The Trump administration has announced its intention to suspend billions of dollars in federal health payments to several states, mirroring the move it made to Minnesota.
A specific target is Medicaid, a public health insurance program that combines state and federal funding. Federal officials announced an unprecedented move in Minnesota this year, holding off on more than $2 billion in scheduled payments to the state and potentially clawing back nearly $260 million from last year.
The Minnesota action comes as part of the administration’s declared crackdown on fraud, but critics liken it to using a club instead of a scalpel and say it likely hurts patients who rely on Medicaid for health care but are not responsible for the system’s fraud.
“If they had to go through something like this, it would hurt a lot of people,” said Sumuka Telakanambi, a 27-year-old with Duchenne muscular dystrophy who works as a public policy consultant for the Minnesota Council on Disabilities.
“Of course we support pursuing fraud,” Telakanambi said, but added: “This overly aggressive action misses the point. We’re not punishing fraudsters, we’re punishing people.”
Longtime Medicaid observers also question whether federal action will achieve its goals.
Jocelyn Geyer, senior managing director at consulting firm Manatt, recently told reporters that such a large-scale action by the federal government is unprecedented, in part because punitive actions against states “have never been an effective means of addressing wrongdoing.”
Meanwhile, fraud prosecutions have stalled in Minnesota as the state’s federal prosecutor’s office grapples with the loss of nearly half its lawyers and a surge in cases due to the Trump administration’s immigration crackdown.
Despite these concerns, Mehmet Oz, director of the Centers for Medicare and Medicaid Services, said the methods the federal government is using in Minnesota can be applied to other states, and he has launched a social media campaign denouncing high-cost public benefit fraud in California, Florida, Maine and New York. Additionally, the Trump administration’s Department of Government Efficiency’s release of incomplete Medicaid data in February appears to be part of a campaign to paint the program as riddled with fraud, Geyer said.
Andy Schneider, a research professor at Georgetown University’s Center for Children and Families, said the administration’s campaign appears to be particularly focused on services aimed at keeping people with disabilities out of institutions, and said withholding $2 billion from Minnesota’s Medicaid program is a “core option.”
“Political Soccer”
Oversight of Minnesota’s public benefit programs began years before the latest investigation, early in the Biden administration. The state’s Medicaid system came into focus after an FBI raid on two autism treatment providers in December 2024.
The following May, a Minneapolis television station’s investigation into Minnesota’s Medicaid Housing Stability Services prompted further scrutiny from federal prosecutors and Gov. Tim Walz.
Under the Democratic governor, the state launched investigations into 85 autism health care providers, ordered third-party audits of 14 types of Medicaid services deemed “high risk” for fraud, and delayed payments for those services for up to 90 days. Many services are available to people with disabilities at home, making monitoring more difficult.
Telakambi feared the state’s “heavy-handed approach” would destabilize the entire home health care system. Although his own care was not interrupted, and his parents provide the 10 hours of personal care each day that he is eligible for through Medicaid, other Minnesotans with disabilities say they have experienced interruptions and have criticized the delayed payments.
In December, a man who lost his home care services during the crackdown was found dead.
“We’re losing sight of people who have done nothing wrong and who rely on these supports and services to live in their communities,” said Sue Shettle, chief executive of ARRM, a Minnesota nonprofit that represents disability advocacy organizations. “It becomes a political football.”
Shettle said he brought his concerns about the crackdown to state officials and has since met regularly with him and other supporters. But she said she was “shocked” by the federal government’s subsequent actions.
“Nuclear option”
In December, a video posted by a conservative YouTuber with the help of the state Republican Party greatly inflamed Minnesota’s problems, alleging widespread fraud at child care centers owned by members of the Somali community. A state follow-up review of the child care centers featured in the video found that all were “operating as expected.”
On January 6, CMS’s Mr. Oz sent Mr. Walz a letter alleging that Minnesota’s Medicaid program does not comply with federal rules regarding fraud, waste and abuse, setting the stage for the Trump administration’s move to withhold more than $2 billion in federal Medicaid funds from Minnesota this year, about 18% of what the state received last year.
Minnesota is fascinating.
Paragon Health Institute, a Republican-leaning think tank, recently released a policy brief calling for similar enforcement actions across the country and applauded the federal government’s move.
“This will encourage states to take the necessary steps to ensure that Medicaid funds reach those who are truly eligible,” said Chris Medrano, a legal research analyst and co-author of the brief.
Georgetown’s Schneider questioned the necessity and effectiveness of withholding funds.
“I don’t see any connection between that and actually reducing fraud against the Minnesota Medicaid program, given the number of steps the state has already taken,” he said.
In late February, Mr. Oz went further, announcing that in addition to withholding $2 billion in future payments to Minnesota, he was also “deferring” about $260 million in federal Medicaid payments to Minnesota.
“We have notified the states that we will give them the money, but we will hold it and only release it once the states have proposed and acted on a comprehensive corrective action plan to fix the problem,” Oz said at a Feb. 25 press conference with Vice President J.D. Vance.
Minnesota is challenging the delay in court.
“We are waiting for feedback from CMS on our corrective action plan, so we were surprised and confused when Dr. Oz said in a press conference with the Vice President last week that we would need to submit a corrective plan,” Minnesota Medicaid Director John Connolly said at a March 3 press conference.
“Another Minnesota”
Mr. Oz and Mr. Vance said at a press conference in February that they were not specifically targeting Democratic-led states. Oz said Florida has a “major fraud problem” and sent a letter to state officials in mid-March with a list of questions about the Medicaid program. Until then, most of the letters and Oz’s social media videos were confined to Democratic-led states of California, Maine and New York.
“We may have another Minnesota on our hands,” Oz said in a video posted the same day as a letter to Maine Gov. Janet Mills (D) asking for information on how the state is dealing with Medicaid fraud.
“And if we are not satisfied with their progress, we reserve the right to cut off payments entirely,” Oz said in the video.
The video and letter were prompted by a federal audit of Maine’s autism services that found the state had made at least $45.6 million in improper Medicaid payments. Similar audits were conducted in Indiana, Wisconsin, and Colorado with similar results.
Mills said in a statement that Oz’s letter is “an excuse to bring ICE and other weaponized federal agents into Democratic-led states.”
CMS spokesman Chris Klepisch said CMS does not undertake funding activities lightly. “We are focused on strengthening oversight, improving accountability, and ensuring vulnerable patients receive the services they deserve,” Krepić said.
But Telakambi said it’s not hard to see how federal actions like the one in Minnesota could jeopardize services. The amount of money Minnesota could potentially lose from the CMS measures announced this year already equates to about two-thirds of the state’s rainy day funds.
Many states are considering cutting or eliminating funding for home care services, citing much smaller budget shortfalls. And Congressional Republicans’ One Big Beautiful Bill Act, passed last year, is expected to cut federal Medicaid spending by more than $900 billion over the next 10 years, with further cuts expected.
“People will die,” Telakambi said. “People lose important support and are unable to participate in their communities as much as they would like.”
