CMS to audit Minnesota Medicaid and defer payments to 14 high‑risk programs after state pauses
Federal CMS Administrator Mehmet Oz told Gov. Tim Walz in a Jan. 6 letter that CMS will audit Minnesota Medicaid receipts and defer federal payment on claims for 14 high‑risk programs—about $3.75 billion annually—until the legitimacy of claims can be verified, saying the state’s late year‑end corrective action plan was “deeply insufficient” and warning more payments could be withheld. The action follows Walz’s pause of payments to those programs amid suspected fraud and steps by the state—including a legislatively funded audit contract, Optum flagging with DHS verification and DHS OIG referrals, enhanced fingerprint checks and unannounced visits—and comes amid links to recent federal fraud prosecutions.
📌 Key Facts
- On Jan. 6, CMS Administrator Mehmet Oz notified Gov. Tim Walz that CMS will begin auditing Minnesota Medicaid receipts and will defer federal payments on claims for 14 high‑risk programs the state identified as "rife with fraud" until CMS can verify which claims are legitimate.
- CMS says the 14 high‑risk programs account for about $3.75 billion annually in combined state and federal funding.
- Oz told Walz that Minnesota’s year‑end corrective action plan, submitted late on Dec. 31, was "deeply insufficient," and warned CMS may withhold additional payments as it uncovers more issues if Minnesota "cannot get a handle on this fraud."
- Minnesota state officials had already paused payments to the 14 high‑risk Medicaid services and ordered an audit; the state provided a full enumeration of those 14 services and Gov. Walz framed the actions as necessary to restore trust and address suspected fraud.
- Planned state oversight measures include enhanced fingerprint checks and unannounced visits; the described workflow is that contractor Optum will flag suspicious claims, DHS will verify them, and suspected fraudulent claims will be referred to the DHS Office of Inspector General.
- Officials note links between some of the audited programs and recent federal fraud prosecutions, and a federal prosecutor (AUSA Joe Thompson) commented on the large magnitude of the fraud.
- The developments prompted public reactions from advocacy groups and elected officials — including statements from ARRM and Rep. Robbins — and named responses from legislative GOP leaders (Demuth, Niska, Johnson).
📊 Relevant Data
Somali immigrants in Minnesota have a poverty rate of 36%, compared to the statewide rate of about 9%.
The billion-dollar fraud in Minnesota's social services, including Medicaid, was perpetuated mainly by Somali immigrants.
How Misreading Somali Poverty Led Minnesota into Its Largest Welfare Scandal — American Enterprise Institute
Federal prosecutors estimate that fraud likely exceeds $9 billion in Minnesota-run Medicaid services.
U.S. Attorney: Fraud likely exceeds $9 billion in Minnesota-run Medicaid services — Minnesota Reformer
Minnesota is home to the largest Somali population in the United States, with the majority arriving as refugees fleeing civil war since the 1990s, facilitated by resettlement agencies.
How Minnesota became a hub for Somali immigrants in the U.S. — NPR
About half of the $18 billion in Medicaid claims paid to Minnesota programs since 2018 may have been fraudulent.
About half of Medicaid's $18 billion in claims paid to Minnesota programs may be fraudulent, official says — Los Angeles Times
📰 Source Timeline (4)
Follow how coverage of this story developed over time
- CMS Administrator Mehmet Oz sent a Jan. 6 letter to Gov. Tim Walz stating CMS will begin auditing Minnesota Medicaid receipts.
- CMS will defer payment on claims for 14 high‑risk programs the state identified as 'rife with fraud' until it can verify which claims are legitimate.
- CMS says the 14 programs account for about $3.75 billion annually in combined state and federal funding.
- Oz said CMS found Minnesota’s year‑end corrective action plan 'deeply insufficient' after it was submitted late on New Year’s Eve.
- Oz warned that if Minnesota 'cannot get a handle on this fraud,' CMS intends to withhold more payments as it uncovers additional issues.
- Governor’s direct quotes on restoring trust and pausing programs.
- Full enumeration of the 14 high‑risk services.
- Detailed workflow: Optum flags; DHS verifies; suspected claims go to DHS OIG.
- Named reactions from legislative GOP leaders (Demuth, Niska, Johnson).
- Federal context quote from AUSA Joe Thompson on fraud magnitude.
- Specifies the legislative funding source for the audit contract.
- Lists additional oversight measures (enhanced fingerprint checks, unannounced visits).
- Notes ties between audited programs and recent federal fraud cases.
- Provides ARRM and Rep. Robbins’ statements.