Feds defer additional $91 million in Minnesota Medicaid funds; Gov. Walz calls it "campaign of retribution"
Gov. Tim Walz says the Trump administration is exploiting the state's fraud crisis after Dr. Mehmet Oz, administrator for the Centers for Medicare & Medicaid Services, announced an additional $91 million in federal Medicaid funding is being deferred, citing ongoing concerns about fraud and program vulnerabilities.
"This is a transparent effort to cut funding for the same working people and rural Minnesota hospitals they've had in their crosshairs for months. Minnesota will not stand for this continued campaign of retribution," Walz said Thursday. "Minnesota is working to stop fraud."
In a tweet posted earlier Thursday afternoon, Oz said the new deferral follows a "pattern we can't ignore" of issues in Minnesota's Medicaid program. Oz referenced previous incidents, such as the "Learing Center" brouhaha and recent Department of Justice actions involving childcare centers, claiming that these were not isolated breakdowns.
According to Oz, of the $91 million now being withheld, $76 million is tied to 14 service categories he identified as "highly vulnerable" to fraud.
"We cannot and will not pay bad bills, so we're asking for more information from Minnesota to verify these bills," Oz said. He added that CMS will continue to use all available tools to protect the integrity of the Medicaid program.
Earlier this year, CMS deferred over $260 million in Medicaid funding to Minnesota after auditing fourth-quarter fiscal year 2025 billing. Oz said the federal government funds roughly half of Medicaid and has both the authority and responsibility to ensure those dollars are spent legally and appropriately.
Minnesota Human Services Commissioner Shireen Gandhi said, "For more than a year, the Minnesota Department of Human Services has been taking aggressive action to both prevent fraud and recoup fraudulent payments. We have been reporting to our federal partners and the public about those efforts. We are disappointed to learn that CMS will extend deferrals of needed funds for another quarter. Nonetheless, the department will continue to fight against the criminals who target Medicaid programs."
The latest federal action comes as Minnesota's healthcare system faces mounting financial strain. According to the Minnesota Hospital Association, 30% of hospitals in the state are losing millions of dollars each year.
Separately, the Minnesota Senate on Wednesday earmarked hundreds of millions of dollars to stabilize hospitals across the state facing financial struggles, especially with some looming federal changes coming to Medicaid under the so-called "One Big Beautiful" bill.
That plan, and what passed the Senate Wednesday, still needs to clear the tied Minnesota House. Legislative leaders have begun end-of-session negotiations ahead of the constitutional last day on May 18.
Oz said the Centers for Medicare & Medicaid Services will continue to work with Minnesota officials to address the identified vulnerabilities, but emphasized that federal funding will not be restored until the state can demonstrate that Medicaid dollars are being spent appropriately.
