Minnesota Governor Tim Walz criticized the Trump administration Thursday for freezing federal Medicaid payments to his state, calling it political payback while announcing new legislation designed to combat fraud in government programs.
The Democratic governor’s remarks came one day after Vice President JD Vance announced the administration would temporarily suspend Medicaid funding due to concerns about fraudulent activity. Walz had been developing his anti-fraud proposals before the federal announcement, continuing efforts he started previously to address problems that contributed to his decision not to seek reelection.
“This is a targeted retribution against a state that the president doesn’t like,” Walz stated during a press briefing. He accused the administration of using misleading fraud claims as justification, similar to how they defended Operation Metro Surge, which deployed more than 3,000 federal agents to Minnesota.
Walz’s comprehensive proposal includes enhanced detection systems, stronger investigative powers, tougher criminal penalties, and establishing a centralized Office of the Inspector General for fraud prevention. The state Senate approved a bipartisan inspector general measure last year, but it remains stuck in the House due to disputes over whether the office should have law enforcement powers or focus solely on investigations while leaving enforcement to the existing state Bureau of Criminal Apprehension.
Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz announced Wednesday alongside Vance that the federal government would withhold $259.5 million in Minnesota Medicaid payments. Oz stated the funds would only be released after Minnesota develops “a comprehensive corrective action plan to solve the problem” and gave Walz a 60-day deadline to respond.
“How does taking and punishing children and elderly have anything to do with fighting fraud?” Walz responded. He noted that the Trump administration has provided no guidance on addressing their concerns or opportunities to demonstrate Minnesota’s existing anti-fraud efforts. His administration projects that 1.2 million state residents could be affected.
The federal action represents part of a broader nationwide fraud investigation, stemming from allegations involving daycare facilities operated by Somali residents in the Minneapolis region that triggered the massive federal enforcement operation in the city, leading to widespread demonstrations.
A Minnesota federal prosecutor estimated last summer that total fraud across multiple programs might surpass $9 billion. However, John Connolly, the state’s Medicaid director, told media Thursday that the state lacks evidence supporting such an enormous figure.
Minnesota Department of Human Services officials, who oversee Medicaid, pointed out that withholding the $259.5 million — retroactive to the fourth quarter of 2025 — follows previous federal decisions to freeze over $2 billion in annual Medicaid funding. The department said it previously submitted a corrective action plan and continues appealing that determination.
The state agency reported implementing multiple new procedures and reforms to prevent and identify Medicaid fraud since 2024. These changes included pinpointing high-risk fraud areas, establishing tighter controls like criminal background screenings for providers, and conducting more surprise facility inspections.
Both Walz and Minnesota Attorney General Keith Ellison are set to testify before the U.S. House Oversight Committee next Wednesday during a hearing examining federal fund misuse in Minnesota’s social service programs.
