The Trump administration notified Minnesota on Thursday that it is deferring $91 million in Medicaid funding due to concerns about fraud vulnerabilities in state-run, federally funded social service programs. Dr. Mehmet Oz, administrator for the Centers for Medicare and Medicaid Services, announced the action after federal agents conducted searches on Tuesday at childcare and learning centers and other sites in the Minneapolis-St. Paul area that receive federal Medicaid funding.
This deferral comes on top of $243 million that Vice President JD Vance said CMS was temporarily withholding in February over fraud concerns affecting the state's Democratic administration. Of the newly deferred funds, $76 million is tied to 14 service categories considered highly vulnerable to fraud, while another $14 million involves program integrity concerns, including payments for ineligible individuals, Oz said.
Governor Tim Walz characterized the action as part of what he called a retribution campaign by the Trump administration against Minnesota. Walz, the Democratic vice presidential nominee in 2024 who dropped out of the governor's race in January, said the state is working to stop fraud while the administration is exploiting it. "This is a transparent effort to cut funding for the same working people and rural Minnesota hospitals they've had in their crosshairs for months," Walz said in a statement.
Minnesota sued in response to the earlier $243 million withholding, warning it may need to cut healthcare services for low-income families. A judge declined to grant a restraining order. The state's Department of Human Services has been taking what it described as aggressive action for over a year to combat fraud and recover improper payments. Commissioner Shireen Gandhi said the department is "disappointed" by the extended deferrals but will continue fighting those who target Medicaid programs.
Oz defended the action as necessary to protect taxpayer money and framed it as an effort to support accountability. "This isn't about punishment, it's about partnership and accountability," Oz said. "We're offering Minnesota the support they need to fix these problems. But at the same time, we cannot and will not pay claims that don't meet federal standards."
The action followed an investigation triggered in part by a video posted by right-wing influencer Nick Shirley in December suggesting that members of Minnesota's Somali community were running fraudulent childcare centers. State inspectors discounted those allegations, but the video caught the attention of the administration and conservative activists. CMS approved Minnesota's corrective action plan in March but has not yet released any of the earlier withheld funds.
