Trump Admin Audit Uncovers $1.3 Billion in Medicaid Funds Illegally Spent on Undocumented Immigrants in Democratic States

A preliminary audit by the Centers for Medicare and Medicaid Services (CMS) has revealed that six Democratic-led states spent more than $1.3 billion in federal Medicaid funds on healthcare for undocumented immigrants during 2024 and 2025, prompting the Trump administration to launch formal probes and demand refunds.

The findings, announced on November 1, 2025, by CMS Administrator Dr. Mehmet Oz, target California, Washington D.C., Illinois, Washington, Colorado, and Oregon. California alone accounted for over $1 billion, followed by Illinois with nearly $30 million and Oregon with more than $5 million. Federal law under 42 U.S.C. § 1396b(v) prohibits using Medicaid for non-emergency care for undocumented individuals, limiting coverage to emergency services only. The audit determined these states provided comprehensive benefits, including routine doctor visits and treatments, in violation of that restriction.

Oz detailed the issue in a statement on X, emphasizing the administration's commitment to eliminating fraud, waste, and abuse. "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," he wrote. He noted that while emergency services are permissible, the states extended coverage to individuals, including some with criminal records for murder and assault, using federal dollars meant for U.S. citizens and legal residents. Oz highlighted the risk: "Whether willful or not, the states’ conduct highlights a terrifying reality: American taxpayers have been footing the bill for illegal immigrants’ Medicaid coverage."

The probes build on a broader Trump administration effort to scrutinize state Medicaid programs for compliance. Manhattan Institute public health policy expert Chris Pope explained how states have exploited loopholes, such as padding emergency expenses to divert funds for prohibited activities. "Medicaid is by far the largest source of federal funding for states. It was originally intended to only provide aid for eligible beneficiaries, but over time, states have figured out how to game the system," Pope stated.

California Governor Gavin Newsom's office rejected the allegations, calling them "false" and asserting the state-funded program for undocumented residents uses only state dollars, not federal Medicaid. Other states have begun refunding portions of the identified funds following CMS notifications, though full compliance remains under review.

Medicaid, the nation's largest health insurer covering 80 million low-income Americans, relies on a 50-50 federal-state match, making improper diversions a direct drain on federal resources. The administration's audits, initiated earlier in 2025, aim to protect the program for vulnerable citizens while aligning with President Trump's priorities on border security and fiscal accountability. Further investigations could lead to withheld funding or penalties for non-compliant states.