The Trump administration said Tuesday it is pausing more than $867 million in federal Medicaid payments to California amid suspected fraud, a situation one expert said has made it a “piece of cake” for scammers to profit.
“We are not sending Medicaid dollars out the door until we have confidence that they are being spent lawfully and appropriately,” Health and Human Services Secretary Robert F. Kennedy Jr. said at a Tuesday press conference.
The dispute focuses on California’s In-Home Supportive Services program, known as IHSS, a Medicaid-funded initiative that pays caregivers — frequently relatives — to assist elderly and disabled residents in their homes rather than in institutional care.
Centers for Medicare & Medicaid Services Administrator Mehmet Oz said California’s spending on in-home services over the past two years was “twice the rate of the average of the rest of the entire nation.”
“If it smells like fraud, we’re not paying for it anymore,” Oz said, adding that CMS is holding back payments until California can “substantiate their claims from this past quarter audit.”
The action also froze about $199 million in Medicaid funding for Minnesota.
According to Oz, CMS identified questionable billing patterns, including providers filing claims more than a year after services were delivered, billing for four or more patients at the same time, or appearing among the top 2.5% of billers nationwide.
Haywood Talcove, CEO of LexisNexis Risk Solutions for Government and a nationally recognized fraud expert, told The California Post that taxpayers should be “outraged” by what he described as weak oversight that allows fraud to spread in California.
“Anytime you have a program like this where it is self-reported, there is virtually no auditing, and no one gets caught, then the probability of fraud is very, very high,” he said, estimating that fraud accounts for roughly 20% of the IHSS program.
Talcove explained how fraudsters can exploit IHSS, describing the process as a “piece of cake.”
According to Talcove, the fraud scheme begins when someone submits an IHSS application claiming to need in-home care, then designates a caregiver and persuades a licensed healthcare professional to falsely certify their need for care in exchange for a “cut.”
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“I’ll tell you that your fake person that doesn’t exist needs home healthcare, and guess what? You’re going to give me a little cut. That’s how it goes,” Talcove said, adding that the “state doesn’t have the technology, doesn’t have the people, and doesn’t have the systems to validate it.”
Talcove argued California lacks the staffing, technology and incentive to adequately verify the state’s more than 500,000 IHSS recipients.
“There’s no money that comes out of the state pocket,” he said. “The incentive structure — federally funded, state-administered — is a recipe for disaster.”
California Governor Gavin Newsom rejected the administration’s claims of rampant fraud, describing the decision to halt payments as “pure politics.”
“We take fraud seriously,” Newsom said. “We don’t politicize it like these guys.”
The governor claimed that Tuesday’s announcement was an attack on his potential successor Xavier Becerra, the Democratic candidate for governor and a former Health and Human Services chief under former President Biden.
Newsom also said his office has been actively cooperating with the Trump administration, pointing to communications in which information requested from California was already provided.
“California’s approach, which had been long approved by CMS, saves federal and state taxpayers money,” a spokesperson for Newsom’s office told The Post. “One year of in-home care saves state and federal taxpayers approximately $100,000 per person annually versus nursing facility care. A 2020 California State Auditor report found no program integrity concerns and recommended increasing reimbursement rates to grow the in-home care provider workforce and reduce reliance on costly institutional care.”
Talcove believes the only way to prevent future fraud and abuse is to issue block grants and give the money directly to the states, or have the program fully funded and administered at the federal level.
“You can’t arrest and prosecute your way out of this,” he said.
In May, the Trump administration withheld $1.3 billion in Medicaid funding from California over mounting concerns tied to the state’s hospice and home-health agencies — bringing the current total over $2 billion.
The funds will be frozen until California and Minnesota can substantiate their claims and while federal officers review “high-risk” Medicaid claims.
“They need to provide documentation that these payments are legitimate,” Kennedy said.
