The Centers for Medicare & Medicaid Services has deferred $867 million in payments to California for the second quarter of 2026. This decision follows a review of Medicaid spending that uncovered significant irregularities and potential waste. The federal government identified suspicious claims including billings for deceased individuals and excessive hours that exceed physical possibility.
At the center of the concern is California’s In-Home Supportive Services program. Costs for this service grew by nearly 24% over two years, a rate that stands as an outlier compared to national trends. Federal auditors are currently reviewing expenditure reports to identify the source of this rapid growth.
Additional scrutiny was applied to payments meant for ineligible enrollees and individuals with unsatisfactory immigration status. The federal government withheld approximately $220 million related to these categories. Officials state that taxpayer dollars should not fund healthcare for those who do not meet federal eligibility requirements.
There are also questions regarding the role of powerful unions within the state’s caregiver programs. Reports suggest that some caregivers faced pressure or coercion regarding union membership and dues deductions. These concerns about transparency and labor practices coincide with broader issues of financial oversight within the state system.
Federal administrators describe this action as a necessary diagnostic step. By halting these funds, they aim to force the state to account for discrepancies and reform internal controls. California now faces a choice between reforming its payment integrity standards or continuing to face federal financial restrictions.