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The Trump administration notified Minnesota that it is deferring an additional $91 million in Medicaid funding, citing new concerns about vulnerabilities to fraud in state-run programs funded by the federal government. CMS administrator Dr. Mehmet Oz said the decision followed searches by federal agents on Tuesday at childcare and learning centers and other sites in the Minneapolis-St. Paul area that receive federal Medicaid money.
Oz said Minnesota “state-run programs have raised serious red flags,” in a video statement posted to social media. In the same video, he said the administration is seeking additional documentation to verify charges before Medicaid payments proceed.
Gov. Tim Walz, the Democratic vice presidential nominee in 2024, said the administration’s move is part of a retribution campaign. In a statement, Walz said the Trump administration is trying to cut funding for “the same working people and rural Minnesota hospitals they’ve had in their crosshairs for months,” and said Minnesota “will not stand for this continued campaign of retribution.”
The federal government’s action comes after CMS temporarily withheld $243 million earlier this year, a hold that Vice President JD Vance notified Walz about in February. The state sued in response, warning it may have to cut healthcare for low-income families, and a judge declined to grant a restraining order. The latest $91 million deferral comes in addition to that earlier withholding.
Oz said $76 million of the latest tranche is tied to 14 service categories that CMS considers highly vulnerable to fraud. He also said another $14 million involves program integrity concerns, including payments for ineligible individuals, such as those who might be in the country illegally.
Oz also cited a right-wing influencer, Nick Shirley, who posted a video in December alleging members of Minnesota’s Somali community were running fake childcare centers to collect federal subsidies. The AP reported that state inspectors had discounted the allegations, and Oz cited the video anyway in his remarks Thursday.
Minnesota’s Department of Human Services, the agency that administers Medicaid in the state, defended its record and said it has taken “aggressive action” for more than a year to stop fraud and recoup improper payments. Commissioner Shireen Gandhi said in a statement that the department had been reporting those efforts to federal partners and the public, and that it was “disappointed” CMS would extend deferrals of needed funds for another quarter while saying the department would continue to fight the “criminals” targeting Medicaid programs.
CMS had approved a corrective action plan in March, but has yet to free up any of the $243 million it withheld earlier, according to the AP account. The administration’s announcement arrived about a week after Oz said CMS would require all states to explain their plans to revalidate some Medicaid providers as part of what he described as an escalation of the anti-fraud effort—an approach that Minnesota now faces with additional withheld funds.