At House Oversight Hearing, California's Medicaid Director Testifies CMS Cited 'No Instances of Fraud' to Justify Its $1.3B Medi-Cal Deferral

At a House Energy & Commerce oversight subcommittee hearing on June 25, 2026, California Medicaid Director Tyler Sadwith testified that despite CMS's May deferral of roughly $1.3 billion in federal Medicaid funds — the largest such deferral in CMS history, aimed mainly at in-home/personal-care (IHSS) spending — 'CMS decided to defer the payments, and they have not provided any instances of fraud, waste or abuse as part of their review.'

Sadwith noted California has suspended approximately 5,000 providers for fraud over the past five years and recovered more than $1 billion in fraudulent payments over the past three; Minnesota's Medicaid director testified about a $350 million deferral there, with CMS threatening to withhold $2 billion annually. Democrats characterized the CMS actions as politically targeted, while Republicans defended the administration's anti-fraud posture.

For FQHCs, the hearing sharpens a fact implicit in the original deferral: the withheld dollars are not (yet) tied to any documented fraud finding, even as the freeze tightens the Medi-Cal cash pool the safety net draws on.