Trump administration defers $91M more in Minnesota Medicaid funding citing fraud vulnerabilities

MINNEAPOLIS (AP) — The Trump administration on Thursday notified Minnesota that it’s deferring an additional $91 million in Medicaid funding, due to fresh concerns about vulnerabilities to fraud in state-run but federally funded social service programs.

The announcement from Dr. Mehmet Oz, administrator for the Centers for Medicare and Medicaid Services, cited searches by federal agents on Tuesday at childcare and learning centers and other sites in the Minneapolis-St. Paul area that receive federal Medicaid funding.

“Minnesota state-run programs have raised serious red flags,” Oz said in a video statement on social media.

Gov. Tim Walz called the action part of the Trump administration’s retribution campaign against Minnesota.

Vice President JD Vance notified Walz in February that CMS was temporarily withholding $243 million because of fraud concerns that have dogged the Democratic governor’s administration. Minnesota sued in response, warning it may have to cut healthcare for low-income families. A judge declined to grant a restraining order.

The deferral of $91 million comes in addition to the funds Vance said were being withheld earlier this year.

Of the latest tranche, $76 million is tied to 14 service categories that are considered highly vulnerable to fraud, Oz said. Another $14 million involves program integrity concerns, such as payments for ineligible individuals, including those who might be in the country illegally, he said.

Right-wing influencer Nick Shirley posted a video in December that said members of Minnesota’s large Somali community were running fake childcare centers to collect federal subsidies. The video caught the eye of the administration and conservative activists, though state inspectors discounted the allegations. Oz cited the video Thursday.

Walz — the Democratic vice presidential nominee in 2024 — dropped out of the governor’s race in January, promising to devote his energy to fighting fraud rather than seeking a third term.

“While Minnesota is working to stop fraud, the Trump Administration is working to exploit it,” Walz said in a statement. “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. Minnesota will not stand for this continued campaign of retribution.”

But Oz said the action was about protecting taxpayer money.

“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. So we’re asking for additional documentation to verify these charges.”

The Minnesota Department of Human Services, which administers Medicaid in the state, defended its record, saying it has been taking “aggressive action” for more than a year to stop fraud and recoup improper payments.

“We have been reporting to our federal partners and the public about those efforts,” Commissioner Shireen Gandhi said in a statement. “We are disappointed to learn that CMS will extend deferrals of needed funds for another quarter. Nonetheless, the department will continue to fight against the criminals who target Medicaid programs.”

CMS approved the state’s corrective action plan in March but has yet to free up any of the $243 million it withheld earlier.

The announcement comes a week after Oz said CMS would require all states to explain their plans to revalidate some of their Medicaid providers in an escalation of the Trump administration’s anti-fraud campaign.

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Associated Press reporter Ali Swenson in Washington, D.C., contributed.