California Ordered to Return More Than $1 Billion After Federal Audit Finds Medicaid Misuse [WATCH]

The Trump administration has ordered California to return more than $1 billion to the federal government after a sweeping audit found that the state improperly used federal Medicaid funds to pay for non-emergency healthcare services for illegal immigrants, according to officials and audit findings made public this week, as reported by The Gateway Pundit.

The audit was conducted under the direction of Mehmet Oz, the administrator of the Centers for Medicare & Medicaid Services, and examined Medicaid billing practices across several states and Washington, D.C.

The review determined that more than $1.3 billion in federal healthcare funds were improperly claimed for services that federal law does not allow Medicaid to cover for individuals in the country illegally.

Under longstanding federal Medicaid rules, states are permitted to use federal funds only for emergency medical services provided to illegal immigrants.

Routine medical care, elective procedures, and non-emergency treatments must be paid for using state funds. The audit found that multiple states billed the federal government for routine care, directly violating those requirements.

The findings were first highlighted in a report discussed on Fox News, which detailed the scope of the improper billing uncovered during the audit.

Assistant U.S. Attorney for the Central District of California Bill Essayli addressed the findings in a post on X, writing:

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“California must return more than $1 billion to the federal government after an audit by Dr. Oz and his team uncovered federal dollars being spent on healthcare for illegal immigrants. We are teaming up to combat healthcare fraud so the money can be used for American citizens who need it!”

California must return more than $1 billion to the federal government after an audit by @DrOzCMS and his team uncovered federal dollars being spent on healthcare for illegal immigrants. We are teaming up to combat healthcare fraud so the money can be used for American citizens… pic.twitter.com/YWgwQg7XBZ

— F.A. United States Attorney Bill Essayli (@USAttyEssayli) January 19, 2026

According to federal auditors, the total amount owed back to U.S. taxpayers is approximately $1.394 billion. California accounted for the overwhelming majority of that figure, with roughly $1.3 billion identified as improperly billed.

The remaining amounts were attributed to several other states and jurisdictions, including New York at approximately $30.7 million, Illinois at $29.8 million, Minnesota at $12.7 million, Oregon at $5.4 million, Washington at $2.3 million, Washington, D.C. at $2.1 million, and Colorado at $1.5 million.

Auditors concluded that the disputed funds were billed for routine medical services rather than emergency care, placing the claims outside the scope of what Medicaid permits under federal law.

California officials rejected the findings and denied wrongdoing, asserting that the state “routinely reimburses” the federal government for any improperly billed services.

However, the audit report directly contradicts that assertion and states that the funds in question were not repaid prior to the federal review.

The repayment order places renewed attention on California’s healthcare policies under Democratic Gov. Gavin Newsom, who has publicly supported expanding state-funded healthcare access regardless of immigration status.

California has enacted policies extending taxpayer-funded healthcare coverage to its undocumented population, a position that has drawn scrutiny as federal auditors now seek repayment of misused federal funds.

The Trump administration has indicated that additional enforcement actions and reviews may follow as federal agencies continue examining Medicaid billing practices nationwide.

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