Walz accuses federal officials of “retribution” as Medicaid payments hinge on corrective action
Gov. Tim Walz on Thursday denounced the Trump administration’s threat to withhold Minnesota Medicaid funds as another step in a “retribution” campaign, while unveiling a package of state legislation intended to tighten fraud detection and enforcement in public programs.
Walz’s remarks came a day after Vice President JD Vance said the administration would “temporarily halt” some Medicaid funding to Minnesota over fraud concerns. Walz said the proposals he announced were in development before Vance’s comments and that federal officials had been pursuing additional enforcement efforts that, in his view, have been connected to immigration pressure in Minnesota.
At a news conference, Walz argued the administration is using what he described as the same kind of “false information” about fraud as a justification for Operation Metro Surge, in which the Department of Homeland Security sent more than 3,000 federal officers into Minnesota. Walz called the funding threat a “targeted retribution against a state that the president doesn’t like.”
Walz’s criticism also focused on the administration’s Medicaid funding freeze. He said the federal government had given his team no guidance on what it wanted Minnesota to do and no opportunity to show work the state has already carried out to fight fraud, adding that his administration estimates that 1.2 million Minnesotans could be hurt by the withholding.
Federal officials have tied the dispute to a specific payment amount and a federal corrective-action requirement. Centers for Medicare and Medicaid Services administrator Mehmet Oz told reporters that the government will hold off on paying $259.5 million to Minnesota for Medicaid—the health care safety net for low-income Americans—until the state implements “a comprehensive corrective action plan to solve the problem,” and gave Walz 60 days to respond.
Walz challenged the premise behind the withholding, asking how freezing payments to children and elderly could be connected to “fighting fraud.” Minnesota Department of Human Services officials, which administer Medicaid, said the withholding of the $259.5 million—retroactive to the fourth quarter of 2025—follows earlier federal action to withhold more than $2 billion in annual Medicaid funding. The agency said Minnesota submitted a corrective action plan earlier and is still in the process of appealing that decision.
Minnesota also said it has moved to reduce fraud since 2024. The Department of Human Services said it implemented new processes including identifying areas at high risk of fraud, imposing stricter controls such as criminal background checks on providers, and conducting more unannounced site visits.
The state’s legislative package focuses on broader detection, investigative authority, and penalties. One proposal Walz highlighted would create a centralized Office of the Inspector General to lead fraud prevention efforts; the Minnesota Senate passed a bipartisan bill last year, but it remains stalled in the House. Officials described a split over whether the office should have law enforcement authority or focus on investigations while leaving enforcement to the existing state Bureau of Criminal Apprehension.
The dispute has played out alongside other Minnesota fraud cases that federal officials have cited in support of enforcement. The AP report said a prosecutor in December estimated fraud across several programs could exceed $9 billion, but John Connolly, the state’s Medicaid director, told reporters Thursday that the state has no evidence to substantiate such a figure. The reporting also referenced a $300 million pandemic food fraud scheme involving the nonprofit Feeding Our Future that has resulted in charges against 78 defendants and at least 57 convictions, described by prosecutors as the largest COVID-19-related fraud scheme in the country.
Walz and Minnesota Attorney General Keith Ellison are scheduled to appear before the U.S. House Oversight Committee next Wednesday, with the hearing focused on alleged misuse of federal funds in Minnesota’s social service programs.