Minnesota Medicaid audit quietly put all claims in 14 programs under 90‑day payment hold before DHS narrowed to flagged cases
On Jan. 1 the Minnesota Department of Human Services effectively delayed payments for all claims across 14 designated “high‑risk” Medicaid programs as part of a fraud audit ordered by Gov. Tim Walz and funded by the 2025 legislature, triggering immediate cash‑flow crises for many providers. After provider and lawmaker pushback and in keeping with federal 90‑day payment rules, DHS said it would narrow the pause to claims flagged by Optum’s analytics for up to 90 days, refer suspected improper claims to the DHS Office of Inspector General, and roll out enhanced oversight measures — a move that drew sharp criticism from provider groups and legislators.
📌 Key Facts
- On Jan. 1 internal DHS communications show the agency effectively delayed all payments for 14 designated “high‑risk” Medicaid services, triggering an immediate cash‑flow crisis for many providers (small autism, ICS, housing and home‑care agencies) who reported taking loans, delaying payroll or warning of possible closures.
- DHS originally announced it would pause payments for up to 90 days for 14 high‑risk services while a third‑party contractor (Optum) runs billing analytics to flag anomalous claims; the state said it would comply with federal 90‑day payment rules.
- After rollout confusion and pushback, DHS publicly and by email clarified that only claims flagged by Optum would be held for prepayment review (and potentially denied if fraudulent), while ‘clean’ claims should be paid on time, though DHS warned some processing delays could continue.
- The 14 services named by DHS are: EIDBI/autism services, Integrated Community Supports (ICS), Nonemergency Medical Transportation, Peer Recovery Services, adult rehabilitative mental health services/ARMHS, Adult Day Services, Personal Care Assistance/Community First Services and Supports (PCA/CFSS), Recuperative Care, Individualized Home Supports, Adult Companion Services, Night Supervision, Assertive Community Treatment (ACT), Intensive Residential Treatment Services (IRTS), and Housing Stabilization Services.
- The audit contract was funded with money authorized in the 2025 legislative session; Optum will flag irregular claims for DHS review, DHS will verify and refer suspected improper claims to its Office of Inspector General, and reporting noted Optum/UnitedHealth business lines have drawn federal scrutiny.
- The abrupt, poorly communicated rollout prompted significant provider and political backlash: ARRM CEO Sue Schettle called the delays an “existential threat,” lawmakers (including Tina Liebling, Mohamud Noor, Lisa Demuth and others) criticized the lack of notice and transparency, and some urged creating a stronger state inspector general office.
- The Walz administration said the moves were meant to ‘pump the brakes’ and restore public trust in Medicaid after recent prosecutions; federal and state prosecutors have characterized recent Medicaid fraud tied to services like HSS and EIDBI as substantial.
- Beyond the claims review, the administration expanded program‑integrity actions — proposing added oversight such as enhanced fingerprint background checks, initial screening and unannounced visits and planning a pause on licensing adult day cares — as it scaled anti‑fraud measures.
📊 Relevant Data
The Somali population in Minnesota is approximately 64,354, making up about 1.12% of the state's total population.
Somali Population by State 2026 — World Population Review
The vast majority of people charged in Minnesota's Medicaid fraud cases to date are of Somali origin.
Prosecutors Say Minnesota's Fraud Scandal Goes Further Than Previously Known — The New York Times
Autism prevalence among Somali children in Minnesota is 1 in 16 for 4-year-olds, compared to 1 in 53 for their classmates statewide.
Research finds 1 in 16 Somali children diagnosed with autism, 3 times more than state — MPR News
Hypotheses for higher autism rates in Somali children in Minnesota include vitamin D deficiency due to darker skin and limited sunlight exposure in northern climates.
A Review of Autism Spectrum Disorder among the Somali Diaspora — Scientific Research Publishing
Somali refugees began resettling in Minnesota in large numbers in the 1990s due to the Somali civil war, facilitated by U.S. refugee resettlement programs and organizations like Lutheran Immigration and Refugee Service and Catholic Charities.
How Minnesota became a hub for Somali immigrants in the U.S. — NPR
Somali Minnesotans generate at least $500 million in income annually and pay about $67 million in state and local taxes.
Somali Minnesotans drive economic growth, pay $67M taxes annually — KSTP
The Somali community in Minnesota has a 22% self-employment rate, indicating high entrepreneurship.
Minnesota's Somali residents largely work in a few key industries — Minneapolis / St. Paul Business Journal
High poverty rates in the Somali community in Minnesota contribute to extensive welfare qualification, which has been linked to vulnerabilities in fraud schemes.
Somali Immigrants in Minnesota — Center for Immigration Studies
Causal factors for Medicaid fraud in Minnesota include relaxed oversight during COVID-19, program design flaws making scams easy, and concentrated resettlement leading to community vulnerabilities.
U.S. Attorney: Fraud likely exceeds $9 billion in Minnesota-run Medicaid services — Minnesota Reformer
📰 Source Timeline (8)
Follow how coverage of this story developed over time
- Reformer obtained internal DHS communications and provider notices showing that on Jan. 1 the agency effectively delayed all payments for 14 designated 'high‑risk' Medicaid services, not just anomalous claims, despite earlier public assurances.
- The blanket delay created an immediate cash‑flow crisis for providers — especially small metro autism, ICS, housing and home‑care agencies — forcing some to take out loans, delay payroll or warn of possible closures.
- Only after pushback from providers, lawmakers and federal rules about 90‑day payment windows did DHS begin moving toward the narrower policy later described publicly (pausing only Optum‑flagged claims and releasing the rest).
- The article details specific service categories in the 14‑program dragnet and documents that DHS gave providers little to no advance notice that January claims would be held, with some learning about the delay only when payments didn't arrive.
- Legislators quoted in the piece say they were not fully briefed on the scope and mechanics of the Jan. 1 freeze, raising fresh questions about transparency from DHS and the Walz administration.
- Positions the adult day care licensing pause as an additional front in the expanded fraud‑control effort beyond the flagged‑claims audit process.
- Signals continued scaling of program‑integrity actions under the Walz administration.
- DHS emailed providers hours after the announcement stating it is not holding all submitted claims for the 14 services for 90 days (in bold).
- Rep. Tina Liebling said lawmakers urged the administration to correct misinformation; Rep. Mohamud Noor said 'clean claims' should be paid on time.
- DHS warned there may still be payment processing delays as the new prepayment review process rolls out.
- ARRM CEO Sue Schettle said the press release wording caused confusion and providers received no advance notice.
- Optum, the third‑party auditor, did not respond to questions about the review timelines; the article notes DOJ is investigating UnitedHealth's PBM.
- The report details that only claims flagged for anomalies will be paused for up to 90 days and denied if found fraudulent.
- Direct quote from Gov. Tim Walz framing the action as necessary to restore public trust and 'pump the brakes' on 14 programs targeted by fraud.
- Explicit, full list of all 14 'high-risk' services named by DHS (including EIDBI for autism, ICS, Nonemergency Medical Transportation, Peer Recovery, ARMHS, Adult Day Services, PCA/CFSS, Recuperative Care, Individualized Home Supports, Adult Companion, Night Supervision, ACT, IRTS, and Housing Stabilization Services).
- Process detail: Optum will flag irregular claims; DHS will verify flagged claims and refer suspected improper claims to the DHS Office of Inspector General.
- New political reaction quotes: House Speaker Lisa Demuth and Floor Leader Harry Niska criticize the timing and scope; Senate Minority Leader Mark Johnson calls the audit 'too little, too late.'
- Contextual quote from Assistant U.S. Attorney Joe Thompson calling Minnesota Medicaid fraud 'staggering,' citing recent HSS and EIDBI prosecutions.
- Enumerates additional affected programs beyond earlier lists: adult rehabilitative mental health services, intensive residential treatment services, adult companion services, individualized home supports, and recuperative care (along with autism services, integrated community supports, nonemergency medical transportation, peer recovery services, adult day services, personal care assistance and community first services and supports, and Housing Stabilization Services).
- Quote from Gov. Tim Walz emphasizing restoring public trust and 'pumping the brakes' on 14 high‑risk programs.
- House Speaker Lisa Demuth criticizes scope of alleged fraud and urges creation of a new Office of Inspector General to investigate state-program fraud.
- Senate Majority Leader Erin Murphy praises the action as proactive and says the audit provides enhanced tools to stop fraud.
- Confirms payment pause is for up to 90 days to detect suspicious billing while Optum flags anomalies for DHS review.
- Audit contract funding source: paid with money authorized during the 2025 legislative session.
- High-risk programs will face added oversight such as enhanced fingerprint background studies, initial screening visits, and unannounced visits.
- Article explicitly links two targeted programs (Housing Stabilization Services and autism services) to recent federal fraud prosecutions.
- Includes on-record reaction from ARRM CEO Sue Schettle calling delays an “existential threat.”
- Political reaction: Rep. Kristin Robbins, chair of the GOP-created House Fraud Prevention and State Oversight Committee, criticized Walz and referenced her earlier call for a federal audit.
- Minnesota will pause payments for 14 designated 'high‑risk' Medicaid services for up to 90 days while the audit proceeds.
- DHS identified the services based on vulnerabilities, evidence of fraud, or anomalous billing patterns; a DHS letter from Temporary Commissioner Shireen Gandhi cites the criteria.
- Optum will perform the billing analytics and flag issues for DHS review; the state says it will still meet federal 90‑day payment rules.
- ARRM (representing 200 disability‑service providers) warned the pause could destabilize an already fragile care network.
- The affected list includes: Integrated Community Supports, Nonemergency Medical Transportation, Peer Recovery Services, ARMHS, Adult Day Services, PCA/CFSS, Recuperative Care, Individualized Home Supports, Adult Companion Services, Night Supervision, ACT, and IRTS; Medicaid autism treatment and the now‑defunct Housing Stabilization Services are also named.