REGIONAL- The Trump administration has deferred another $199 million in federal Medicaid payments to Minnesota, marking the third time this year that federal officials have withheld reimbursements while questioning claims submitted by the state.
The latest action, announced Tuesday by the U.S. Department of Health and Human Services and Centers for Medicare & Medicaid Services CMS, brings the total deferred from Minnesota this year to approximately $550 million. Federal officials emphasized that the deferrals are not permanent funding cuts and do not affect eligibility for Medicaid, known in Minnesota as Medical Assistance.
CMS said $195 million of the latest deferral involves claims from specific providers identified as presenting a high risk for fraud or showing “aberrant billing practices.” The claims cover services provided from January through March that Minnesota has already paid.
The state will be required to provide documentation showing that the claims meet federal Medicaid requirements. Claims that cannot be supported could be deducted from future federal reimbursements.
John Connolly, temporary commissioner of the Minnesota Department of Human Services and the state’s Medicaid director, accused the administration of continuing to use “unprecedented and punitive ways as part of their war on Medicaid and its recipients.”
“CMS touts their new fraud-detection capabilities, yet has not provided data or explanation on how the deferral amount was calculated or what it was based on,” Connolly said. “I respectfully ask the federal government to partner with us and share any information about their methods to identify potentially fraudulent providers in Minnesota.”
The dispute centers largely on Medicaid services the state identified last fall as especially vulnerable to fraud or improper billing. In October, Gov. Tim Walz ordered a third-party audit and enhanced pre-payment review of claims involving 14 high-risk service categories, most of which provide home, community, or behavioral health services to elderly people and people with disabilities.
One of those programs, Housing Stabilization Services, was terminated by the state on Oct. 31. The remaining 13 were placed under closer scrutiny, including an expanded review of claims before providers were paid.
Federal officials subsequently demanded that Minnesota submit a corrective-action plan addressing weaknesses in its Medicaid oversight. CMS threatened in January to withhold as much as $2 billion annually before deferring approximately $259.5 million in February and another $91 million this spring.
Minnesota challenged the initial deferral in federal court, arguing that CMS was improperly withholding money across entire service categories rather than questioning individual claims. A federal judge denied the state’s request for a preliminary injunction in April, allowing the withholding to continue while the case proceeds.
CMS approved Minnesota’s revised corrective-action plan in March, but the previously deferred funds have not been released.
As part of that plan, the state conducted an accelerated revalidation of 5,583 providers in the remaining high-risk service categories. The review included ownership disclosures, background studies and unannounced site visits.
DHS announced in June that 2,061 providers had been approved to continue billing Medicaid, while 3,411 were notified that they would be disenrolled. Most of those facing disenrollment had submitted incomplete paperwork or documentation, while 916 failed verification during site visits and four failed background studies. Providers were given 60 days to appeal.
The hurried review drew criticism from providers and advocates who said legitimate providers were cut off from payments, threatening services for vulnerable Minnesotans.
HHS Secretary Robert F. Kennedy Jr. said the latest deferrals, which also included $867.5 million in payments to California, are intended to strengthen Medicaid oversight.
“States that receive federal Medicaid funding must demonstrate that every dollar meets federal requirements,” Kennedy said. “When they cannot, we will not release federal funds until they do.”
Walz rejected the administration’s explanation, arguing that Minnesota is being targeted for political reasons.
“This isn’t about fraud,” Walz said. “It’s about cutting your health care so that Trump can afford the tax cuts he gave to billionaires.”
More than one million Minnesotans receive health coverage through Medicaid. The program cost approximately $18 billion in Minnesota in 2024, with expenses shared by the state and federal governments.
The Minnesota Reformer contributed to this article.