California Flagged as Worst Offender in Explosive Medicaid Fraud Investigation

California Flagged as Worst Offender in Explosive Medicaid Fraud Investigation

The Trump administration is intensifying its push to overhaul the U.S. health care system, and a sweeping new Medicaid investigation has placed California squarely in the spotlight. According to federal officials, the state has emerged as the worst offender in a rapidly expanding probe into Medicaid fraud, waste, and abuse—an investigation now measured in billions of dollars.

The revelations came as Donald Trump rolled out a comprehensive health care reform plan focused on lowering costs, reducing drug prices, and restoring accountability across federal health programs. Speaking from Davos, Dr. Mehmet Oz, Administrator of the Centers for Medicare and Medicaid Services (CMS), detailed both the administration’s broader reform strategy and the alarming scale of fraud uncovered in recent months.

Most Favored Nation Drug Pricing: Ending America’s “Three Times More” Problem

At the core of the Trump health care plan is the expansion and codification of Most Favored Nation (MFN) drug pricing. Under this framework, Americans would no longer pay dramatically higher prices for the same medications sold at a fraction of the cost overseas.

Dr. Oz explained that Americans routinely pay three times more for identical drugs—often manufactured in the same factories—than patients in Europe. Trump, frustrated by the imbalance during his first term, tasked CMS with confronting pharmaceutical companies directly.

The result: agreements with 16 of the 17 major drug companies initially approached. The administration now aims to lock those agreements into law to prevent future reversals, while carefully protecting pharmaceutical innovation.

Oz emphasized that transparency is key. While European governments benefit from lower prices, Americans often shoulder the financial burden of drug development—meaning lifesaving medications frequently reach U.S. patients years before European ones.

Cutting Middlemen and Restoring Fair Pricing

While pharmaceutical benefit managers and other intermediaries contribute to inflated costs, Oz said the core problem was simpler: drug companies charged more because they were allowed to.

“This is capitalism,” Oz said. “If you can charge more and no one stops you, you will.”

Trump’s intervention, backed by regulatory authority and political leverage, forced concessions that Oz described as both fair and sustainable. The administration now plans to replicate this model across the broader health care system to drive down costs without simply injecting more taxpayer money into insurance programs.

Medicaid Fraud Exceeds $1.8 Billion—and Growing

The most explosive revelations, however, came from CMS’s Medicaid fraud investigation. According to Oz, federal auditors initially flagged $1.3 billion in potentially unlawful Medicaid spending across six states—funds allegedly used to provide full health benefits to illegal immigrants.

That figure has now ballooned to over $1.8 billion across eight states, with California identified as the single largest offender. CMS has already withheld more than $300 million from the state.

“They were getting away with it,” Oz said bluntly. “There’s a new sheriff in town.”

California Put on Notice

Oz accused California of illegally billing the federal government for expansive benefits—including dental, vision, and hearing coverage—for illegal immigrants, benefits that even Medicare recipients do not universally receive.

Governor Gavin Newsom and state officials, Oz said, attempted to justify the spending on humanitarian grounds. The administration’s response was firm: states may fund such programs themselves, but federal taxpayers will not foot the bill.

“It’s not right that taxpayers in poorer states subsidize benefits in Los Angeles,” Oz said. CMS has since begun clawing back funds already paid, with California now repaying the improperly billed amounts.

Hospice and Home Health: A $4 Billion Red Flag

The investigation does not stop there. CMS officials believe an additional $3.5 to $4 billion may have been lost to fraud in California’s home health care and hospice systems alone.

Oz cited a staggering anomaly: the number of hospice centers in California has increased sevenfold, despite no corresponding increase in end-of-life patients. Even more troubling, survival rates at some facilities approach 100 percent—a statistical impossibility for programs designed for terminal patients.

“These aren’t hospice centers,” Oz said. “They’re billing centers.”

Minnesota Also Under Scrutiny

Minnesota has also drawn federal attention, with CMS accusing the state of blocking basic program integrity measures such as fingerprinting health care providers. Governor Tim Walz has yet to personally respond to CMS inquiries, and Oz expressed frustration with what he described as inadequate cooperation.

“If fraud dilutes care,” Oz warned, “the truly vulnerable get nothing.”

Obamacare Enrollment Drops—but Not Coverage

New CMS data shows 1.4 million fewer Americans enrolled in Obamacare exchange plans after temporary subsidies expired. However, Oz said fears of mass coverage loss were overstated.

Many removed from the rolls were either ineligible, earning too much, or not U.S. citizens. Despite the drop, overall enrollment has remained stable due to baseline subsidies still covering roughly 83 percent of costs.

Digital Health, GLP-1 Drugs, and a $3 Trillion Payoff

Looking ahead, Oz said digitizing health care could unlock enormous savings, bringing efficiency gains similar to those seen in banking and transportation.

He also highlighted GLP-1 medications, now made more affordable under Trump-backed pricing deals, as transformational. Beyond obesity, these drugs show promise in reducing heart disease, dementia, addiction, and long-term health costs.

If Americans remain healthier and work just one additional year, Oz estimated the economic benefit could reach $3 trillion in GDP.

Accountability as Health Policy

From drug pricing to Medicaid fraud, the administration’s message is clear: reform begins with accountability. With billions already recovered and more investigations underway, CMS officials say the era of unchecked spending is ending.

“Time’s up,” Oz said. “And we’re just getting started.”

#MedicaidFraud #HealthcareReform #CaliforniaAudit #TrumpHealthPlan #CMS

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