Fraud-filled state plays victim card as Trump may turn off Medicaid spigot

Minnesota public officials are preparing for the Trump administration to pull hundreds of millions in federal funding from the state which has been marred by a massive healthcare fraud scandal in recent months.

A government official appointed by Democratic Minnesota Gov. Tim Walz expressed his concern with the Center of Medicare & Medicaid Services (CMS) and Health & Human Services (HHS) for freezing $550 million in federal funding in 2026, claiming the state’s Medicaid program is being unfairly targeted in fraud implications, the Washington Sun reported. The Trump administration froze the funding due to allegations of widespread fraud in the state that first broke in late 2025.

While members of Walz’s administration concede there is some level of fraud present in the Medicaid program, they claim the exact scope of the problem is difficult to calculate, and are seeking clarification from the Trump administration on what grounds they have for deterring funds, the outlet reported.

Walz appointed John Connolly as Minnesota Department of Human Services’ (MN DHS) temporary commissioner and state Medicaid director in May. Connolly said his department is ready to act on any “credible allegations of fraud,” but that the pressures put on by the Trump administration “feel increasingly like a war on Medicaid, not a war on fraud,” according to the Sun.

“We are deeply concerned that this would be another step in a retribution campaign for Minnesota that was promised very publicly,” Connolly according to the outlet.

Connolly sent a five-page letter to CMS administrator Dr. Mehmet Oz on Oct. 2, seeking for federal funding to be resumed, claiming the state’s DHS had sufficiently met its fraud reporting requirements by identifying 14 “high risk” Medicaid service providers, and thereby sufficiently complying with CMS.

“Minnesota has repeatedly asked CMS and federal law enforcement to provide evidence supporting public claims of of fraud in Minnesota’s Medicaid programs so the Department of Human Services can stop payments where warranted,” Connolly’s letter read. “To date, no such evidence has been shared with the Department of Human Services. Nor has CMS requested that the Minnesota Department of Human Services impose a payment withhold on any provider.”

“The Minnesota Department of Human Services is acting aggressively to detect and prevent fraud and shuts off money to providers when credible allegations of fraud come to light,” the MN DHS said in a statement to the Daily Caller News Foundation. “We do this work in close partnership with other state agencies and law enforcement.”

The Department did not appear to address what specifically it is doing to mitigate fraud in the state when asked by the DCNF.

According to analysis conducted by independent health policy organization KFF, federal funding makes up 64 percent of Minnesota’s total Medicaid spending with the state receiving $11.8 billion annually from the federal government.

CMS has deferred $550 million in payments to Minnesota since the beginning of 2026 and threatened to withhold up to $2 billion over alleged fraud, according to the MN DHS’ website. Minnesota’s massive fraud scandal involved COVID-19 pandemic relief, day care centers, autism services and home care support programs and the vast majority of people charged in connection to it were of Somali descent.

An Obama-era CMS official decried the steps taken by Trump administration’s iteration of the agency against the blue state amid the ongoing fraud probe.

“They have done to Minnesota what CMS has never done to any other state. It’s all uncharted territory,” former CMS senior advisor Andy Schneider said, as reported by the Sun.

In June the Department of Health and Human Services announced it was deferring $1 billion from both Minnesota and California for their Medicaid and social services fraud.

CMS initially deferred $259 million dollars in Medicaid payments from the state, alleging this accounted for $243.8 million worth of state expenditures for unsupported or potentially fraudulent Medicaid claims and $15.4 million related to claims involving illegal immigrants, according to its February press release.

In March, then MN DHS commissioner Shireen Gandhi and Attorney General Keith Ellison filed a lawsuit against CMS claiming the department was illegally withholding funds from the state, however the case was denied a preliminary injunction by the court. He has filed over 73 different lawsuits against the Trump administration per CBS.

The DCNF reached out to both Walz’s and Ellison’s offices but did not receive a comment from either in time for publication.

“CMS is committed to safeguarding Medicaid by strengthening program integrity, protecting taxpayer dollars, and ensuring benefits are reserved for those who are eligible under the law,” a spokesperson from CMS told the DCNF. “The agency does not comment further on matters in pending litigation.”

In June, Vice President JD Vance announced on X that he referred Walz and Ellison to the Justice Department for a criminal fraud investigation.

Walz issued a response the same day, saying the move had “nothing to do with fraud,” calling it a “campaign of retribution,” NBC News reported.

Connolly’s letter and the Sun report both claimed that Minnesota had “revalidated” thousands of Medicaid providers in an effort to mitigate fraud.

In 2023, Ellison boasted that his office undertook the “largest-ever Medicaid fraud prosecution” by a state attorney general — charging three defendants with 24 counts and a total of $11 million in fraud.

However, the Department of Justice announced in May that it had charged 15 defendants in Minnesota for over $90 million in fraud.

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[ H/T WorldNetDaily ]