When I started covering home-based care, I did not anticipate that the industry would become a flashpoint in partisan politics, beyond familiar debates about reimbursement rates and the finer points of regulations.

So, I’ve been surprised — and disturbed — by developments this year. The latest came this week: CMS and HHS deferred over $1 billion in Medicaid payments to Minnesota and California for services including home-based care. I’ve previously mentioned FBI Director Kash Patel’s AI-generated callout of home health Medicare fraud. Both the administrator of the U.S. Centers for Medicare & Medicaid Services (CMS), Dr. Mehmet Oz, and Robert F. Kennedy Jr., the secretary of Health and Human Services (HHS), have gone out of their way to mention fraud related to home-based care services.  

These talking points are backed up by real substance. Federal agents have suspended home health providers from the Medicare program and imposed a moratorium on new Medicare enrollments. But the deferrals announced this week also show how quickly fraud enforcement can move beyond a compliance issue. Gov. Gavin Newsom of California and Gov. Tim Walz of Minnesota each argued that the action was politically motivated, while Minnesota’s Department of Human Services questioned the federal government’s methodology.

The deferrals make home-based care a hot political issue, not merely a health-policy issue.

In this week’s exclusive, members-only HHCN+ Update, I’ll unpack the political microscope on home-based care fraud, offering analysis and key takeaways, including:

– How California and Minnesota leaders responded to the Medicaid payment deferrals

– Why the situation reminds me of the “de-risking” problem in the financial sector

The political reply

The affected states’ governors framed the deferments as politically motivated. Neither suggested there is no fraud in their state, but rather that the federal agencies’ actions were driven by ulterior motivations.

“This isn’t about fraud — it’s about cutting your healthcare so that Trump can afford the tax cuts he gave to billionaires,” Walz said in a post on X. “They’re cutting more money in healthcare than they’ve prosecuted for fraud. The math doesn’t add up.”

Newsom specifically pointed to the cost savings that in-home care can produce.

“Today’s announcement from Dr. Oz is the same recycled political stunt we’ve seen before,” Newsom said in a post on X. “California isn’t being targeted because Trump has evidence of fraud. We are being targeted for political reasons — and because Dr. Oz doesn’t understand that we are *SAVING* taxpayers money by keeping seniors and people with disabilities out of far more expensive nursing homes! We hate fraud. That’s not what this is. And we stand ready to collaborate with CMS in good faith efforts to combat fraud.”

In a Tuesday statement, the temporary commissioner of the Minnesota Department of Human Services (DHS), John Connolly, asked federal government officials to share information about the methodology they used to identify potentially fraudulent providers in the state.

“CMS touts their new fraud-detection capabilities, yet has not provided data or explanation on how the deferral amount was calculated or what it was based on,” Connolly said. “Today’s actions show that the federal government is acting again in unprecedented and punitive ways as part of their war on Medicaid and its recipients. Partnership – not politics – is required to stop criminals and protect services for the people who need them.”

These states’ leaders are challenging how the federal government exercises its fraud enforcement authority. My concern is that perception could become reality here; regardless of whether the Trump administration is targeting Democrat-led states, the impression alone could start to shape at-home care providers’ decisions about where to expand and invest.

And claims that federal anti-fraud actions are being used as political weapons are only exacerbated by a lack of transparency.

It’s an issue that hospice providers know well. My colleague Jim Parker, senior editor of Hospice News and Palliative Care News, previously told me that hospice program integrity efforts have involved a wide net that catches legitimate providers up “like dolphins in a fish net.”

“There is little transparency into how they select hospices for enforcement actions,” Parker said. “This is affecting everyone.”

That concern tracks with the issue raised by Connolly. States and legitimate providers need enough clarity to understand the nature of the fraud-related concerns and be able to correct issues before a broader payment disruption occurs.

Without clearer methodology into why CMS and HHS selected these states, I fear that the impression that these deferments are politically motivated can perpetuate. Whether or not that impression is accurate, it can undermine confidence in the enforcement effort — and make it more difficult to build the state-federal cooperation needed to identify and remove actual bad actors. It also could deter providers from expanding and investing in states that they perceive as being high-risk from a political perspective, as providers seek to avoid both the complications of being wrongly caught up in an anti-fraud dragnet and the financial pressures that could result from actions like Medicaid payment deferrals

The de-risking risk

The potential for these tensions to persist — or intensify — brings to mind a phenomenon long discussed in financial services: de-risking.

Banking has a well-documented “de-risking” problem. When faced with anti-money laundering requirements and the threat of strict enforcement, banks have sometimes retreated from entire customer categories they identify as representing a higher level of risk.

In the Department of the Treasury’s words, de-risking is “the practice of financial institutions terminating or restricting business relationships indiscriminately with broad categories of clients rather than analyzing and managing the risk of clients in a targeted manner.” The Department of the Treasury notes that de-risking is not consistent with the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regulatory framework.

There is a glimmer of a similar risk in home-based care, though that risk should not be overstated.

If states led by Democrats are thought to be at heightened risk for scrutiny, even compliant providers could refrain from expanding as aggressively, or at all, into that geography. It does not matter if the Trump administration is actually targeting Democrat-led states. The appearance of such could cause home-based care providers to de-risk through their expansion strategies.

That is the real-world danger of allowing the fight over fraud to become primarily a political one. Fraud enforcement requires aggressive, credible action against bad actors. But if enforcement disputes create broad uncertainty around entire states, service lines or provider categories, policymakers risk producing a health care version of de-risking — one in which compliant providers pull back not because patients need less care, but because the surrounding policy environment has become too uncertain to justify expansion.

Congress directed Treasury to develop a national strategy addressing de-risking in the Anti-Money Laundering Act of 2020. Treasury’s resulting 2023 strategy focused on identifying the practice’s drivers and encouraging more targeted risk management. That lesson may apply to Medicaid as well: Effective oversight should identify and isolate actual misconduct without making compliant providers, patients and entire markets collateral damage.