The Trump administration is freezing nearly $260 million in funding for Minnesota’s Medicaid system, citing concerns about fraud in the program.
The move comes soon after President Trump declared a “war on fraud” during his State of the Union address, an effort that is being led by Vice President JD Vance. During the speech, Trump suggested that the federal government could conceivably balance its budget by eliminating fraud — something that would be virtually impossible given the size of the budget deficit. (“He’ll get it done,” Trump said of Vance. “And if we’re able to find enough of that fraud, we will actually have a balanced budget overnight.”)
The announcement of the Medicaid freeze on Wednesday was the first action taken by Vance in the newly declared war. “What we’re doing is we are stopping the federal payments that will go to the state government, until the state government takes its obligations seriously to stop the fraud that’s being perpetrated against the American taxpayer,” Vance told reporters.
Dr. Mehmet Oz, who runs the Centers for Medicare & Medicaid Services, said the freeze means that $259.5 million in healthcare spending in Minnesota will not be reimbursed as federal investigators review specific programs for potential fraud.
“This is not a problem with the people of Minnesota,” Oz said. “It’s a problem with the leadership of Minnesota and other states who do not take Medicaid preservation seriously. Any delay in services is going to be, should be laid at the seat of Governor [Tim] Walz.”
A political football: Oz’s comments highlight the unavoidably political nature of the dispute, which comes against a background of multiple investigations into significant fraud in the state’s social welfare programs. The first federal investigations began in 2021 during the Biden administration, leading to dozens of indictments and more than 60 convictions so far.
A video about specific instances or allegations of fraud in Minnesota by a conservative influencer named Nick Shirley that went viral late last year pushed the story into the national spotlight and onto the agenda of the Trump administration. Supercharging the issue, Walz was on the Democratic presidential ticket that lost to Trump in the 2024 election, and some of the instances of fraud involved Somali immigrants, a group that Trump has repeatedly singled out, calling them “garbage” and “low-IQ people,” among other things.
Last month, Trump emphasized the political aspect of his aggressive crackdown in Minnesota, which initially focused on immigrants and has now been expanded. “FEAR NOT, GREAT PEOPLE OF MINNESOTA,” he wrote on his social media platform in January, “THE DAY OF RECKONING & RETRIBUTION IS COMING.”
Walz said Wednesday that the freeze on Medicaid funds is “totally illegal and unprecedented.”
“This has nothing to do with fraud,” Walz said on social media. “This is a campaign of retribution. Trump is weaponizing the entirety of the federal government to punish blue states like Minnesota.”
In December, Walz said that an estimate of fraud in the state’s Medicaid program of $9 billion — a number that Trump has rounded up to $19 billion in his State of the Union address — lacked evidence and was “sensationalized.” Last summer, Walz indicated that total fraud in the state’s social welfare programs could exceed $1 billion — massive, to be sure, but far short of some of the claims being tossed around currently.
A plan to tighten up: Whether the estimates of fraud are accurate or not, the Trump administration is demanding that Minnesota take steps to guard against cheating.
“We will give them the money, but we’re going to hold it and only release it after they propose and act on a comprehensive corrective action plan to solve the problem,” Oz said. “If Minnesota fails to clean up the systems, the state will rack up a billion dollars of deferred payments this year.”
On Thursday, Walz unveiled an anti-fraud legislative package that aims to provide better oversight, enhanced enforcement and sharper criminal penalties.
“Any dollar of state money, especially those being used for programs to enhance people's lives, if that goes to the wrong place, is misspent, or in the case of this, criminals are stealing it, we need to do everything possible to prosecute that,” Walz said.
The governor noted that Minnesota’s rate of Medicaid fraud is below the national average. In January, CMS data showed that Minnesota’s improper payment rate for Medicaid was about 2.1%, less than half the national rate of 6.1%.