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Last month, the Department of Health and Human Services notified Minnesota that it would withhold roughly $515 million in federal Medicaid matching funds each quarter until the state meets federal standards. The agency also launched a review of how Minnesota spends federal Medicaid dollars, raising questions about oversight and accountability.
Minnesota has appealed the decision, insisting the freeze is unjustified.
CMS said its review of Minnesota’s Medicaid claims for the fourth quarter of fiscal year 2025 flagged $243.8 million in potentially fraudulent payments, plus an additional $15.4 million tied to individuals lacking proper immigration status.
“I feel quite confident we have the legal authority to do this,” Vance told reporters Wednesday, emphasizing that the administration believes its actions are firmly grounded in law.
Under the new arrangement, Minnesota has already paid providers, but the federal government is now withholding reimbursement for that quarter, Vance explained.
The move has predictably sparked strong reactions from Democratic leaders in Minnesota, who claim the freeze is politically motivated.
Governor Tim Walz took to X to lash out at the administration, writing: “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.”
Minnesota Attorney General Keith Ellison also threatened legal action, warning that he would sue if the administration is found to be unlawfully withholding funds intended for low-income Medicaid recipients.
Despite the pushback, the White House is framing the freeze as evidence of its commitment to protecting taxpayers and holding states accountable for Medicaid spending. Officials argue that billions in federal dollars are flowing into programs with insufficient oversight, creating opportunities for fraud and abuse.
In addition to freezing Minnesota’s Medicaid funds, the administration announced a six-month suspension of new Medicare enrollments for durable medical equipment suppliers—a sector it says is rife with fraud. CMS reported that last year alone, it stopped more than $1.5 billion in suspected fraudulent claims in this category.
Federal authorities say these measures are just the beginning of a nationwide effort to tighten accountability and ensure that taxpayer dollars support eligible recipients rather than lining the pockets of fraudsters.
