The Centers for Medicare & Medicaid Services (CMS) took separate actions against the Medicaid programs of California and New York on consecutive days last week. On Tuesday, October 20, CMS Administrator Mehmet Oz announced a deferral of $1.2 billion in federal Medicaid payments to California, held until the state documents its personal care claims. On Wednesday, CMS sent New York's Medicaid director a letter demanding a corrective action plan within 30 days, after federal officials audited social adult day care centers, which offer supervision, meals and activities to older enrollees, and said they found billing for people who were not attending. For California, CMS cited the growth of the state's in-home care program; Governor Gavin Newsom's office called the deferral an attempt "to use vulnerable Californians as political pawns." New York Governor Kathy Hochul, who announced a joint state and federal crackdown on the centers the day before the letter, has ordered a review of whether to end the benefit.
New York: a 30-day clock
Kim Brandt, CMS's chief operating officer, audited 15 centers on October 20; HHS said all 15 "showed no record of a single meal, activity, or hour of supervision — just attendance sheets," and the Daily Caller reported she found pre-filed billings for people who were not participants. CMS deputy administrator Dan Brillman said sign-in sheets "already had things filled out for tomorrow, Thursday, and Friday." Officials said they are also using a newly delegated power to bar providers from federal health programs against New York City adult day care centers they say are committing fraud, STAT reported; Health Secretary Robert F. Kennedy Jr. gave CMS that authority on October 14. CMS has not named those centers or published the audits, and no charges tied to them have been reported. The same day, federal and state investigators executed search warrants at several adult day care centers across the city, CBS New York reported, and the director of one Queens center Oz visited said it billed only for seniors who attended, Fox News reported. Nor has CMS released the letter. According to CBS New York, it requires a corrective action plan within 30 days and says the state must maintain "an effective monitoring system" to detect and prevent fraud. Brillman said New York then has 90 days to come into compliance, and that if the state "can't produce a corrective action plan, the question shifts from how to fix it to whether it can be fixed at all and should this even continue." CMS has not said publicly what would follow a missed deadline.
On October 20 Hochul announced that state investigators, working with the FBI and the HHS inspector general, had examined more than 100 social adult day care providers. She ordered health plans to review the centers' claims before paying them and told the Health Department to weigh options including "phasing out the benefit and transitioning participants to other services," with recommendations due December 31. The program serves about 45,000 people at more than $500 million a year. CMS has erred on New York figures before: in April it acknowledged that it had misinterpreted how New York applies its billing codes when Oz said in March that roughly 5 million New Yorkers received Medicaid personal care. The figure was closer to 450,000, and Hochul's office had called the claim "patently false." The federal review of New York's program remained ongoing, Mediaite reported, citing the Associated Press. A February audit by the state comptroller found $2.4 billion paid for the service from 2019 through October 2024, including more than $285 million in "questionable" payments for dates after centers had been terminated from a plan's network. Staten Island prosecutors charged two operators of one center last week with billing more than $530,000 for services never provided; both have pleaded not guilty.
California: a third hold on home care
The California deferral is the third this year aimed mainly at In-Home Supportive Services, a county-run program that pays caregivers, nearly three-quarters of them relatives according to a 2020 state audit, to help older and disabled low-income residents with daily tasks at home. Oz said California "has been growing that program 24% in the last three years," twice the average rate in other states. The administration cited concerns about potential fraud, the Los Angeles Times reported, but Oz did not provide evidence of it; he argued instead that the state was paying for help relatives would otherwise give for free: "Many of you would carry groceries upstairs for your mom for free, but in California, they will pay you a lot of money for it." A spokesperson for Newsom called the deferral "a cruel, reckless attempt to use vulnerable Californians as political pawns, putting seniors, children, and people with disabilities at risk," and said $1.1 billion of it involves in-home care. The state argues the program saves money by keeping people out of nursing homes, at about $30,000 a year per person against $137,000 for nursing home care, and its Medicaid agency said in July that the growth "reflects intentional, federally encouraged expansion, not improper spending."
A deferral is not a cut: CMS withholds its share of questioned claims while a state supplies documentation, and the money is lost only if CMS later disallows the claims, which the state can appeal to HHS's Departmental Appeals Board and then in federal court. In May, CMS deferred about $1.3 billion, saying California's personal care spending growth "exceeded the average growth rate of all other states by 11.23%"; a second deferral of $867.5 million followed in July. Newsom's office puts in-home care deferrals at $2.8 billion in all, and state officials say services have continued without interruption. HHS Secretary Robert F. Kennedy Jr. said in July that states "must demonstrate that every dollar meets federal requirements"; Andy Schneider of Georgetown University's Center for Children and Families wrote in July, about the earlier deferrals, that Oz "presented no evidence that withholding federal matching funds from states actually reduces fraud against Medicaid."
This article reflects reporting through the afternoon of Monday, October 26, 2026. Sources: CBS News New York; STAT, October 21; Daily Caller; Office of Governor Hochul; New York State Comptroller; the Associated Press via Mediaite; Los Angeles Times via Yahoo News; The Epoch Times; Medical Daily; CMS May deferral letter; KFF; Georgetown Center for Children and Families; Fox News.
