Minnesota officials warn Trump’s threatened Medicaid cuts after CMS $2B deferral would endanger vulnerable residents
CMS Administrator Mehmet Oz notified Gov. Tim Walz that the Trump administration will audit Minnesota’s Medicaid receipts and defer roughly $2 billion in payments tied to 14 “high‑risk” programs the state identified as rife with suspected fraud, saying Minnesota’s corrective action plan was inadequate; Walz has paused payments, ordered an Optum analytics audit and other oversight measures while filing a formal appeal accusing CMS of politicizing Medicaid. State officials, frontline caregivers and unions warn the federal hold — and President Trump’s broader threats to cut funding to “sanctuary” states — would endanger seniors and people with disabilities, has prompted provider suspensions and enrollment freezes, and is being challenged in court.
📌 Key Facts
- CMS Administrator Dr. Mehmet Oz sent a Jan. 6 letter saying CMS will audit Minnesota Medicaid receipts and has deferred roughly $2 billion in payments tied to 14 “high‑risk” programs Minnesota identified as rife with fraud while CMS verifies legitimate claims; CMS said those 14 programs account for about $3.75 billion annually in combined state and federal funding.
- Minnesota has filed a formal administrative appeal and sent a sharply worded letter accusing the Trump administration of politicizing or “weaponizing” Medicaid oversight; state officials argue the broad, preemptive federal deferral is an overreach compared with targeted audits or normal claim reviews.
- Governor Tim Walz ordered a state Optum analytics audit of the 14 high‑risk services and paused certain payments; the state workflow will have Optum flag suspicious claims, DHS verify them, and refer suspected fraud to the DHS Office of Inspector General.
- Minnesota officials say they have been working with CMS on program‑integrity efforts since October 2024 and submitted a corrective action plan on New Year’s Eve that CMS rejected as “deeply insufficient,” while CMS warned it may withhold additional payments if Minnesota cannot control fraud.
- State actions tied to the fraud response include dropping about 800 inactive Medicaid providers, freezing new enrollment in 13 programs, and moving to revoke licenses of some metro providers under criminal indictment; Walz and DHS also announced enhanced oversight measures such as fingerprint checks and unannounced visits.
- State leaders, frontline caregivers and SEIU representatives warned that federal Medicaid cuts would directly endanger seniors and people with disabilities — including claims that cuts could lead to deaths — and emphasized the legality of the CMS deferral is already being challenged in court.
- The federal context includes large fraud estimates (reports cite up to $9 billion since 2018), statements from federal prosecutors about the magnitude of fraud, the resignation of six prosecutors in the Minnesota U.S. Attorney’s Office amid related turmoil, and President Trump’s public threat to stop federal payments to “sanctuary” cities and states beginning Feb. 1.
📊 Relevant Data
73% of Somali immigrant households in Minnesota have at least one member enrolled in Medicaid, compared to 18% for native-born households, based on data from 2014-2023.
Somali Immigrants in Minnesota — Center for Immigration Studies
In Minnesota, during 2021-2023, Medicaid coverage at the time of birth was highest for Black women at 72.9%, followed by American Indian/Alaska Native at 70.8%, Hispanic at 51.4%, Asian/Pacific Islander at 42.5%, and White at 23.3%.
Medicaid Coverage by Race/Ethnicity: Minnesota, 2021-2023 Average — March of Dimes
More than 90% of the people charged in major Medicaid fraud cases in Minnesota since 2018 are of Somali descent, despite Somalis comprising about 1.5% of the state's population.
About half of Medicaid's $18B in claims paid to Minnesota programs may be fraudulent, official says — Coast Reporter
Somali immigrants in Minnesota face high poverty rates, with 52% of Somali children living in poverty compared to 8% for native-born children, contributing to higher welfare dependency.
A December 2025 Center for the Immigration Studies (CIS) report ... — Instagram
📰 Source Timeline (7)
Follow how coverage of this story developed over time
- President Trump publicly threatened to stop 'any payments' to sanctuary cities and states beginning Feb. 1, explicitly tying future Medicaid funding to immigration and 'sanctuary' status rather than just fraud concerns.
- State Medicaid Director John Connolly says Minnesota had been working closely with CMS since October 2024 on program integrity, and that CMS staff never indicated their efforts were insufficient before CMS suddenly rejected the state’s draft corrective action plan submitted on New Year’s Eve.
- Frontline caregivers and SEIU Healthcare board members at the news conference warned that federal Medicaid cuts aimed at Minnesota would directly lead to deaths among seniors and people with disabilities, framing the funding threat as a willingness to 'let our disabled and elderly loved ones die to punish us.'
- State officials emphasized that the legality of Trump’s move to withhold Medicaid funds from Minnesota is already being challenged in court, underscoring that this is not just a bureaucratic dispute but an active constitutional fight.
- Confirms Minnesota will file a formal administrative appeal against CMS’s deferral of roughly $2 billion in Medicaid claims, rather than quietly absorbing the hit.
- Details DHS and Walz administration arguments that CMS is overstepping and politicizing Medicaid oversight by using a broad, preemptive deferral instead of targeted audits or standard claim reviews.
- Adds program‑level impact language: DHS says it is trying to protect current clients in the 14 high‑risk services while the state‑ordered Optum analytics audit proceeds, but warns a prolonged federal hold could force cuts or delayed payments to providers.
- Reports that state officials are coordinating this appeal with their broader fraud‑response posture (dropping 800 inactive Medicaid providers, freezing new enrollment in 13 programs, and moving to revoke licenses of some metro providers under criminal indictment).
- Minnesota DHS says federal officials have now decided to withhold $2 billion in Medicaid funding as part of the CMS deferral tied to suspected fraud in 14 programs.
- The state has formally filed an appeal of CMS’s deferral decision and sent a sharply worded letter to CMS Administrator Dr. Mehmet Oz accusing the Trump administration of 'weaponizing' Medicaid against Minnesota for political purposes.
- The article connects the funding fight directly to federal fraud estimates of up to $9 billion since 2018 and notes that Trump has publicly threatened to cut off all federal funding to 'sanctuary' states starting Feb. 1, explicitly broadening the pressure campaign.
- The story notes that six federal prosecutors in the Minnesota U.S. Attorney’s Office resigned, reportedly over pressure to investigate the widow of ICE shooting victim Renee Good, underscoring turmoil around the fraud and immigration enforcement push.
- 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.