Trump administration pauses some Medicaid funding to Minnesota over fraud concerns

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Vice President JD Vance announced Wednesday that the Trump administration will “temporarily halt” some Medicaid funding to Minnesota over fraud concerns, saying the federal government will hold payment of $259.5 million tied to the state’s Medicaid program. Vance said the decision was made to ensure Minnesota “takes its obligations seriously to be good stewards of the American people’s tax money.”

Vance made the announcement with Dr. Mehmet Oz, the administrator for the Centers for Medicare and Medicaid Services, as Oz criticized fraud in the program and tied the pause to a broader push by the administration to spotlight and crack down on misuse of public funds. Oz said the action was being taken “in order to ensure that the state of Minnesota takes its obligations seriously to be good stewards of the American people’s tax money,” while also describing people committing fraud as “self-serving scoundrels.”

Oz said CMS was holding off on paying $259.5 million to Minnesota and that the funding included $244 million in “unsupported or potentially fraudulent Medicaid claims” and about $15 million in claims involving “individuals lacking a satisfactory immigration status.” He said immigrants who are not living in the U.S. legally, as well as some lawfully present immigrants, are not allowed to enroll in Medicaid, and the federal funding pause reflects concerns about those claims.

The administration also described a process for Minnesota to restore payments. Oz said CMS was notifying Democratic Gov. Tim Walz at the same time the announcement was made and that the administration would give Minnesota the money but “hold it and only release it after they propose and act on a comprehensive corrective action plan.” Oz said Walz would have 60 days to respond and told health care providers and Medicaid beneficiaries who were concerned to contact Walz’s office.

Walz pushed back, saying the administration’s move had nothing to do with fraud. In social media posts, Walz called it “a campaign of retribution” and said Trump was “weaponizing the entirety of the federal government to punish blue states like Minnesota,” adding that the cuts would be “devastating” for veterans, families with young kids, people with disabilities, and working people in the state.

Minnesota Attorney General Keith Ellison also criticized the federal approach. Ellison said in a statement that his team has secured “over 300 Medicaid fraud convictions since he took office in 2019,” and warned that if the federal government is “unlawfully withholding money meant for the 1.2 million low-income Minnesotans on Medicaid,” his office would take the dispute to court. He said he had called on the Legislature earlier Wednesday to provide more staff and legal tools to combat Medicaid fraud.

Alongside the Medicaid funding pause, Oz said CMS was taking additional steps to address fraud in Medicare, the program for older adults. He said CMS would block new Medicare enrollments for suppliers of durable medical equipment, prosthetics, orthotics or other supplies used to treat chronic conditions or assist in injury recovery for six months, and he referenced findings by the U.S. Department of Health and Human Services’ Office of the Inspector General that Medicare improperly paid suppliers nearly $23 million for durable medical equipment from 2018 through 2024.

CMS said in a release that it could defer up to $1 billion in federal funds to Minnesota over the next year if the state failed to satisfy requirements. Catherine Howden, a CMS spokesperson, said the agency’s review of potential fraud cases would include sampling claims to see if they comply with federal requirements, and it could request additional information about specific claims.

Commonwealth Fund Medicaid program officer Akeiisa Coleman said the administration’s step was “highly unusual” and warned that if Minnesota does not have enough funds available, it may have to halt payments to providers, potentially affecting care. The administration also announced a crowdsourcing effort it said would help “crush fraud” by soliciting tips and suggestions from the public.

The action follows other disputes involving federal attempts to cut off funds from Democratic-led states over suspected fraud. One judge blocked similar actions and required payments to Minnesota and four other states—California, Colorado, Illinois and New York—for certain social service programs after the government said there was “reason to believe” the states were granting benefits to people in the country illegally. Another judge also stopped the government from cutting off funding for administrative costs for 22 states that refused to provide information about applicants and recipients of food aid through the Supplemental Nutritional Assistance Program.

The federal cases that prompted the larger crackdown also include the nonprofit Feeding Our Future, which prosecutors accused of stealing pandemic aid meant for school meals, with prosecutors putting the losses in that case at $300 million. The announcement came as Trump, during his State of the Union address Tuesday, said Vance would spearhead a national “war on fraud,” and as Trump recently nominated Colin McDonald to lead a Justice Department division dedicated to rooting out fraud.