The Trump administration has followed through on threats to strip Medicaid dollars from Minnesota as part of its anti-fraud offensive, although not to the degree the state had feared.
The Centers for Medicare and Medicaid Services will not reimburse Minnesota roughly $112.7 million the state paid for services the administration deemed at high risk of fraud, the agency told Minnesota in a letter sent Friday. But it will release the rest of the funds — about $131 million — from an initial bucket of frozen Medicaid payments earlier this year.
The canceled payments are only a fraction of the dollars Minnesota collects from the federal government every year to help pay for health care for its low-income residents. But the action signals CMS is willing to crack down on states in its quest against fraud and could foreshadow more Medicaid cuts for Minnesota and California, another state the administration has targeted.
“CMS is committed to protecting taxpayer dollars and ensuring Medicaid resources serve the people who depend on the program,” a CMS spokesperson said. “Holding states accountable for compliance with federal requirements is central to that responsibility.”
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Minnesota’s Medicaid director, John Connolly, wrote to employees Tuesday morning that “while we have been bracing for some sort of disallowance, this amount is deeply concerning for the more than one million Minnesotans who depend on Medicaid and stands to perpetuate uncertainty across our state’s health and human services system.”
To recoup the funds, Minnesota will have to claw back payments it already made to providers. States pay for their own Medicaid programs and later bill the federal government for a portion of the costs.
The action is part of a broader anti-fraud effort the administration has launched across multiple government agencies, through a task force headed by Vice President JD Vance. The administration made Minnesota a particular target after findings of widespread fraud in more than a dozen of its safety-net programs.
Minnesota has taken its own actions against the fraud, pausing payments and reviewing providers in high-risk programs.
CMS told Minnesota that it didn’t review every claim it’s refusing to pay. Rather, the agency extrapolated the sum it is choosing to withhold by evaluating a subset of claims from high-risk providers or high-risk areas and whether they met the requirements for federal reimbursement. It said that out of 330 claims it looked at, 78 didn’t pass muster.
In some cases, medical providers’ agreements to provide services or documentation was insufficient, the CMS letter said. In others, medical assessments or treatment plans fell short.
CMS listed some examples, many of them involving home care services, adult day cares and housing services.
Minnesota is still awaiting whether the administration will unfreeze another roughly $400 million in Medicaid payments due for subsequent quarters. So is California, where CMS has frozen around $3.4 billion in federal Medicaid payments.
Minnesota could appeal the cancellation of funds. A spokesperson for the state said the department is “considering its options before determining next steps.”
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