Feds: California Owes $1B for Covering Illegal Aliens With Medicaid Dollars

Feds: California Owes $1B for Covering Illegal Aliens With Medicaid Dollars

A few weeks ago, I noted that California was losing over $160 million due to improper management of its commercial driver’s license program.

And well, Governor Gavin Newsom asserted his current budget would only have a $2 billion deficit, the state’s shortfall is actually estimated to be over $17 billion according to the Legislative Analyst’s Office.

The budget reports a $2.9 billion deficit, described as a “modest shortfall” by Department of Finance staff. This estimate differs markedly from the Legislative Analyst’s Office (LAO) projection of a $17.6 billion deficit—a gap of $14.7 billion. According to department staff, the governor’s proposal incorporates $31.5 billion in additional revenues not included in the LAO forecast and excludes the risk of a stock market downturn that the LAO elected to factor into its analysis. Overall, the state budget totals $348.9 billion, including $248.3 billion in General Fund expenditures and $23 billion in total reserves.

Now, the gap may even widen.

California is facing federal demands to repay more than $1 billion in Medicaid funds that Dr. Mehmet Oz, the head of the Centers for Medicare and Medicaid Services (CMS), says were improperly used for health care for illegal aliens.

The Trump administration is planning to claw back over $1 billion in federal Medicaid dollars it says are being spent by blue states on healthcare for illegal immigrants, including some with violent criminal records for murder and rape.

A preliminary audit by the Centers for Medicare and Medicaid Services found that, over the last few years, mostly during 2024 and 2025, California; Washington, D.C.; Illinois; Washington; Colorado; and Oregon improperly spent a combined $1,351,204,127 in federal Medicaid funds to help pay for healthcare for illegal immigrants.

While federal Medicaid dollars are supposed to be prohibited broadly from being used to cover healthcare for illegal immigrants, they can be used by states for emergency treatment regardless of a patient’s citizenship or immigration status.

While 5 other states were also investigated for illegal alien-oriented Medicaid abuses, California was by far the most egregious.

The truth is that federal law is supposed to prohibit federal Medicaid dollars broadly from being used to cover illegal immigrants. It does permit states to use Medicaid dollars for emergency treatment, regardless of patients’ citizenship or immigration status. States can also legally build Medicaid programs for illegal immigrants using their own state tax dollars, so long as no federal tax dollars are used.

But that didn’t stop Democrats from going even further by breaking federal law to give illegal immigrants federal Medicaid dollars meant for American citizens.

Earlier this year, the CMS team began auditing state Medicaid programs to ensure they were following the law and not spending any federal tax dollars on illegal immigrants outside of emergency Medicaid. What we found was shocking.

In a preliminary review of 6 states, we found those states improperly using federal tax dollars for their allegedly state-funded program and providing coverage to individuals, including some with criminal records of murder and assault.

Those states are:
CA – $1,310,032,549
DC – $2,114,628
IL – $29,778,645
WA – $2,367,194
CO – $1,506,743
OR – $5,404,368

Buckle up for this one.

Based on our initial set of audits, more than $1B of federal taxpayer dollars were being spent on funding Medicaid for illegal immigrants. And my team is getting it back.

Some want to deny that illegal immigrants are receiving Medicaid. Others insist… pic.twitter.com/aF45ttsofF

— DrOzCMS (@DrOzCMS) October 31, 2025

California officials are disputing the findings.

“Claims that California improperly used federal Medicaid dollars to provide health care to undocumented immigrants are flatly false and misrepresent both federal law and standard administrative practice,” said the California Department of Health Care Services, which runs the state’s Medicaid program, in a statement.

However, based on past history, Oz and his team of investigators are likely to be correct. California had already been audited in 2024 for fiscal games for healthcare dollars.

This isn’t the first time California’s handling of federal Medicaid funds has come under scrutiny. A 2024 audit by the U.S. Department of Health and Human Services Office of Inspector General (OIG) found that the state improperly claimed $52.7 million in reimbursements for payments to illegal aliens. The OIG criticized California’s outdated proxy methodology, which failed to accurately exclude non-emergency costs, recommending periodic reassessments that the state has yet to fully implement.

The OIG’s earlier report recommended that California refund the $52.7 million and reassess its proxy system, but as of January 2026, no formal repayment has been confirmed.

However, now the state’s politicos are facing an administration willing to do something about it.

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