CMS is freezing $259.5 million in federal Medicaid funding to Minnesota, citing unsupported or potentially fraudulent claims in the state’s program.
“We have decided to temporarily halt certain amounts of Medicaid funding that are going to the state of Minnesota in order to ensure that the state of Minnesota takes its obligation seriously to be good stewards of the American people’s tax money,” Vice President J.D. Vance said at a Feb. 25 news conference alongside CMS Administrator Mehmet Oz, MD.
The freeze covers claims from July through September 2025 and targets spending in personal care services, home and community-based services, and other practitioner services. Of the total, $243.8 million relates to claims CMS deemed unsupported or potentially fraudulent, and $15.4 million involves claims for individuals the agency said lacked satisfactory immigration status.
“This is a campaign of retribution,” Gov. Tim Walz said. “Trump is weaponizing the entirety of the federal government to punish blue states like Minnesota. These cuts will be devastating for veterans, families with young kids, folks with disabilities, and working people across our state.”
The funding freeze comes a day after President Trump used his State of the Union address to spotlight potential Medicaid fraud, blaming what he called “Somali pirates who ransacked Minnesota” and pledging that Vice President Vance would lead “the war on fraud.” The president also accused California, Massachusetts and Maine of having serious fraud issues. He spent just under four minutes on healthcare during the record 107-minute speech.
Minnesota’s Medicaid program has been under intensifying scrutiny for months. In January, CMS directed the state to pause provider enrollment across 13 Medicaid service categories and said the state’s corrective action plan was insufficient. The agency then moved to withhold up to $515 million per quarter from the state’s high-risk programs, which could total more than $2 billion annually. The state is appealing that action, calling it legally baseless.
UnitedHealth’s Optum has also been conducting a prepayment audit of program claims across 14 high-risk services, so far identifying $52.3 million in direct recoveries over 46 months and flagging $1.7 billion in potential savings if the state tightened its policies. At the end of 2025, the federal government separately froze all child care payments to the state over suspected fraud.
The audit comes as federal prosecutors estimate losses could exceed $9 billion across multiple Medicaid programs in Minnesota, though Gov. Walz has disputed that figure, according to CBS News. Federal investigators have been probing more than a dozen social services programs, including nutrition, housing and behavioral health.
Elsewhere, Texas Gov. Greg Abbott has been advocating for his own state to investigate its Medicaid program, and a Maine program audit uncovered nearly $46 million in improper Medicaid payments for autism-related services earlier in the year.
Alongside the Minnesota freeze, CMS announced a six-month nationwide moratorium on new Medicare enrollment for certain durable medical equipment suppliers, building on what the agency said was $1.5 billion in suspected fraudulent billing it stopped in the area last year. The agency also launched a request for public comment under what it is calling the “CRUSH initiative,” or Comprehensive Regulations to Uncover Suspicious Healthcare, to inform potential future rulemaking on fraud prevention efforts. Comments are due March 20.
The agency added that it plans to publicly list providers and suppliers that have been removed from the Medicare program, including their national provider identifier numbers and the reason they were removed.
HHS Secretary Robert F. Kennedy Jr. said the administration is moving from a “pay and chase” model to a “detect and deploy” strategy using AI to flag fraud before payments go out. Dr. Oz said the approach would “padlock the jar” on fraudsters rather than catch them after the fact.
CMS said it suspended $5.7 billion in suspected fraudulent Medicare payments in 2025 and sent 372 fraud referrals totaling $3.7 billion in billing to law enforcement.
