State Letters Threaten to End All Federal Medicaid Funding
The Trump Administration’s decision to freeze more than a billion dollars in Medicaid funding to California — and to impose similar punishment on any other state that cannot prove it is “effectively and aggressively” addressing so-called Medicaid fraud — threatens health care for millions of the country’s children.
“The White House continues to wage war on state Medicaid programs and jeopardize children’s health care using the boogeyman of ‘fraud’ as a thinly veiled cover to defund social safety net programs for low-income families,” said First Focus on Children President Bruce Lesley. “The letters sent to states yesterday threaten massive consequences but do not specify what actions the states can take to avoid them other than to run their fraud control programs ‘effectively.’ This is not serious policy — it is bullying, plain and simple.”
Two letters reviewed by First Focus on Children policy experts threaten the states with loss of all federal Medicaid funding. The letters, which the Administration has not released publicly, say that the states’ failure to comply with all federal obligations to receive Medicaid Fraud Control Unit (MFCU) funds could result in “denial of recertification, which could lead to the loss of all Federal grant funds provided to your State’s Medicaid program.” The letters stress: “Noncompliance with your MFCU obligations can take your State’s entire Medicaid program out of compliance. This means your failure to do your job as head of the MFCU has put all of your State’s Medicaid funds in jeopardy.”
These threats come as states struggle to prepare for nearly $1 billion in cuts to their Medicaid programs under H.R. 1 and as coverage for children continues to drop. Roughly 1.5 million children have lost coverage under Medicaid and the Children’s Health Insurance Program (CHIP) since the Trump Administration took office in January 2025, according to Georgetown University’s Center for Children and Families.
In addition, reviews by the Administration’s own Centers for Medicare and Medicaid Services (CMS) suggest that claims of fraud are grossly overstated and that the vast majority of Medicaid payments are made properly.
“If the Administration is truly committed to going after fraud, it should start with the massive overpayments that Medicare HMOs receive and that the Administration made worse in recent weeks by giving the industry a $13 billion bonus,” Lesley said. “Children can’t simply turn off their need for emergency care, asthma treatments, or chemotherapy. Medicaid provides critical health services for nearly half of the nation’s children. We urge CMS to restore partnership with states and ensure that all future program integrity efforts carefully protect access to care for children and their families.”