Minnesota Department of Human Services implements pre-payment program to fight Medicaid fraud

The Minnesota Department of Human Services says it has developed a pre-payment system to flag potentially fraudulent Medicaid claims.

In October, Gov. Tim Walz said the state would partner with Optum to audit billing for 14 Medicaid services that were deemed "high risk" for fraud. The goal by the end of the year is to create an automated system to review the claims before they're paid and flag items for further review.

According to Optum's update on Friday, they were able to identify over $52 million in potentially recoverable funds due to policy violations across the 14 Medicaid services. The audit also identified a potential $1.7 billion that could be saved if the DHS updated some of its policies. An additional $165 million was caught and saved in the fourth quarter of 2025 once the state started an enhanced review process.

Deputy Commissioner and State Medicaid Director John Connolly said the department will refer suspicious findings to law enforcement if necessary. With the recent exodus at the U.S. Attorney's Office in Minnesota, Connelly says he is still handing over information to them, but doesn't know who is receiving or reviewing it.

He added that though the Optum contract is in place for a year, changes to safeguard against fraud will likely take more time and require action at the Minnesota Legislature.

The virtual meeting comes days after the human services department said it was transferring 168 employees from other state agencies to examine and conduct site reviews as a way to combat Medicaid fraud. Their goal is to revalidate nearly 6,000 providers by the summer.