The federal government’s promised crackdown on healthcare fraud is now producing concrete enforcement actions, with CMS emerging as a far more powerful regulator.
In late July 2026, HHS and CMS deferred more than $1 billion in federal Medicaid payments to California and Minnesota pending a review of high-risk claims.
California faced a deferral of approximately $867.5 million after focused financial reviews flagged spending growth in certain in-home care programs that far exceeded national trends.
Minnesota saw approximately $199 million in payments deferred following a review of claims across 14 high-risk service areas linked to providers flagged through program integrity reviews.
CMS Administrator Dr. Mehmet Oz stated the agency is “done trying to chase down stolen and misused funds after they’ve already left the building,” signalling a decisive shift in enforcement strategy.
HHS Secretary Robert F. Kennedy Jr. reinforced the move, stating that “states that receive federal Medicaid funding must demonstrate that every dollar meets federal requirements.”
Kennedy added that “when they cannot, we will not release federal funds until they do,” framing the deferrals as a document-driven accountability mechanism rather than permanent payment cuts.
States whose funding has been deferred can submit documentation showing that flagged claims meet federal Medicaid requirements, at which point the withheld funds are expected to be released.
Some providers and stakeholders have raised concerns that these deferrals could cause cash-flow disruptions for legitimate claims and impose additional burdens on state Medicaid agencies.
On the same day the payment deferrals were announced, Secretary Kennedy made a second announcement that drew comparatively less attention but may carry even greater long-term consequences.
Kennedy delegated to CMS the authority to exclude individuals and entities from federal healthcare programs, a power that had historically belonged exclusively to the HHS Office of Inspector General.
Kennedy stated that both CMS and HHS-OIG “will be able to use that authority to remove bad actors from federal health care programs and in many cases to permanently ban them from returning.”
Exclusion is a severe enforcement tool that prevents providers from billing or receiving payment from Medicare, Medicaid, or any other federally funded healthcare programme.
Between October 2025 and March 2026 alone, HHS-OIG excluded 1,212 individuals and entities, generating $5.56 billion in monetary impact and more than $447 million in potential cost savings.
HHS Inspector General T. March Bell described the delegation as “a force multiplier” designed to create “additional momentum” in the government’s pursuit of fraudulent actors.
Several significant questions remain unanswered, including how CMS and HHS-OIG will divide enforcement responsibilities and what due process protections will apply to CMS-initiated exclusions.
It is also unclear how CMS’s new exclusion authority will interact with its existing Medicare enrollment revocation powers or affect False Claims Act settlements.
Providers with substantial Medicare or Medicaid exposure should now reassess their compliance programmes, fraud-and-abuse controls, and internal risk-assessment processes without delay.
The combination of expanded exclusion authority and aggressive payment deferrals signals that CMS is repositioning itself as a frontline enforcement agency, not merely a programme administrator.
Healthcare providers and state Medicaid agencies alike should prioritise strong documentation practices, compliance readiness, and proactive risk assessment as this new enforcement environment takes hold.