The Trump administration has paused more than $1 billion in federal Medicaid payments to California and Minnesota, citing suspected fraud, questionable billing patterns and compliance concerns.

According to a report from Disability Scoop⁠, the decision is drawing concern because some of the funding supports home- and community-based programs used by people with developmental disabilities, older adults and others who need help living outside institutional settings.

How much Medicaid funding is being withheld?

The Centers for Medicare & Medicaid Services is deferring approximately:

• $867.5 million in federal Medicaid payments to California
• $199 million in payments to Minnesota

Together, the deferred payments total about $1.07 billion.

Federal officials said the states must provide documentation demonstrating that the spending complies with Medicaid requirements before the money is released.

It is important to note that the payments are currently being deferred—not permanently eliminated. The states may recover the money if CMS determines that the underlying claims are valid. The action does not immediately change Medicaid eligibility or benefits, according to Reuters⁠.

Why did CMS pause the payments?

Health and Human Services Secretary Robert F. Kennedy Jr. and CMS Administrator Dr. Mehmet Oz said federal reviews uncovered data irregularities and unusual billing patterns.

In California, officials are examining rapid spending growth involving in-home services. California leaders argue that these programs allow older adults and people with disabilities to remain in their communities instead of moving into more expensive nursing facilities.

Minnesota’s deferred funding involves 14 service areas previously identified as having elevated fraud risks. Earlier in 2026, CMS also deferred $259.5 million in Minnesota Medicaid funding while reviewing claims involving personal care, home- and community-based services and other practitioners. CMS said⁠ states have an opportunity to submit documentation supporting questioned expenses.

Federal officials cited anomalies and potentially improper payments but had not publicly presented proof that the entire $1 billion involved confirmed fraud when the latest deferrals were announced.

Why disability advocates are concerned

Medicaid is one of the nation’s most important funding sources for disability services. It helps pay for personal-care attendants, behavioral health treatment, transportation and home- and community-based services.

Although the federal action targets payments to states rather than individual beneficiaries, prolonged funding delays could place pressure on state budgets and the organizations providing everyday care.

The concern is that legitimate providers and vulnerable residents could experience disruptions while federal and state officials dispute the validity of the claims. Smaller service providers may be especially vulnerable if state reimbursements are delayed.

States reject the administration’s allegations

California Gov. Gavin Newsom and Minnesota Gov. Tim Walz criticized the deferrals and suggested that the administration was targeting Democratic-led states.

Newsom said California supports legitimate efforts to prevent fraud but defended the state’s in-home care system as a less expensive alternative to institutional care.

Walz argued that withholding broad Medicaid payments risks harming children, seniors and people with disabilities instead of focusing enforcement directly on providers accused of wrongdoing.

The states can submit additional documentation to CMS and potentially have the deferred payments restored. Minnesota has already provided records that federal officials are reviewing.

What does this mean for North Carolina Medicaid?

The announced payment deferrals specifically involve California and Minnesota. There is currently no indication that North Carolina Medicaid funding is included in this particular action.

However, the dispute matters to North Carolina because it signals more aggressive federal review of Medicaid spending nationwide—particularly personal-care programs, autism services and home- and community-based care.

North Carolina families, disability advocates and service providers should watch for:

• New federal Medicaid audits or documentation requirements
• Changes affecting home- and community-based services
• Payment delays for disability-service providers
• State budget adjustments tied to federal reimbursements
• Additional CMS enforcement involving high-growth service categories

What happens next?

California and Minnesota will have an opportunity to document the questioned claims and demonstrate compliance with federal Medicaid rules. CMS could then release some or all of the deferred money.

The central question is whether the federal review will identify specific fraudulent claims or create an extended funding dispute that places legitimate disability services under financial strain.

DoRaleigh.com will continue following federal Medicaid developments and what they could mean for North Carolina residents, families and disability-service providers.

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Published by Bryan Tomlinson | BTDesigns.pro |

This article summarizes reporting from Disability Scoop and additional publicly available information. Read the original Disability Scoop report⁠.

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