and is working to resolve. 

The federal freeze of California funding follows a similar action in Minnesota in February, when the federal administration suspended $259 million in Medicaid payments. Minnesota sued to block it. 

During Wednesday’s press conference, Vice President JD Vance – who oversees the administration’s fraud task force – accused California, New York and Hawaii of not doing enough to combat Medicaid fraud. “This is why we’re taking this action,” Vance said. “We want California to get more serious about this fraud.” 

California has been a focus in the Trump administration’s anti-fraud efforts, with hospice care at the center of investigations. Vance and Oz also announced a six-month nationwide moratorium on Wednesday – barring new hospice providers from enrolling in Medicare. California has imposed a similar pause on new hospice licenses. 

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