The Trump administration has signaled a willingness to halt billions of dollars in federal health payments to multiple states, mirroring moves they made against Minnesota.<\/p>\n
The specific target is Medicaid<\/a>, the public health insurance program that pairs state and federal money. Federal officials have announced unprecedented actions in Minnesota this year, declaring they could withhold over $2 billion in payments slated for the state and claw back nearly $260 million from last year.<\/p>\n The actions in Minnesota came as part of the administration\u2019s declared crackdown on fraud, but critics have likened them to using a bludgeon instead of a scalpel, probably harming patients who rely on Medicaid for care but are not responsible for fraud in the program.<\/p>\n \u201cIt\u2019s going to hurt a lot of people if they end up going through with this,\u201d said Sumukha Terakanambi, a 27-year-old who has Duchenne muscular dystrophy and works as a public policy consultant with the Minnesota Council on Disability.<\/p>\n \u201cOf course we support going after fraud,\u201d Terakanambi said, but \u201cthis overly aggressive action is missing the point. It\u2019s not punishing fraudsters. It\u2019s punishing the people.\u201d<\/p>\n Longtime Medicaid observers also doubt the federal actions will achieve their purported objective. <\/a><\/p>\n Jocelyn Guyer<\/a>, a senior managing director with the consulting firm Manatt, recently told reporters<\/a> that actions of this magnitude by the federal government are unprecedented, partly because punitive measures against states have \u201creally never been an effective way to address fraud.\u201d<\/p>\n Meanwhile, fraud prosecutions have stalled in Minnesota<\/a> as the U.S. attorney\u2019s office there grapples with the exodus of nearly half its attorneys and a surge in cases from the Trump administration\u2019s immigration crackdown.<\/p>\n Despite these concerns, Centers for Medicare & Medicaid Services head Mehmet Oz said the techniques the federal government is using in Minnesota could be applied to other states, and he has launched social media campaigns alleging high-dollar public benefit fraud\u00a0in California<\/a>, Florida<\/a>, Maine<\/a>, and New York<\/a>. And a February release of incomplete Medicaid data<\/a> by the Trump administration\u2019s Department of Government Efficiency appears to be part of a campaign to paint the program as riddled by fraud, Guyer said.<\/p>\n Andy Schneider<\/a>, a research professor at Georgetown University\u2019s Center for Children and Families, said that campaign by the administration seems particularly focused on services designed to keep people with disabilities out of institutions, and he described withholding $2 billion from Minnesota\u2019s Medicaid program as \u201cthe nuclear option<\/a>.\u201d<\/p>\n A \u2018Political Football\u2019<\/strong><\/p>\n Scrutiny of Minnesota\u2019s public benefit programs began early in the Biden administration, years before the most recent investigations. The spotlight on the state\u2019s Medicaid system grew after FBI raids targeting two autism treatment providers<\/a> in December 2024.<\/p>\n The following May, an investigation by a Minneapolis TV station<\/a> into Medicaid housing stabilization services in Minnesota prompted further scrutiny from federal prosecutors, and from Gov. Tim Walz.<\/p>\n Under the Democratic governor, the state launched investigations into 85 autism providers, ordered a third-party audit of 14 types of Medicaid services deemed to be \u201chigh-risk\u201d for fraud, and delayed payments for those services for up to 90 days. Many of the services are ones people with disabilities receive at home, making them more difficult to monitor. \u00a0<\/p>\n Terakanambi worried the state\u2019s \u201cheavy-handed approach\u201d would destabilize the entire home care system. While his own care was not disrupted \u2014 his parents provide the 10 hours of daily personal care he qualifies for through Medicaid \u2014 other Minnesotans with disabilities have said they experienced interruptions and have criticized the delayed payments<\/a>.<\/p>\n In December, one man was found dead<\/a> after losing his in-home care services amid the crackdown.<\/p>\n \u201cWe\u2019re losing sight of the people that have done nothing wrong, that rely on these supports and services to live in the community,\u201d said Sue Schettle, chief executive of ARRM<\/a>, a Minnesota nonprofit that represents organizations supporting people with disabilities. \u201cIt becomes a political football.\u201d<\/p>\n Schettle said she took her concerns about the crackdown to state officials, who have since met routinely with her and other advocates. The subsequent federal actions, however, have left her \u201cshell-shocked,\u201d she said.<\/p>\n The \u2018Nuclear Option\u2019<\/strong><\/p>\n In December, a video posted by a conservative YouTuber<\/a>, with help from state Republicans, supercharged the issue in Minnesota, alleging widespread fraud in child care centers owned by members of the Somali community. A follow-up state investigation of the child care centers that were featured in the video determined that all were \u201coperating as expected<\/a>.\u201d<\/p>\n On Jan. 6, CMS\u2019 Oz sent Walz a letter alleging Minnesota\u2019s Medicaid program was out of compliance with federal rules on fraud, waste, and abuse, setting the stage for the Trump administration\u2019s move to withhold over $2 billion in federal Medicaid funds to Minnesota this year, about 18% of what the state received the year before.<\/p>\n Minnesota is appealing.<\/p>\n The Republican-aligned Paragon Health Institute, a think tank that recently published a policy brief<\/a> calling for similar enforcement actions across the country, applauded the federal moves.<\/p>\n \u201cThat will spur states to take necessary action, thus ensuring that Medicaid funds go to those who are truly eligible,\u201d said Chris Medrano<\/a>, a legal research analyst who co-authored the brief.<\/p>\n Georgetown\u2019s Schneider questioned the necessity and effectiveness of withholding the money.<\/p>\n \u201cI don\u2019t see any relationship between that and actually reducing fraud against the Minnesota Medicaid program, given the state has already taken a lot of action,\u201d he said.<\/p>\n In late February, Oz went further, announcing that on top of withholding $2 billion in future payments to Minnesota, the administration was also \u201cdeferring\u201d about $260 million<\/a> in federal Medicaid payments to the state.<\/p>\n \u201cWe have notified the state that we will give them the money, but we are going to hold it and only release it after they propose and act on a comprehensive corrective action plan to solve the problem,\u201d Oz said at a Feb. 25 news conference<\/a> with Vice President JD Vance.<\/p>\n Minnesota is challenging<\/a> the deferment in court.<\/p>\n \u201cWe\u2019re waiting for feedback from CMS on our corrective action plan, which is why we were surprised and confused when Dr. Oz said in a news conference with the vice president last week that we needed to provide one,\u201d Minnesota Medicaid director John Connolly said at a March 3 news briefing.<\/p>\n \u2018Another Minnesota\u2019<\/strong><\/p>\n Oz and Vance both said during the February news conference that they are not specifically targeting Democratic-led states. Oz noted Florida has a \u201cbig fraud problem\u201d and in mid-March sent a letter to state officials with a list of questions about their Medicaid program. Until then, the letters and most of Oz\u2019s social media videos had been limited to California, Maine, and New York, all led by Democrats.<\/p>\n \u201cWe might have another Minnesota on our hands,\u201d Oz said in a video<\/a> posted the same day as a letter<\/a> sent to Maine Gov. Janet Mills, a Democrat, requesting information on how the state was addressing Medicaid fraud.<\/p>\n \u201cAnd if we\u2019re not satisfied with their progress, we reserve the right to cut off payments entirely,\u201d Oz said in the video.<\/p>\n The video and letter were prompted by a federal audit of autism services<\/a> in Maine that found the state had made at least $45.6 million in improper Medicaid payments. Similar audits in Indiana<\/a>, Wisconsin<\/a>, and Colorado<\/a> had comparable findings.<\/p>\n In a statement<\/a>, Mills called Oz\u2019s letter a \u201cpretense to send ICE and other weaponized federal agents into states led by Democrats.\u201d<\/p>\n CMS spokesperson Chris Krepich said the agency does not take funding actions lightly. \u201cThe focus is on strengthening oversight, improving accountability, and ensuring that vulnerable patients receive the services they are entitled to,\u201d Krepich said.<\/p>\n But Terakanambi said it\u2019s not difficult to see how federal actions like those in Minnesota could put services in jeopardy. The amount of money Minnesota could lose from the CMS actions announced this year is already equivalent to about two-thirds of the state\u2019s rainy-day fund.<\/p>\n Many states are looking to reduce<\/a> or even eliminate<\/a> funding for home care services over much smaller budget shortfalls. And further cuts are anticipated, with congressional Republicans\u2019 One Big Beautiful Bill Act, signed into law last year, expected to reduce federal Medicaid spending by more than $900 billion over the next decade.<\/p>\n \u201cPeople will die,\u201d Terakanambi said. \u201cPeople will lose critical supports and will no longer be able to participate in their community the way they want to.\u201d<\/p>\n KFF Health News<\/a> is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF\u2014an independent source of health policy research, polling, and journalism. Learn more about KFF<\/a>.<\/p>\nUSE OUR CONTENT<\/h3>\n