Federal health officials announced Thursday they are withholding an additional $91 million in Medicaid payments to Minnesota, escalating concerns over potential fraud in the state’s federally-funded social programs.
Dr. Mehmet Oz, who leads the Centers for Medicare and Medicaid Services, linked the decision to Tuesday’s federal raids conducted at childcare facilities and learning centers throughout the Minneapolis-St. Paul region that receive Medicaid dollars.
“Minnesota state-run programs have raised serious red flags,” Oz stated in a social media video announcement.
Minnesota Governor Tim Walz responded by characterizing the move as political payback from the Trump administration targeting his state.
This latest funding freeze follows an earlier action in February when Vice President JD Vance informed Walz that CMS was temporarily blocking $243 million due to fraud allegations that have plagued the Democratic governor’s tenure. Minnesota filed a lawsuit challenging that decision, expressing concerns about potential healthcare cuts for low-income residents. A federal judge refused to issue a restraining order blocking the action.
The newly frozen $91 million comes on top of the funds already blocked from earlier this year.
According to Oz, $76 million of the latest amount relates to 14 service categories deemed highly susceptible to fraudulent activity. The remaining $14 million involves program oversight issues, including payments made to ineligible recipients, potentially including individuals without legal immigration status.
A December video posted by conservative social media personality Nick Shirley alleged that members of Minnesota’s substantial Somali population were operating fraudulent childcare operations to obtain federal subsidies. The video gained attention from administration officials and conservative groups, despite state investigators dismissing the claims. Oz referenced this video in Thursday’s announcement.
Walz, who served as the 2024 Democratic vice presidential candidate, announced in January he would not seek a third gubernatorial term, pledging instead to focus his efforts on combating fraud.
“While Minnesota is working to stop fraud, the Trump Administration is working to exploit it,” Walz stated. “This is a transparent effort to cut funding for the same working people and rural Minnesota hospitals they’ve had in their crosshairs for months. Minnesota will not stand for this continued campaign of retribution.”
However, Oz defended the action as necessary to safeguard taxpayer funds.
“This isn’t about punishment, it’s about partnership and accountability,” Oz explained. “We’re offering Minnesota the support they need to fix these problems. But at the same time, we cannot and will not pay claims that don’t meet federal standards. So we’re asking for additional documentation to verify these charges.”
The Minnesota Department of Human Services, which oversees the state’s Medicaid program, stood by its fraud prevention efforts, stating it has taken “aggressive action” for over a year to eliminate fraud and recover improper payments.
“We have been reporting to our federal partners and the public about those efforts,” said Commissioner Shireen Gandhi. “We are disappointed to learn that CMS will extend deferrals of needed funds for another quarter. Nonetheless, the department will continue to fight against the criminals who target Medicaid programs.”
While CMS approved Minnesota’s corrective action plan in March, none of the previously withheld $243 million has been released.
The announcement follows last week’s directive from Oz requiring all states to outline their plans for revalidating certain Medicaid providers as part of the Trump administration’s expanded anti-fraud initiative.
