Gov. Tim Walz unveiled a proposal March 10 to eliminate managed care organizations from the state’s Medicaid program and replace them with a single statewide organization.
Currently, about 45% of the state’s Medicaid spending and nearly 80% of basic care services flow through eight MCOs. Under the governor’s proposal, the insurers would be replaced by a centralized administrative services organization responsible for claims processing, financial transactions, and provider services. The shift would standardize provider networks, rates, and billing rules regardless of where a Medicaid enrollee lives in the state.
The proposal also calls for moving Medicaid eligibility determinations from counties to the state by mid-2028, and includes funding for a broader study on how healthcare responsibilities are shared between the state, counties, and Tribal Nations.
The state previously ended UnitedHealthcare’s participation in its Medicaid program at the end of 2024 under a law barring for-profit insurers from the program. The insurer had managed care for approximately 32,000 enrollees out of Minnesota’s roughly 1.4 million Medicaid beneficiaries at the time.
The latest announcement comes as Minnesota is engaged in an active legal dispute with the federal government over withheld Medicaid funds. The state filed a lawsuit in early March against CMS over $243.8 million in deferred Medicaid dollars after the agency froze nearly $260 million in funding in February tied to personal care, home and community-based care, and other practitioner services.
In its complaint, the state pointed to its Medicaid payment error rate of 2.2% in both 2022 and 2025, compared to national averages of 15.6% and 6.1% in those respective years. Gov. Walz has characterized the federal funding actions as “a campaign of retribution,” and the lawsuit described the withholding as the federal government weaponizing Medicaid for political purposes.
