The Trump administration is temporarily deferring nearly $260 million in Medicaid funding to Minnesota over fraud concerns.
The announcement is part of what the administration calls a "major crackdown on healthcare fraud" after President Trump declared a “war on fraud” in his State of the Union address on Tuesday.
“We are going to start very aggressively in the administration, cracking down on the people and the organizations that are defrauding Americans,” Vice President JD Vance said, after Trump announced Vance would lead the effort.
CMS will defer $259.5 million in federal funds, and warns it could defer more than $1 billion if Minnesota does not “clean up its significant program integrity vulnerabilities or demonstrate that the expenditures are allowable.”
“These are services the governor has already paid for. We are just not reimbursing the state. To make it clear, there is a rainy day fund in Minnesota, so we are very confident that people will not be hurt in Minnesota. This is not a problem with the people of Minnesota. It's a problem with the leadership of Minnesota,” CMS administrator Dr. Mehmet Oz said, contending that any service delays should be “laid at the seat of Governor Walz.”
The action comes after Oz said CMS received an inadequate response from the state to a request for a corrective action plan. The administration is giving Minnesota 60 days to respond, according to Oz, who also noted more announcements on other states would follow.
“We need to know that the providers actually are the real providers. Oftentimes, there's no person that you can associate with the treatment itself. We need you after you adjudicate who these providers are, make sure they're not already in trouble for doing bad stuff, and then re-evaluate all the current providers to make sure they're supposed to be able to provide these services,” Oz said.
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The announcement follows the administration’s previous surge of immigration agents to the state as it honed in on fraud allegations.
During a press briefing unveiling the new steps, Oz said the administration was simultaneously notifying Minnesota’s Democratic Gov. Tim Walz as he was making the announcement publicly.
“The agents Trump allegedly sent to investigate fraud are shooting protesters and arresting children. His DOJ is gutting the U.S. Attorney’s Office and crippling their ability to prosecute fraud. And every week Trump pardons another fraudster,” Governor Walz wrote on X. “This is a campaign of retribution. Trump is weaponizing the entirety of the federal government to punish blue states like Minnesota. These cuts will be devastating for veterans, families with young kids, folks with disabilities, and working people across our state.”
Additionally, CMS is enacting a six month moratorium on new medicare enrollment for certain durable medical equipment, prosthetics, orthotics and supplies companies and seeking stakeholder input on additional ways to prevent fraud.
Oz also pointed to waste, fraud and abuse when it comes to the solvency of medicare, in an interview with Scripps News ahead of the announcement.
The Hospital Insurance Trust Fund, which is used to pay Medicare Part A benefits, is projected to be exhausted in 2040, according to a Congressional Budget Office estimate.
“One big issue is fraud, waste and abuse, and this is a problem that could reflect $300 billion of loss a year if we just did the part that applies to Medicare, just reduce the fraud, waste and abuse there, it would dramatically lengthen the life expectancy of the Medicare trust fund,” Oz said. “And so there's many legal arms we can push on, but the most obvious is stop throwing the money away at people who are stealing from you.”
President Trump previously announced Colin McDonald to serve as assistant attorney general for a national fraud enforcement division.
