On Thursday, the Centers for Medicare and Medicaid Services told Minnesota it would defer an additional $91 million in Medicaid payments, the latest escalation in a months-long clash over fraud in the state’s federally funded social service programs — a dispute that Governor Tim Walz has called a “campaign of retribution” by the Trump administration.
The deferral, announced by CMS administrator Dr. Mehmet Oz in a video statement, brings the total amount of Minnesota Medicaid money being held by Washington to more than $330 million. Vice President JD Vance had notified the state in February that CMS was temporarily withholding $243 million over fraud concerns, and that money remains frozen. The new withholding was split: $76 million tied to 14 categories of service that CMS considers “highly vulnerable to fraud,” and $14 million over what Oz described as “program integrity concerns,” including payments for people who may be ineligible, such as those potentially in the country illegally.
Oz’s announcement came three days after federal agents executed search warrants at several Twin Cities childcare and learning centers that receive Medicaid funding, an operation he cited as evidence of the risks. He also referenced a December video posted by right-wing influencer Nick Shirley that alleged members of Minnesota’s Somali community were operating fake child-care centers; state inspectors later discounted those allegations.
“Minnesota state-run programs have raised serious red flags,” Oz said in the video. “This isn’t about punishment, it’s about partnership and accountability. … We cannot and will not pay claims that don’t meet federal standards.”
Governor Walz, who dropped his 2026 reelection bid in January to focus on fraud enforcement, fired back with a statement portraying the federal action as a political weapon. “While Minnesota is working to stop fraud, the Trump Administration is working to exploit it,” Walz said. “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.”
The Minnesota Department of Human Services, which administers the state’s Medicaid program, defended its record. Commissioner Shireen Gandhi said the department has been reporting its anti-fraud efforts to federal partners and will continue “to fight against the criminals who target Medicaid programs.” CMS approved the state’s corrective action plan in March, Gandhi noted, but has not yet released any of the withheld $243 million.
Thursday’s deferral extends a pattern of pressure from the Trump administration on states it accuses of lax oversight. A week earlier, Oz announced that all states would be required to explain their plans to revalidate some Medicaid providers, intensifying a nationwide anti-fraud push.
The stalemate leaves Minnesota healthcare providers and low-income families in limbo. The state sued over the February freeze but a federal judge declined to order the money’s release while the case proceeds.