The Minnesota Department of Human Services providing an update on how the auditing process is going for 14 programs considered at high-risk for Medicaid fraud.
DHS Deputy Commissioner and state Medicaid Director John Connolly says the programs were flagged for a variety of reasons.
"It could have been an increase in payments holistically among those services year over year," says Connolly. "So looking at concerning trends in billing or kind of outliers in terms of increases in billing."
Connolly says so far they have sent 80,000 claims to an outside auditor for review and will continue that process every two weeks, which may result in delayed payments to some providers.
Since May, DHS has disenrolled approximately 800 inactive providers, terminated the Housing Stabilization Services program due to widespread fraud, and paused licenses for some adult day care operations.
Connolly says they fall within 14 specific programs deemed high-risk for fraud.
"It does not necessarily mean that there is a problem with those claims or that there was something inherently concerning about them," he explained Monday. "We're just doing prepayment review in this enhanced fashion with Optum for all of those claims for the 14 high-risk services."
The auditing follows several other steps the state has taken to combat fraud, including terminating the Housing Stabilization Services program and pausing licenses for some adult day care operations.
Since May 2025, the Department of Human Services says they have taken these actions to prevent and stop fraud:
- Moved 11 additional Medicaid benefits into a high-risk classification, enabling tighter provider oversight with pre-enrollment site visits, unannounced site visits, criminal background checks and fingerprinting of those with an ownership stake in provider organizations.
- Disenrolled approximately 800 inactive providers in high-risk programs, freeing resources to focus on active providers.
- Brought on a third-party vendor to audit fee-for-service billing for 14 high-risk services, using advanced analytics to identify risks before making payments.
- Terminated Housing Stabilization Services due to widespread fraud.
- Paused licenses for new Home and Community-Based Services and Adult Day providers for two years, freeing capacity to provide monitoring and oversight of existing providers.
Homeland Security says a fraud investigation is underway in Minneapolis
The state is coming under increased scrutiny and allegations from the federal government.
Federal Homeland Security officials were conducting a fraud investigation on Monday in Minneapolis, Department of Homeland Security Secretary Kristi Noem said.
Noem posted a video on the social platform X showing DHS officers going into an unidentified business and questioning the person working behind the counter. Noem said that officers were “conducting a massive investigation on childcare and other rampant fraud."
“The American people deserve answers on how their taxpayer money is being used and ARRESTS when abuse is found,” U.S. Immigration and Custom Enforcement posted.
The action comes a day after FBI Director Kash Patel said on X that the agency had “surged personnel and investigative resources to Minnesota to dismantle large-scale fraud schemes exploiting federal programs.”
Patel said that previous fraud arrests in Minnesota were “just the tip of a very large iceberg."
A federal prosecutor alleged earlier in December that half or more of the roughly $18 billion in federal funds that supported 14 programs in Minnesota since 2018 may have been stolen.
Minnesota Gov. Tim Walz said then that fraud will not be tolerated and that his administration “will continue to work with federal partners to ensure fraud is stopped and fraudsters are caught.”
President Donald Trump has criticized Walz’s administration over the fraud cases that to date have resulted in dozens of people being charged with stealing $250 million in a pandemic-related fraud scheme to steal from federal programs.
A spokesperson for Walz did not immediately respond to an email Monday seeking comment.
In recent weeks, tensions have been high between state and federal enforcement in the area as the Trump administration's immigration crackdown focused on the Somali community in the Minneapolis-St. Paul area, which is the largest in the country.