The current administration has indicated a potential to cease substantial federal health reimbursements to several states, a strategy mirroring actions previously taken against Minnesota.
The principal focus of this initiative is Medicaid, the public health insurance program funded through a combination of state and federal resources. Federal authorities have initiated unprecedented measures concerning Minnesota this year, suggesting the possibility of retaining over $2 billion in allocated payments and reclaiming approximately $260 million from the preceding year.
These interventions in Minnesota were framed as part of the administration’s stated campaign against fraudulent activities. However, critics contend that these tactics are overly broad, potentially causing harm to beneficiaries who depend on Medicaid for healthcare and are not complicit in any program misconduct.
“The consequences of proceeding with this could be severe for numerous individuals,” stated Sumukha Terakanambi, a 27-year-old who navigates life with Duchenne muscular dystrophy and serves as a public policy advocate with the Minnesota Council on Disability.
“Naturally, we endorse efforts to combat fraud,” Terakanambi acknowledged, adding, “but this excessively forceful approach misses the mark. It doesn’t penalize offenders; it penalizes the recipients.”
Veteran observers of the Medicaid system also express skepticism regarding the efficacy of these federal actions in achieving their stated objectives.
Jocelyn Guyer, a senior managing director at the consulting firm Manatt, informed journalists that the scale of such federal government interventions is without precedent, in part because punitive measures against states have “historically not been an effective means of addressing fraud.”
Concurrently, fraud prosecutions in Minnesota have lagged, coinciding with the U.S. attorney’s office facing a significant departure of nearly half its legal staff and an escalation in cases stemming from the administration’s immigration enforcement initiatives.
Notwithstanding these apprehensions, the head of the Centers for Medicare & Medicaid Services, Mehmet Oz, has suggested that the methodologies employed by the federal government in Minnesota could be extended to other states. He has also initiated social media campaigns highlighting allegations of substantial fraud within public benefit programs in California, Florida, Maine, and New York. Furthermore, a release of incomplete Medicaid data in February by the Trump administration’s Department of Government Efficiency appears designed to portray the program as heavily compromised by fraud, according to Guyer.
Andy Schneider, a research professor at Georgetown University’s Center for Children and Families, indicated that this administration’s campaign seems particularly focused on services aimed at enabling individuals with disabilities to reside within the community rather than in institutional settings. He characterized the potential withholding of $2 billion from Minnesota’s Medicaid program as “the nuclear option.”
A ‘political football’
Scrutiny of Minnesota’s public assistance programs commenced early in the Biden administration, predating the most recent investigations. Increased attention on the state’s Medicaid system intensified following FBI raids targeting two autism treatment providers in December 2024.
In the subsequent May, an investigation by a Minneapolis television station into Medicaid housing stabilization services in Minnesota drew further examination from federal prosecutors and Governor Tim Walz.
Under the leadership of the Democratic governor, the state initiated inquiries into 85 autism providers. A third-party audit was commissioned for 14 types of Medicaid services identified as “high-risk” for fraudulent activity, and payments for these services were temporarily suspended for up to 90 days. Many of these services are delivered to individuals in their homes, making them more challenging to monitor.
Terakanambi expressed concern that the state’s “heavy-handed approach” could destabilize the entire home care infrastructure. While his personal care, which includes 10 hours of daily assistance through Medicaid provided by his parents, remained unaffected, other Minnesotans with disabilities have reported service disruptions and have voiced criticism regarding the postponed payments.
In December, an individual was discovered deceased following the cessation of their in-home care services amidst the intensified enforcement measures.
“We are losing sight of the individuals who have acted ethically, who rely on these supports and services to maintain their community integration,” stated Sue Schettle, chief executive of ARRM, a Minnesota-based nonprofit representing organizations that assist individuals with disabilities. “It devolves into a political football.”
Schettle mentioned that she conveyed her concerns about the enforcement actions to state officials, who have since engaged in regular dialogue with her and other advocates. However, the subsequent federal interventions have left her “shell-shocked,” she reported.
The ‘nuclear option’
In December, a video disseminated by a conservative YouTuber, with assistance from state Republicans, significantly amplified the issue in Minnesota. The video alleged widespread fraudulent practices in childcare facilities owned by members of the Somali community. A subsequent state investigation of the childcare centers featured in the video concluded that all were “operating as expected.”
On January 6, CMS’s Oz transmitted a letter to Governor Walz, asserting that Minnesota’s Medicaid program was not in adherence with federal regulations concerning fraud, waste, and abuse. This action set the stage for the administration’s decision to withhold over $2 billion in federal Medicaid funds from Minnesota for the current year, representing approximately 18% of the state’s receipts from the prior year.
Minnesota is currently contesting this decision.
The politically aligned Paragon Health Institute, a think tank that recently published a policy paper advocating for similar enforcement actions nationwide, commended the federal government’s initiatives.
“This will compel states to implement necessary measures, thereby ensuring that Medicaid funds are disbursed to those who are genuinely eligible,” commented Chris Medrano, a legal research analyst who co-authored the paper.
Georgetown’s Schneider questioned the necessity and efficacy of withholding funds.
“I perceive no correlation between that action and the actual reduction of fraud within the Minnesota Medicaid program, particularly given the extensive measures the state has already undertaken,” he remarked.
Toward the end of February, Oz escalated matters further by announcing that in addition to withholding $2 billion in future reimbursements to Minnesota, the administration was also “deferring” approximately $260 million in federal Medicaid payments to the state.
“We have informed the state that we will disburse the funds, but we will hold them and only release them once they present and act upon a comprehensive corrective action plan to resolve the issue,” Oz stated at a February 25 press conference alongside Vice President JD Vance.
Minnesota is legally challenging the deferment.
“We are awaiting feedback from CMS regarding our corrective action plan, which is why we were surprised and confused when Dr. Oz stated at a press conference with the vice president last week that we were required to provide one,” articulated Minnesota Medicaid director John Connolly during a March 3 news briefing.
‘Another Minnesota’
Oz and Vance both asserted during the February press conference that their actions are not specifically targeting Democratic-led states. Oz noted that Florida has a “major fraud problem” and, in mid-March, dispatched a letter to state officials containing a list of inquiries regarding their Medicaid program. Prior to this, the correspondence and most of Oz’s social media videos had been directed at California, Maine, and New York, all governed by Democrats.
“We may be facing another Minnesota situation,” Oz remarked in a video posted on the same day a letter was sent to Maine Governor Janet Mills, a Democrat, requesting details on the state’s strategies for addressing Medicaid fraud.
“And should we find their progress unsatisfactory, we reserve the right to completely suspend payments,” Oz declared in the video.
The video and letter were prompted by a federal audit of autism services in Maine, which revealed that the state had made improper Medicaid payments amounting to at least $45.6 million. Comparable findings emerged from similar audits conducted in Indiana, Wisconsin, and Colorado.
In a formal statement, Governor Mills characterized Oz’s letter as a “pretext to dispatch ICE and other weaponized federal agents into states led by Democrats.”
CMS spokesperson Chris Krepich affirmed that the agency does not undertake funding actions lightly. “The emphasis is on reinforcing oversight, enhancing accountability, and ensuring that vulnerable patients receive the services to which they are entitled,” Krepich stated.
However, Terakanambi commented that it is not difficult to comprehend how federal actions, such as those observed in Minnesota, could jeopardize essential services. The financial sum that Minnesota stands to lose from the CMS actions announced this year already equates to approximately two-thirds of the state’s emergency reserve fund.
Numerous states are endeavoring to reduce or entirely eliminate funding for home care services due to considerably smaller budget deficits. Further reductions are anticipated, with the congressional Republicans’ One Big Beautiful Bill Act, enacted last year, projected to decrease federal Medicaid expenditures by over $900 billion over the coming decade.
“People will perish,” Terakanambi predicted. “Individuals will be deprived of crucial support systems and will no longer be able to participate in their communities as they desire.”
