Health and Human Services Secretary Robert F. Kennedy Jr. is pointing the finger squarely at his predecessor, alleging that former HHS Secretary Xavier Becerra systematically dismantled the department's fraud oversight and left billions of taxpayer dollars exposed to theft. Kennedy paired that accusation with action, freezing more than $1 billion in federal Medicaid payments to California and Minnesota while investigators chase what the administration calls staggering patterns of waste and abuse.
The twin moves mark the sharpest escalation yet in the Trump administration's campaign to root out Medicaid fraud, and they set up a direct clash with two blue-state governors who say the payment holds are politically motivated.
Kennedy's charges against Becerra are specific and structural. The California Globe reported that Kennedy accused Becerra of gutting HHS fraud oversight during the Biden administration, creating conditions that enabled billions in theft from federal health programs. The allegation is not that Becerra personally stole funds but that his leadership choices stripped away the guardrails meant to catch fraud before money went out the door.
Kennedy has framed the problem as one of deliberate institutional neglect. Under Becerra, he contends, the department deprioritized enforcement, weakened internal controls, and allowed spending anomalies to go unchecked for years. The result, in Kennedy's telling, was an HHS apparatus that could not distinguish legitimate claims from fraudulent ones, even when the warning signs were obvious.
Becerra, who served as HHS Secretary from March 2021 through January 2025, has not publicly responded to Kennedy's latest accusations in the materials reviewed for this report. Investigators have not said whether any formal referral or inquiry targeting Becerra's tenure is underway.
Kennedy backed up the rhetoric with a concrete enforcement step. The Centers for Medicare and Medicaid Services is now withholding approximately $867 million in federal Medicaid payments to California and over $200 million to Minnesota, pending fraud reviews of flagged claims.
The frozen funds are not random. CMS used artificial intelligence and advanced analytics to identify suspicious spending patterns, then targeted specific categories of claims that triggered red flags. The New York Post reported that $221 million of California's frozen funds involve claims tied to individuals with "unsatisfactory immigration status." Millions more are linked to services allegedly billed for beneficiaries after their deaths.
Other flagged payments involve providers who were caught by fraud detection systems and spending patterns that CMS considers significant statistical outliers. Minnesota, for its part, disenrolled roughly 3,000 providers after failed background checks, failed site visits, and other compliance failures, a number that itself raised questions about how those providers were approved in the first place.
One data point sits at the center of the administration's case against California. The state's in-home supportive services spending grew 24% over the past two federal fiscal years. The national average for the same period was roughly 12%. California's rate was double.
CMS Administrator Dr. Mehmet Oz called that gap inexplicable on its face.
"So California increased spending at twice the rate of the average of the rest of the entire nation. That doesn't make sense."
The 24% growth rate does not, by itself, prove fraud. States can have legitimate reasons for rising Medicaid costs, including population growth, expanded eligibility, or increased service utilization. But CMS is treating the outlier as a reason to demand documentation before releasing additional funds. Investigators will need to determine how much of the spending increase reflects genuine service delivery and how much may involve inflated, duplicated, or fabricated claims.
Kennedy framed the payment hold not as a punishment but as a compliance checkpoint. Fox News reported his direct challenge to the two states' leaders.
"If Governor Gavin Newsom or Governor Tim Walz wants this funding released, all they have to do is provide basic documentation showing that these services are legitimate and not fraudulent."
The offer is straightforward on paper: prove the claims are clean, and the money flows again. But the volume of documentation required to clear more than $1 billion in flagged payments could take months to assemble and verify, leaving state Medicaid programs in financial limbo during the review.
Kennedy reinforced the broader principle driving the freeze in a separate statement.
"We are not sending Medicaid and Medicare dollars out the door until we have confidence that they are being spent lawfully and appropriately."
Both California and Minnesota pushed back quickly. Democratic governors in both states called the payment holds politically motivated, though neither has publicly detailed a rebuttal to the specific data points CMS cited. The political dynamic is hard to miss: two of the bluest states in the country, governed by two of the Democratic Party's most prominent executives, facing a funding freeze ordered by a Republican administration that has made Medicaid integrity a signature issue.
Whether the governors' objections gain legal traction will depend on the specifics. Federal law gives CMS broad authority to defer payments when fraud is suspected, but states can challenge the scope and duration of holds through administrative and judicial channels. Authorities have not publicly confirmed whether either state has filed formal objections or sought emergency relief.
Two categories of flagged claims stand out for their bluntness. Payments billed for services rendered to deceased beneficiaries are among the easiest fraud indicators to verify. If a person is dead and a provider submits a claim for services delivered after the date of death, the claim is either a billing error or a fabrication. CMS has flagged millions of dollars in California payments falling into this category.
The $221 million tied to individuals with unsatisfactory immigration status raises a different set of questions. Federal Medicaid rules generally limit coverage for undocumented immigrants to emergency services. If California billed the federal government for non-emergency services provided to ineligible individuals, those claims would fall outside the scope of what federal matching funds are designed to cover. Investigators will need to determine whether the state applied its own eligibility rules correctly and whether federal funds were drawn down for services that should have been covered by state dollars alone, if at all.
The administration's use of artificial intelligence and advanced analytics to flag suspicious claims represents a shift in how CMS approaches fraud detection. Traditional Medicaid audits are slow, labor-intensive, and often catch problems years after the money has been spent. AI-driven screening can identify statistical anomalies in real time, flagging providers, claim patterns, and spending spikes before additional payments go out.
The approach carries risks. Algorithmic flags are not proof of fraud. They identify patterns that warrant investigation. If CMS freezes funds based on AI output without adequate human review, legitimate providers and beneficiaries could be caught in the net. The administration has not publicly detailed the false-positive rate of its detection systems or the process by which flagged claims are reviewed before payment holds take effect.
Minnesota's situation carries its own troubling details. The state disenrolled roughly 3,000 providers after those providers failed background checks, failed site visits, or triggered other compliance red flags. That number raises a natural question: how did 3,000 problematic providers get enrolled in the first place?
Provider enrollment is supposed to serve as a front-line defense against fraud. States screen providers before granting them access to Medicaid billing systems. If thousands of providers passed initial screening only to fail subsequent checks, the screening process itself may have been inadequate during the period under review. CMS has not said publicly how long those providers were active in the system or how much they billed before being removed.
The payment freeze puts pressure on both states to respond with documentation rather than press conferences. Kennedy's public challenge to Newsom and Walz was designed to shift the burden: if the spending is clean, prove it. If the governors refuse or delay, the administration will treat that resistance as confirmation that the red flags are real.
For CMS, the next steps involve reviewing whatever documentation the states provide, completing fraud investigations on the most suspicious claims, and deciding whether to convert temporary payment deferrals into permanent disallowances. Permanent disallowances would require the states to return federal funds already spent, a far more painful outcome than a temporary hold.
The legal and political fight over these funds is just beginning. But the underlying question is simple enough for any taxpayer to understand: did these states spend federal health care dollars on people who were dead, providers who could not pass a background check, and services that were never delivered?
If the answer is yes, the fraud did not happen in a vacuum. Someone was supposed to be watching the money. Kennedy says that someone stopped.
