The Trump administration has indicated to Minnesota that the state may soon be on the hook for hundreds of millions of dollars in Medicaid payments, Minnesota state officials told The Washington Sun.
The state is bracing for federal health officials to officially withdraw up to $259 million in Medicaid payments that the Trump administration froze earlier this year in the name of rooting out fraud, Minnesota’s temporary human services commissioner and state Medicaid director, John Connolly, said. The federal government deferred Medicaid payments to the state, pending review, after the administration alleged the state’s Medicaid program raised red flags for fraud.
Federal officials have also suggested to the state that it could be required to cover even more Medicaid payments beyond the initial $259 million freeze, Connolly said, in what would be a major escalation of an already unprecedented course of action from the Trump administration.
Minnesota is one of two blue states caught in the administration’s crosshairs as it trumpets a war on Medicaid fraud ahead of the midterm elections. The other is California. The administration has made three quarterly deferrals of Medicaid reimbursements to Minnesota, totaling $550 million, and threatened to cut $2 billion from the state’s annual Medicaid funding through a separate process.
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The federal government, however, has not offered specific evidence backing up its allegations of fraud to the states, California and Minnesota officials have told The Sun. The Centers for Medicare and Medicaid Services declined to comment on its plans for Minnesota’s Medicaid dollars currently under review or on what information it has provided the state.
Connolly said Minnesota is ready to act on any “credible allegations of fraud.” But he said that “this feels increasingly like a war on Medicaid, not a war on fraud.”
“We are deeply concerned that this would be … another step in a retribution campaign for Minnesota that was promised very publicly,” he said.
The fraud task force’s focus on Minnesota and other blue states has played a central role in Republicans’ campaign messaging ahead of the midterms. CMS Administrator Mehmet Oz, the former host of a wellness-focused TV show, has posted a constant stream of videos of himself going on fraud “stings” in U.S. cities. In its campaign, the Trump administration has touted misleading and unsubstantiated claims of fraud savings.
Vice President JD Vance, who is heading up the anti-fraud task force composed of officials from the Department of Health and Human Services, the Department of Justice and the Federal Trade Commission, announced over the summer that he was referring Minnesota Gov. Tim Walz — his former political opponent — and state Attorney General Keith Ellison to the DOJ for criminal fraud investigations.
Connolly wrote to Oz last week in a letter, reviewed by The Sun, asking for more details about how the federal agency has identified claims as suspicious.
“If there’s information you have [or] methods you have you’re not sharing, we’re potentially paying fraudulent actors, criminals, really, in our program,” Connolly said of his inquiry. “We absolutely want to take prompt action if that’s … happening in the program.”
State officials have been meeting with health providers to prepare them for the possibility of Washington officially taking back funding, Connolly said.
There is indisputably some amount of fraud in the Medicaid program, although the exact scope of the problem is difficult to calculate.
Minnesota has been under federal investigation for years for fraud in its safety-net programs, with some of it related to COVID-19 pandemic aid. The state has tagged certain Medicaid services as high-risk, freezing new providers and adding new reviews of claims. It has also revalidated thousands of providers as part of an anti-fraud effort stemming from the federal government’s threat to withhold up to $2 billion in funding. Before Trump’s second term, Ellison also led the state’s largest state Medicaid fraud prosecution.
A disallowance — the technical term for the denial of federal Medicaid matching funds to a state for expenditures that don’t meet federal requirements — can be related to fraud but is not necessarily always about fraud. Disallowances can also be tied to other problems with eligibility, benefits or administration, said Andy Schneider, who served as a senior adviser at the Centers for Medicare and Medicaid Services during the Obama administration, where he focused on Medicaid program integrity
If the federal government does disallow funds, the state will have a chance to appeal the decision. Minnesota sued over the first deferment earlier this year, although a judge declined to issue a preliminary injunction. A stay is currently in place through early January.
States say the implications of these funding withdrawals could be serious. A permanent funding clawback would “force tough choices” for Minnesota given its structural budget deficit, Connolly said. He worries it could require the state to make difficult decisions “not only for the Medicaid program … but also roads, natural resources, public health.”
The Trump administration has also targeted $2.2 billion from California this year, alleging potential fraud in personal care services programs and other health programs — and putting those programs at risk for cuts in the process.
Minnesota, however, may face that uncertain future first.
“They have done to Minnesota what CMS has never done to any other state,” Schneider said of the scale of the administration’s actions against the state. “It’s all uncharted territory.”
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