Walz pushes to scrap Medicaid managed‑care insurers after fraud probe shows MCOs control $6B and 80% of care
Gov. Walz is pushing to eliminate private Managed Care Organizations from Minnesota’s Medicaid program and centralize accountability at the Department of Human Services after a probe found MCOs administer roughly 80% of Medicaid care and have paid out more than $6 billion in claims since 2018. DHS officials and former prosecutors argue the current, fragmented MCO-run fraud‑detection system — with MCOs and DHS the only entities able to freeze suspected payments — failed to stop large schemes, a concern spotlighted by last year’s seizure of major MCO UCare and its absorption by Medica.
📌 Key Facts
- About 80% of Minnesota’s Medicaid care is administered by private Managed Care Organizations (MCOs) rather than directly by the Department of Human Services (DHS).
- FOX 9’s review of contracts and state data shows eight MCOs have paid out more than $6 billion in Medicaid claims since 2018.
- In practice providers submit claims to MCOs, not DHS, leaving the state agency far removed from front‑line utilization review under the current model.
- MCOs — and DHS — are the only entities that can freeze Medicaid funding over suspected fraud; Minnesota’s Medicaid Fraud Control Unit director and other officials describe MCOs as the first line of defense because they decide whether money is paid out.
- Governor Tim Walz this week said he wants to eliminate MCOs from Minnesota’s Medicaid system and centralize accountability within DHS.
- DHS Inspector General James Clark criticized the current setup in which each MCO uses its own fraud‑detection approach and they do not necessarily share information, saying Walz’s proposal would streamline and unify oversight.
- Former Medicaid fraud prosecutors told FOX 9 they observed that neither DHS nor MCOs were appropriately tracking claims and said both had been ‘asleep at the wheel,’ expressing surprise large fraudulent schemes were not caught earlier.
- UCare, previously the state’s largest MCO, was seized by the Minnesota Department of Health last year after massive losses and is being absorbed by Medica; both companies declined to comment on their fraud‑detection roles.
📊 Relevant Data
The improper payment estimate for Medicaid managed care has been at or near 0 percent in recent years, while the error rate in Medicaid fee-for-service claims was 14.8% in FY2021.
Medicaid Managed Care: Improper Payment Estimate | U.S. GAO — U.S. Government Accountability Office
All eight initial Medicaid fraud defendants charged in September 2024 in Minnesota were Somali, and four of the six additional defendants charged in December 2024 were Minnesotan Somalis, with those involved in uncharged cases under investigation being almost entirely Somali.
Learning From Minnesota’s Somali Fraud Scandal — Imprimis - Hillsdale College
Total money disbursed through Minnesota Medicaid programs since 2018 is $18 billion, with an estimated $9 billion potentially fraudulent.
Learning From Minnesota’s Somali Fraud Scandal — Imprimis - Hillsdale College
Causes of Medicaid fraud in Minnesota include low barriers to entry for new providers and beneficiaries, with minimal requirements for reimbursement, and the creation of fictitious companies solely to defraud the system.
Learning From Minnesota’s Somali Fraud Scandal — Imprimis - Hillsdale College
In Minnesota, fraud in Medicaid programs involved industrial-scale operations with a staggering number of bad actors, resulting from widespread failure across leadership levels including agencies that failed to act.
Learning From Minnesota’s Somali Fraud Scandal — Imprimis - Hillsdale College
📰 Source Timeline (3)
Follow how coverage of this story developed over time
- Confirms that about 80% of Minnesota’s Medicaid care is administered by private Managed Care Organizations rather than directly by DHS.
- Reports that MCOs have paid out more than $6 billion in Medicaid claims since 2018, based on data FOX 9 obtained.
- Identifies MCOs and DHS as the only entities that can actually freeze Medicaid funding over suspected fraud, and quotes AG Medicaid Fraud Control Unit director Nicholas Wanka calling MCOs the first line of defense because they decide whether money goes out the door.
- Quotes former state Medicaid-fraud prosecutor Steve Forrest saying MCOs and the state were essentially "asleep at the wheel" on fraud despite MCOs’ financial incentive to stop bogus billing, and that it’s surprising large schemes weren’t caught earlier.
- Clarifies that in practice providers submit claims to the MCOs, not DHS, underscoring how far removed the state agency is from front-line utilization review under the current model.
- Walz stated plainly this week that he wants to eliminate Managed Care Organizations from Minnesota’s Medicaid system and 'centralize' accountability within DHS.
- DHS Inspector General James Clark criticized the current set‑up where each MCO uses its own fraud‑detection approach and 'they're not necessarily sharing information with each other,' arguing the Walz proposal would 'streamline and unify' oversight.
- Former Medicaid Fraud Control Unit prosecutor Steve Forrest told FOX 9 he 'never saw evidence that DHS or any MCO was appropriately tracking claims within their own systems' and said both DHS and MCOs were 'asleep at the wheel' on fraud.
- FOX 9 confirms via contracts and state data that eight MCOs have issued more than $6 billion in Medicaid payments since 2018 and emphasizes that MCOs and DHS are the only entities that can freeze Medicaid funding for suspected fraud.
- The piece notes that UCare was the state’s largest MCO before being seized by the Minnesota Department of Health last year due to massive losses and is now being absorbed by Medica; both declined to comment on their fraud‑detection role.