Federal Medicaid officials cited rapid growth in the state’s personal care services as grounds for a third deferral this year, without presenting evidence of fraud, while California says the program keeps older and disabled residents out of costlier nursing homes.
By Staff Reporter
The Trump administration said on Tuesday that it would defer an additional $1.2 billion in federal Medicaid reimbursements to California, pointing to the growth of the state’s personal care services, the in-home help that allows hundreds of thousands of older and disabled Californians to bathe, dress, eat and remain in their own homes.
Dr. Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services, made the announcement in the Oval Office during an event at which President Trump unveiled a $25 million whistle-blower program for reporting fraud, according to the Los Angeles Times. State officials were notified that day, Dr. Oz said.
“California has been growing that program 24% in the last three years. That is twice the rate of every other state average in the country,” Dr. Oz said, according to the Times and Fierce Healthcare. “Impossible for us to understand how that could be, so we’re taking major action in California.”
The Times reported that Dr. Oz did not provide evidence of fraud. He suggested instead that the state was paying for help that families might otherwise give for free, such as “paying somebody to carry groceries upstairs for your mom.”
A deferral, not a cut
A deferral is a hold on the federal share of claims that Medicaid officials question, not a permanent reduction. Under the process, the state may submit documentation showing that the claims meet federal rules; the agency can then release the money or disallow claims it finds unsupported. When the administration announced an earlier deferral in July, Health and Human Services Secretary Robert F. Kennedy Jr. put it plainly: “If those states want that money, they need to provide documentation that these payments are legitimate,” he said, according to Fierce Healthcare.
Tuesday’s action is the third of its kind against California this year. In May, the agency deferred about $1.3 billion, which Dr. Oz described at the time as the largest deferral the agency had ever made, citing hospice and in-home care spending. In July, it deferred about $867.5 million more. According to Direct Support News, a trade publication covering the home care work force, roughly $646 million of the July amount was tied to in-home services, and the agency’s May letter said California’s personal care claiming had outgrown the average of other states between federal fiscal years 2023 and 2025.
In July, a senior Medicaid official, Dan Brillman, said the administration had not yet released any of the money it had previously held from California or Minnesota, the other state singled out at the time, Fierce Healthcare reported. Together with Tuesday’s announcement, the three deferrals add up to roughly $3.4 billion this year.
What the program is
The personal care spending at issue flows largely through In-Home Supportive Services, or IHSS, a program administered by California’s 58 counties that pays caregivers to help eligible low-income people who are elderly, blind or disabled. A county social worker typically assesses each applicant at home to determine how many hours of help they qualify for.
Much of that work is done by relatives. A 2020 report by the California state auditor found that nearly three-quarters of IHSS caregivers were assisting a family member, the Times noted. That arrangement is by design: California has long paid family caregivers so that people who need daily help can remain at home.
Gov. Gavin Newsom’s office has argued that the program saves money. It has said that IHSS care costs about $30,000 a year per recipient, compared with about $137,000 a year for nursing home care, according to the Times. After the May deferral, the governor’s office called the move a “sick” and politically motivated attack on services meant to “keep seniors and people with disabilities OUT of nursing homes.” It has also said, in a post on X cited by NTD, “We hate fraud. But that’s NOT what this is.”
Mr. Newsom’s office did not immediately respond to the Times’s request for comment on Tuesday’s action. Senator Alex Padilla, a California Democrat, said in a statement that the decision “will hurt older Californians, people with disabilities, and those recovering from illness or injury.”
What it means for California and the Bay Area
A deferral hits the state’s cash flow before it reaches caregivers’ paychecks, Direct Support News noted, but repeated holds put pressure on a program that both the state and the counties help finance. The sums are growing with each round. Medi-Cal, the state’s Medicaid program, has a total budget estimated at about $222 billion this fiscal year in combined state and federal money, NTD reported.
The timing compounds the strain. The Legislative Analyst’s Office has warned that California faces a structural budget deficit in the coming years, and money withheld by Washington, even temporarily, narrows the room for the next governor, who takes office in January after the Nov. 3 election.
For Bay Area families, the dispute is less abstract than the dollar figures suggest. Because IHSS is run county by county, the recipients and caregivers affected live in every part of the region, from San Francisco apartments to the suburbs of the East Bay and the South Bay, and many of the caregivers are the recipients’ own children, spouses or parents. In a region with some of the highest living costs in the nation, the program can be what allows an aging parent to stay at home rather than move into a facility.
The administration has framed the deferrals as part of a broader campaign against waste and fraud in health programs, a priority led by Vice President JD Vance. The Times noted that the effort has focused particularly on states led by Democrats. California has the opportunity to contest the holds through the documentation process, and neither side has said how long that review will take.
