Federal Medicaid Probe Ignites Battle Over Immigrant Care

The Trump administration has escalated its scrutiny of Medicaid spending in several Democratic-led states, including California, over allegations of improper billing for care provided to undocumented immigrants. Federal authorities have identified at least $500 million in overbilled Medicaid funds in California, which were attributed to services such as mental health treatment, prescription drugs, and dental care for individuals lacking permanent legal status. The Centers for Medicare and Medicaid Services (CMS) has notified six states — California, Colorado, Illinois, Minnesota, Oregon, and Washington — that it is investigating their Medicaid payments for potential waste, fraud, or abuse, particularly concerning non-emergency and non-pregnancy-related care for undocumented immigrants [1].

The federal government maintains that states are permitted to bill Medicaid for emergency and pregnancy care for undocumented individuals but are prohibited from using federal funds to subsidize broader health benefits. In a letter to California's health department, CMS stated that if it determines the state is illegally using federal funds for non-eligible immigrants, it will pursue enforcement actions, including reductions in federal funding and potential legal action [1]. This move is part of a broader strategy by the Trump administration to curtail spending on immigrant health care, including changes to reimbursement rates and stricter eligibility verification protocols.

California has been the most prominent case, having self-reported the overbilled $500 million. The state’s Medicaid expansion, which began in 2016, has extended coverage to approximately 1.6 million undocumented immigrants, with a total estimated cost of $12.4 billion for the current fiscal year. Of this, $1.3 billion is federally funded for emergency and pregnancy-related care. The state acknowledged the billing error and reportedly has been working to repay the amount identified by federal regulators, though the repayment status remains unclear [1].

The Trump administration’s probe has drawn criticism from state officials and health advocates, who argue that the investigations are politically motivated and could harm access to care. California’s Attorney General, Rob Bonta, has labeled the federal actions as a manufactured pretext for enforcing an anti-immigrant agenda. He and other officials from states under review claim that their Medicaid programs are lawfully administered and that cutting federal reimbursements will leave safety-net providers financially strained and limit care for vulnerable populations [1].

Health policy experts have highlighted the long-term economic benefits of providing preventive and chronic disease care to immigrants, arguing that early intervention reduces overall healthcare costs. Conversely, the Trump administration has defended its actions as necessary for preserving the fiscal integrity of the Medicaid program and ensuring that federal funds are reserved for legally eligible individuals. CMS Administrator Mehmet Oz emphasized the administration’s commitment to program integrity and safeguarding taxpayer dollars [1].

The situation highlights the ongoing tensions between state and federal policies regarding Medicaid expansion and immigrant health coverage. While California and other states have used their own funds to expand Medicaid to undocumented populations, federal oversight now threatens to restrict those programs. The broader GOP-led policy shift includes reducing reimbursement rates for immigrant health care starting in 2026 and requiring monthly reports on undocumented Medicaid enrollees. These measures could further strain state budgets and complicate efforts to maintain healthcare access for immigrant communities [1].

As the investigations continue, states under review have sought clarity on federal guidelines and pushed back against what they see as unjustified scrutiny. California’s Medicaid director, Jacey Cooper, has defended the state’s commitment to transparency and accountability, stating that the overbilled funds were promptly reported. Meanwhile, health policy analysts remain divided on whether the federal crackdown is a necessary enforcement of Medicaid rules or an overreach that undermines public health and access [1].

Source: [1] California overbilled Medicaid $500 million to provide care ... (https://fortune.com/2025/09/05/california-overbilled-500-million-undocumented-immigrants-trump-crackdown/)