Vice President JD Vance announced Wednesday that the Trump administration would “temporarily halt” some Medicaid funding to the state of Minnesota over fraud concerns, as part of what he described as an aggressive crackdown on misuse of public funds.
Vance, who made the announcement with Dr. Mehmet Oz, the administrator for the Centers for Medicare and Medicaid Services, said the administration was taking the action “in order to ensure that the state of Minnesota takes its obligations seriously to be good stewards of the American people’s tax money.”
Oz, who referred to people committing fraud as “self-serving scoundrels,” said the federal government would hold off on paying $259.5 million to Minnesota in funding for Medicaid, the health care safety net for low-income Americans.
“This is not a problem with the people of Minnesota, it’s a problem with the leadership of Minnesota and other states who do not take Medicaid preservation seriously,” Oz said.
Wednesday’s move is part of a larger Trump administration effort to spotlight fraud around the country. That effort comes after allegations of fraud involving day care centers run by Somali residents in Minneapolis prompted a massive immigration crackdown in the Midwestern city, resulting in widespread protests. President Donald Trump, in his State of the Union address on Tuesday, announced Vance would spearhead a national “war on fraud.”
Trump also recently nominated Colin McDonald to serve as the first assistant attorney general in charge of a Justice Department division dedicated to rooting out fraud.
Minnesota pushes back
Oz said the administration was simultaneously notifying Minnesota’s Democratic Gov. Tim Walz as he was making the announcement publicly.
“We will give them the money, but we’re going to hold it and only release it after they propose and act on a comprehensive corrective action plan to solve the problem,” Oz said.
He said Walz would have 60 days to respond and advised health care providers and Medicaid beneficiaries who were concerned to contact Walz’s office.
Walz, former Vice President Kamala Harris’ 2024 running mate, said in a pair of social media posts that the administration’s move had nothing to do with fraud.
“This is a campaign of retribution. Trump is weaponizing the entirety of the federal government to punish blue states like Minnesota,” Walz said. “These cuts will be devastating for veterans, families with young kids, folks with disabilities, and working people across our state.”
Minnesota Attorney General Keith Ellison said in a statement that his team has secured over 300 Medicaid fraud convictions since he took office in 2019. And he noted that he called on the Legislature earlier Wednesday to give him more staff and new legal tools to combat Medicaid fraud.
"Courts have repeatedly found that their pattern of cutting first and asking questions later is illegal, and if the federal government is unlawfully withholding money meant for the 1.2 million low-income Minnesotans on Medicaid, we will see them in court,” Ellison said.
Oz said the Centers for Medicare and Medicaid Services were also taking action to crack down on fraud in Medicare, the health care system relied upon by millions of older adults.
He said CMS for six months would block any new Medicare enrollments for suppliers of durable medical equipment, prosthetics, orthotics or other supplies used to treat chronic conditions or assist in injury recovery.
The Office of the Inspector General for the U.S. Department of Health and Human Services found last year that Medicare improperly paid suppliers nearly $23 million for durable medical equipment from 2018 through 2024. But it found that most of that was before January 2020, when changes to the system were implemented.
Oz also announced a new crowdsourcing effort he said would help “crush fraud” by soliciting Americans’ tips and suggestions.
“All of us are smarter than any one of us,” he said.
In a news release accompanying the announcement, CMS said the funding being paused in Minnesota included some $244 million in unsupported or potentially fraudulent Medicaid claims and about $15 million in claims involving “individuals lacking a satisfactory immigration status.”
WCCO Political Analyst Blois Olson has been critical of the passive reaction from the Walz administration on fraud, and said again on Thursday that this seems like a reactionary action from the governor.
"So, it just seems to me that the irony of the governor releasing a fraud package today, the day after more payments were frozen, two days after a State of the Union where the president said that there would be fraud focus from Vice President Vance, seems a little late and or reactive," Olson said on the WCCO Morning News. "And those of us who have been in Minnesota following this story literally now for five years are wondering, really, is this the urgency that people have been asking for for two years or three years?"
Immigrants who are not living in the U.S. legally, as well as some lawfully present immigrants, are not allowed to enroll in the Medicaid program that provides nearly-free coverage for health services.
"The agents Trump allegedly sent to investigate fraud are shooting protesters and arresting children," Gov. Walz added. "His DOJ is gutting the U.S. Attorney’s Office and crippling their ability to prosecute fraud. And every week Trump pardons another fraudster."
CMS said in the release that if Minnesota fails to satisfy its requirements, it may defer up to $1 billion in federal funds to the state over the next year. CMS spokesperson Catherine Howden said the agency's review of potential fraud cases would include sampling claims to see if they comply with federal requirements, and potentially requesting more information about specific claims.
Akeiisa Coleman, the senior program officer for Medicaid at the Commonwealth Fund, said CMS was taking a “highly unusual step" in deferring funding. She said if the state doesn't have enough funds available, it may have to halt payments to providers, which could affect care.
Gov. Walz and Lt. Governor Peggy Flanagan are set to unveil what they're calling major anti-fraud legislative blitz later Thursday morning. Minnesota Attorney General and some DFL lawmakers also laid out some new, anti-fraud proposals earlier this week.
Minnesota House Speaker Lisa Demuth, who is also running for governor, and GOP House Majority Leader Harry Niska release a joint statement Wednesday, basically saying it is too little, too late.
“Now that fraud has become a political liability, Democrats are talking tough and trying to rebrand themselves as reformers, but Minnesotans aren’t buying it," they say. "Democrats have already voted against advancing the massively-bipartisan Office of Inspector General seven times. Weeks into the legislative session and years late on fraud, they clearly aren’t serious about stopping fraudsters. It’s time for action, not more words and delays.”
On Monday, Tim O'Malley, the state as Director of Program Integrity, held a news conference on fraud investigations inside state government, saying fraud issues in Minnesota could be traced back decades. DFL lawmakers in the House and Senate held a press conference Wednesday on their fraud legislation proposals. Add in Ellison's announcement on Wednesday, and the announcement from Walz and Flanagan Thursday morning. That is four in one week, something Olson also said rings as reactionary from state Democrats, and seems late in the game.
"Four news conferences in one week on fraud, when I don't know that there were four news conferences last year on fraud," Olson adds. "It goes to show, just that they understand the severity of the issue, both in federal funding and maybe the political dynamics."