California HHS Fraud Suspensions Hits $7.2 Billion

AENN

Chriss Street

July 22, 2026

The Trump administration recently hit California with $2.2 billion in federal health and welfare care payment suspensions for fraud, bringing the total to $.7.2 billion in 2026.

President Trump appointed Vice President Vance to lead the administration’s “War on Fraud Task Force” to look into potential waste or abuse in publicly-funded benefits programs (FFP) in late 2025. The President explicitly named California, Colorado, Illinois, Maine, Minnesota and New York as the worst offenders regarding federal payment fraud.

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Vice President Vance established a strike force “run out of the White House” that promised to take “nationwide jurisdiction over the issue of fraud.” Vance stated that initial targets would include: “Federal government programs, Federally funded benefits, businesses, nonprofits, and private citizens nationwide.”

VP Vance in early January directed Secretary of Health and Human Service (HHS) Robert Kennedy and Dr. Mehmet Oz as Administrator for Centers for Medicare and Medicaid Services (CMS) to suspend $10 billion of federal spending on states, including $5 billion for California, over “concerns” about HHS Children and Families (ACF) and Social Services Block Grant fraudulent billings.

U.S. Southern District of New York issued a temporary restraining order on January 9, 2026, stating that the federal government had administratively exceeded statutory authority and was contrary to law under Administrative Procedure Act Section 42 CFR § 430.40 for not following the specific procedures (notice, hearing, formal findings of noncompliance) before restricting or penalizing funding under these programs.

The Court fully agreed that the Trump administration had the right to take action to suspend state payments in cases where fraud is likely, but ruled that CMS must first give 60-day written notice identifying the type/amount of the deferred claim, the reason for deferral, and request states provide reasonable documents/materials supporting allowability of payment.

With the Courts and the Trump administration in agreement to an appropriate federal policy to allow reducing, suspending and/or terminating potentially fraudulent healthcare and other publicly-funded benefits programs, CMS and HHS agreed to withdraw their initial $10 billion payment suspensions by mid-July.

But CMS on May 13, 2026 under the Court approved policies, deferred $1,343,711,974 in California federal financial participation payments for In-Home Supportive Services (IHSS) / Community First Choice / Personal Care Services to California. CMS commented that California billings have been growing twice as fast, compared to the rest of the nation.

CMS under the Court approved policies, deferred another $867.5 million in California federal financial participation payments regarding in-home health fraud and “unsatisfactory immigration status” on July 21, 2026.

California just enacted a $495.6 billion budget for the 2026-2027 fiscal year beginning on July 1, 2026, that includes $174.7 billion in expected federal payments. The budget forecasted that nearly four-fifths of federal spending (78.3%), or $136.6 billion, is expected to support HHS programs. [below]

That California enacted budget projects a reduction of only $9 billion in federal HHS spending on California. The also budget assumes no federal reductions, suspensions or terminations for fraudulent HHS billings.

The Trump Administration’s Office of Inspector GeneraI (OIG) latest 6-month period ending on March 31, 2026 found $5.56 billion in fraud and banned 1,212 individuals and entities from eligibility to contract with federal programs. Many of the banned individuals and entities are from California.

Acting Attorney General Todd Blanche following whistleblower reports of massive fraud in Minnesota and California announced the creation of a DOJ National Fraud Enforcement Division (NFED) on April 7, 2026.

Vice President JD Vance in June announced criminal referrals of Minnesota Gov. Tim Walz and Attorney General Keith Ellison to the DOJ for $9 billion of healthcare and social services fraud prosecutions.

Given that California gets 7.3 times the federal funding versus Minnesota, Mountain Top Times estimated on June 10, 2026, that California could be liable for about $65.7 billion in federal payment suspensions or terminations

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