The CMS said it will withhold over $259 million in Medicaid funds from Minnesota, an effort the Trump administration says is part of a larger crackdown on fraud in federal healthcare programs.
The Trump administration says it’s holding the money due to unsupported or potentially fraudulent Medicaid claims, including claims involving beneficiaries “lacking a satisfactory immigration status,” according to a Wednesday announcement from the CMS.
If Minnesota does not come into compliance with a corrective action plan from the Trump administration, the CMS said it could defer more than $1 billion in federal funds to the state over the next year.
“CMS is done paying and chasing,” said CMS Administrator Dr. Mehmet Oz during a press conference Wednesday. “The money is not going to ever leave the building again.”
The funds would be a fraction of the $11.8 billion in Medicaid funding the state receives from the federal government, according to KFF. Over 1.1 million adults and children are enrolled in the state’s safety-net insurance program, where 64% of total Medicaid spending comes from the federal government.
At the press conference, Oz and Vice President JD Vance said Medicaid funds in Minnesota were paid to bogus centers for autistic children and one behavioral health organization that billed as if doctors were working 24 hours straight for over 450 days.
“How it didn’t get picked up to us is shocking in the CMS,” Oz said.
Providers in the state have been paid for their services, according to Vance, but the federal government would be halting its Medicaid payments to Minnesota. In Medicaid, the federal government provides matching funds to states, who are responsible for administering the safety-net insurance program.
On Thursday, Minnesota Gov. Tim Walz said he would unveil an anti-fraud legislation package to present to legislators.
Minnesota has recently faced scrutiny for fraud in its social services programs. In 2022, prosecutors in the Biden administration charged 47 defendants for defrauding federal programs meant to feed hungry children. Last year, the federal government charged the first wave of defendants in a fraud case in Minnesota’s housing stabilization program.
President Donald Trump has ramped up his criticisms of the state and Walz recently, blaming many of fraud allegations on Minnesota’s Somalian immigrant community.
“The Somali pirates who ransacked Minnesota remind us that there are large parts of the world where bribery, corruption and lawlessness are the norm, not the exception,” Trump said during his State of the Union address Tuesday. “Importing these cultures through unrestricted immigration and open borders brings those problems right here to the USA.”
The criticism from detractors, in addition to the mounting fraud cases, prompted Walz, a Democrat, to drop his third campaign for reelection last month.
“Every minute that I spend defending my own political interest would be a minute I can’t spend defending the people of Minnesota against the criminals who prey on our generosity and the cynics who want to prey on our differences,” Walz said in early January after he announced he was stepping down from his campaign.
In addition to withholding funds in Minnesota, the Trump administration also said it would pause new Medicare enrollment for six months for certain medical equipment suppliers the CMS says may be engaging in fraud. Prior reports from oversight agencies have found fraud in the program, which gives Medicare Part B-covered supplies to patients aged 65 and older for at-home use.
From 2015 to 2017, Medicare overpaid suppliers by $34 million due to inadequacies in CMS’ billing system that should have detected overpayments, according to the HHS’ Office of Inspector General. The billing systems led to more than $220 million in overpayments since 2008.
Overpayments “substantially decreased” after the CMS fixed its billing system in 2020, according to the OIG. Still, the agency overpaid suppliers by $4.5 million from 2020 to 2024, after the issue was supposedly fixed.
The CMS also announced Monday it would seek public input on ways it could strengthen fraud prevention measures in federal healthcare programs. It particularly wants input from states, providers, suppliers, payers and technology companies.
The Trump administration has said it would prioritize cracking down on healthcare fraud. The CMS has prioritized limiting overpayments in Medicare Advantage plans and the Department of Justice has announced several investigations and enforcement into payers accused of inflating their payments, including UnitedHealth.
In his State of the Union speech this week, Trump said his administration would wage a “war on fraud” led by Vance.
