Minnesota officials are demanding specific fraud evidence from the Trump administration while hundreds of millions in frozen Medicaid payments face permanent cancellation, a standoff that puts years of weak state oversight under federal pressure.
Minnesota’s temporary human services commissioner and state Medicaid director John Connolly warned that the Centers for Medicare and Medicaid Services could officially withdraw up to $259 million in Medicaid payments frozen earlier this year. Connolly sent a letter last week to CMS Administrator Mehmet Oz asking to see the specific allegations behind the freezes, The Hill reported.
State officials are bracing for hundreds of millions of dollars to be cancelled in the coming weeks. They expect word on whether the first deferrals will become a formal disallowance, the official denial of federal Medicaid matching funds for spending that fails federal rules.
CMS has already threatened to withhold Medicaid funding amounting to a $2 billion cut. Over the past several quarters the administration froze $550 million after payments raised red flags for fraud, including claims for care to deceased people and billing for large numbers of patients at the same time.
In his letter, Connolly framed the state’s position as one of repeated unanswered requests.
Minnesota has repeatedly asked CMS and federal law enforcement to provide evidence supporting public claims of fraud in Minnesota’s Medicaid program.
“Minnesota has repeatedly asked CMS and federal law enforcement to provide evidence supporting public claims of fraud in Minnesota’s Medicaid program... to date, no evidence has been shared,”
Connolly said the state is ready to take prompt action if and when the administration provides credible evidence. At the time of the freeze, the administration said the funding was not being cut but merely paused until state officials could show the “high-risk” claims were justified.
That pause is now part of a wider federal crackdown. The Trump administration has honed in on blue states ahead of the midterm elections while alleging massive Medicaid fraud and abuse. Minnesota’s program sits at the center of the dispute.
Vice President JD Vance announced the temporary halt to certain Medicaid funding for Minnesota as he took the lead on a broader anti-fraud effort. Breitbart detailed the move and the $259 million figure tied to the freeze.
“We have decided to temporarily halt certain amounts of Medicaid funding that are going to the state of Minnesota,”
Vance told a news conference. The action followed allegations of widespread benefits fraud in Minnesota and came after President Trump elevated Vance’s anti-fraud role. Federal officials have linked parts of the problem to bad actors in the state’s Somali community and to earlier immigration-enforcement gaps.
Minnesota’s record on related integrity failures is already long. Readers following the $9 billion fraud scandal that has shadowed Democratic politics in the state will recognize the same pattern of delayed accountability.
CMS Administrator Mehmet Oz has gone further, warning Gov. Tim Walz that Minnesota could lose federal Medicaid funding unless it restores program integrity. The New York Post reported Oz’s claim that more than $1 billion was stolen through Medicaid fraud linked to bad actors in the Somali community, with some funds possibly reaching the terrorist group al-Shabab.
“Our staff at CMS told me they’ve never seen anything like this in Medicaid, and everyone from Gov. Tim Walz on down needs to be investigated, because they’ve been asleep at the wheel.”
Oz demanded weekly anti-fraud updates, a six-month freeze on high-risk provider enrollment, provider verification, and a corrective action plan within 60 days.
“If we’re unsatisfied with the state’s plans or cooperation, we’ll stop paying the federal share of these programs.”
Program numbers show how far spending drifted from original projections. The Housing Stabilization Services program paid over $100 million in 2024 against a $2.6 million projection. An early intensive developmental program grew to nearly $400 million in 2023 from $3 million in 2018.
Those figures sit alongside other Minnesota cases that keep resurfacing for taxpayers, including a high-profile alleged $4.5 million Medicaid fraud and sex-trafficking ring and separate guilty pleas in a $2.2 million scheme that used AI-fabricated records.
A federal judge has already rejected Minnesota’s attempt to block the administration. Judge Eric Tostrud, appointed by Trump, denied the state’s motions for a temporary restraining order and preliminary injunction against a pause of more than $243 million in Medicaid funds. The Washington Examiner reported the ruling.
even “Minnesota has recognized it has a serious fraud problem.”
The judge found the deferral complies with federal regulations and that the process is just beginning, with no final disallowance yet issued. CMS has deferred funds over questionable billing and is requiring documentation.
“Minnesota’s request for a preliminary injunction depends on assuming that predicted future events come to pass... the law does not allow a preliminary injunction to be issued based on assumptions like these.”
The court made clear that predicted future cuts do not justify an injunction while the administrative process is still underway. That leaves the freeze in place and the state’s demand for more evidence unanswered in public.
Local integrity failures keep compounding the federal case. Hennepin County shut down a $2 million ICE relief fund after fraud swallowed most claims, another reminder that weak controls have real costs for Minnesota residents.
Walz has also traded blame with the White House on other fronts, including cyberattacks on water systems across seven states, keeping the governor in the middle of repeated accountability fights with federal officials.
Taken together, the letter, the freezes, the Oz demands, and the court ruling show a state still asking for more paper while federal officials point to billing for the dead, simultaneous mass claims, billion-dollar theft estimates, and programs that exploded far beyond their original budgets. Connolly’s request for evidence does not erase the numbers already on the table or the judge’s finding that Minnesota itself has acknowledged a serious fraud problem.
Four men have already pleaded guilty in a separate $2.2 million Minnesota Medicaid fraud case built on AI-fabricated records, underscoring that prosecutions continue even as state leaders press CMS for additional detail.
Taxpayers fund these programs on the promise that states will police them. When red-flag claims pile up and federal dollars are frozen, the first duty is to clean the books, not to stall for more process.