In a recent announcement on January 14, Dr. Mehmet Oz, the Director of the Centers for Medicare and Medicaid Services (CMS), revealed that more states have been using federal Medicaid funds for non-emergency medical care for undocumented immigrants. This misuse of funds has been identified in a total of 8 states, amounting to a staggering $1.8 billion.
Dr. Oz expressed his concern about the severity of the situation, stating that the improper allocation of federal Medicaid funds for non-emergency medical services for undocumented immigrants is illegal. He emphasized the importance of states providing expenditure records to demonstrate that these services were not funded by federal money. However, the 8 states in question failed to provide adequate proof regarding the $1.8 billion allocation.
Consequently, Dr. Oz announced that CMS would be withholding nearly $300 million in funding from California, which is currently the most egregious violator, until they can substantiate the proper use of these funds.
Usually, California uses state financial resources to cover medical service expenses before filing for reimbursement from CMS. Once the claims are audited, the federal government disburses the corresponding funds accordingly.
The office of California Governor Gavin Newsom did not immediately respond to requests for comments regarding the funds being withheld. In 2021, Newsom signed legislation making California the first state in the U.S. to expand healthcare coverage for undocumented immigrants through the state government’s Medicaid program, known as Medi-Cal.
This legislation included preventive services and long-term care for undocumented immigrants aged 50 and above. In 2019, California had already extended the coverage under Medi-Cal to all undocumented immigrants below the age of 26.
However, according to the latest data from the Legislative Analyst’s Office, the cost of providing this coverage has significantly increased in recent years, reaching around $10 billion annually. Approximately 1.7 million participants in Medi-Cal are undocumented immigrants, constituting about 11% of the total.
In October 2025, CMS flagged a total of $1.3 billion in Medicaid funds across 5 states and the District of Columbia, suspecting their improper use for medical care for undocumented immigrants.
Since then, CMS gathered additional information, leading to a further increase in the total amount and the inclusion of 2 more states in the investigation. Dr. Oz did not disclose specific details or name these states.
Dr. Oz emphasized that Medicaid funds belong to Americans and not undocumented immigrants. He pledged to hold the violating states accountable and recover improperly used funds.
It is expected that Dr. Oz will release more information regarding the investigation results. Last year, he announced that CMS had commenced audits of states’ Medicaid programs to ensure compliance with the law and prevent the misuse of federal funds for undocumented immigrants.
Preliminary reviews revealed that 5 states and the District of Columbia were suspected of improperly using federal funds, with California at $1.3 million, the District of Columbia at $2.1 million, Illinois at $29.8 million, Washington at $2.4 million, Colorado at $1.5 million, and Oregon at $5.4 million.
Dr. Oz mentioned that these states were notified in October, prompting many to begin returning the funds subsequently.