Vice President JD Vance announced Wednesday that the federal government will begin withholding Medicaid funding from states that fail to aggressively combat fraud, starting with California after officials blocked $1.3 billion in reimbursements tied to hundreds of suspicious hospice providers.
Speaking at a broad press conference focused on healthcare fraud, Vance said the Trump administration is escalating pressure on states it believes are failing to police abuse within Medicaid, the government insurance program that covers more than 75 million low-income Americans.
“We’re announcing that the federal government is deferring $1.3 billion in Medicaid reimbursements from the state of California,” Vance said. “And the simple reason is because the state of California has not taken fraud very seriously.”
The vice president, who chairs President Trump’s anti-fraud task force, said the administration will send warning letters to all 50 states demanding proof that their Medicaid fraud control units are actively investigating and prosecuting abuse. States that fail to comply could lose federal anti-fraud funding and potentially face broader cuts to Medicaid-related support.
“For those states that refuse to get serious about fraud, we’re going to turn off that anti-fraud money,” Vance said. “And if we continue to find problems, we can turn off other resources within their state Medicaid programs as well.”
Although Vance framed the effort as a national crackdown rather than a partisan initiative, he specifically singled out California, New York and Hawaii as states where federal officials believe enforcement has been weak.
He criticized New York’s prosecution record in particular, noting that the state reported only nine Medicaid fraud indictments over the last year despite operating a program worth roughly $100 billion annually.
“Indiana, which has about a third of the population of the state of New York, has had more than four times as many indictments over the same period,” Vance said. “Does anybody here seriously think that the good people of Indiana are 12 times more likely to commit fraud than the people of New York? No, of course not.”
“What is happening is that the people in the leadership in New York are just not taking the fraud issue seriously,” he added.
Neither the office of California Gov. Gavin Newsom nor New York Gov. Kathy Hochul immediately responded to requests for comment following the announcement.
Dr. Mehmet Oz, who now oversees Medicare and Medicaid at the federal level, said investigators identified widespread abuse within California’s hospice system, especially in the Los Angeles area.
“A third of all hospices, a third of all these programs in the entire country are in Los Angeles,” Oz said. “Ask yourself, how is that possible? It’s not. There are not that many people dying in Los Angeles.”
Oz claimed federal officials believe at least half of the hospice providers operating around Los Angeles are fraudulent. He said 800 hospice and home-care facilities have now been suspended from receiving federal reimbursements, with fewer than 20 complaints filed in response.
“We’re not even sure those are legitimate,” Oz said of the complaints.
Federal officials also announced a nationwide moratorium on approving new hospice and home healthcare providers eligible for reimbursement through Medicare and Medicaid programs. Existing providers will still be allowed to continue operating.
Oz argued the freeze is necessary because fraud operations tend to migrate geographically once enforcement increases in one area.
“When we squeeze the balloon in California, we know what those fraudsters do. They move to nearby Nevada,” he said, pointing to what he described as a sevenfold increase in hospice activity there.
The administration has already taken similar action in other states. Earlier this year, federal officials withheld $259.5 million in Medicaid funds from Minnesota tied to several programs identified as high risk for fraud, including autism services, transportation assistance and home rehabilitation care.
Vance and Oz also announced earlier this year a separate national moratorium targeting new suppliers seeking Medicare reimbursements for durable medical equipment such as wheelchairs and canes, citing concerns about widespread fraud in South Florida.
Despite the heavy focus on Democrat-led states, Vance insisted the effort would apply equally nationwide.
“Red state or blue state, we’re going to go after it,” he said.
“We are not going to have a generous country if Americans think that they’re paying their taxes not to needy people, but to fraudsters. That’s fundamentally what we’re trying to fix, rebuilding America’s trust.”
