The Trump administration has announced plans to withhold over $2 billion in Medicaid funding from Minnesota, according to state officials. During a press conference on March 19, 2024, John Connolly, director of Minnesota Medicaid, revealed that the U.S. Centers for Medicare and Medicaid Services (CMS) intends to withhold $515 million quarterly as part of this decision. The funding cuts will affect thirteen programs deemed at high risk for fraud involving fake healthcare providers.
Connolly emphasized that the reasoning behind this federal decision is “legally deficient.” The programs at risk include essential services that support adults with disabilities and transportation to nonemergency medical appointments. The Minnesota Department of Human Services also shut down a fourteenth program, Housing Stabilization Services, which is currently under federal criminal investigation.
The federal action stems from an investigation led by Joseph Thompson, the former acting U.S. Attorney General for Minnesota, who focused on these high-risk Medicaid services. In October 2023, Minnesota’s Governor Tim Walz announced that the state awarded a contract to Optum to conduct audits of payments made to providers within these programs.
CMS’s analysis indicates that these fourteen programs consume approximately $3.75 billion annually, funded by federal and state taxpayer resources. In a letter posted on social media platform X, Mehmet Oz, who oversees CMS, stated that the agency would defer funding based on findings of fraud, waste, and abuse. He noted that the agency might initiate non-compliance withholding processes for future quarters.
While Connolly acknowledged uncertainty regarding the full impact of the funding freeze, he did clarify that it is possible for the federal government to freeze just a portion of the funds or reinstate them after Minnesota’s Department of Human Services implements satisfactory auditing procedures.
The situation has raised questions about the administration’s broader actions, particularly its decision to freeze over $500 million in childcare payments to Minnesota, which has been a separate issue. In a federal ruling last week, a judge sided with Minnesota and four other states, temporarily unfreezing these payments while both parties work through legal proceedings.
Despite the scrutiny, state officials assert that they are taking Medicaid fraud seriously. However, the audit conducted by Optum is limited to payments directly managed by the Department of Human Services and does not shut down the Medicaid programs entirely. Payments to legitimate healthcare providers have been delayed, but the ongoing federal funding freeze may have broader implications for both providers and patients.
Moving forward, Connolly stated that the changes in federal funding will likely lead to bureaucratic hearings and potential litigation between state officials and federal authorities. The future of Medicaid services for the 1.2 million Minnesotans who rely on the program remains uncertain as both sides navigate this complex situation.
