Minnesota Department of Human Services appealing decision to withhold federal funds for Medicaid

MINNESOTA (KVRR) — 1.2 million people in Minnesota rely on Medicaid, according to the Minnesota Department of Human Services. But funding for over one million people is being withheld of up to $515 million quarterly unless the state takes more actions against fraud.

“What CMS is saying here is they’re going to basically withhold possibly up to $2 billion annually until we make some action or set of actions to address program integrity concerns. And in the letter that CMS sent to us, they did not indicate what those actions necessarily would be,” said John Connolly, Deputy Commissioner for the Minnesota Department of Human Services and State Medicaid Director.

In early December, Connolly said the department received notice from The Centers for Medicare and Medicaid Services to produce a new plan to address fraud by the end of 2025. Last week, CMS Administrator Dr. Mehmet Oz sent a letter to Governor Tim Walz rejecting the plan, calling it deeply insufficient.

“We were disappointed to find that our draft corrective action plan was rejected in an unprecedented way, with a little substance of analysis of the facts and no time for the state and federal agencies to discuss and agree upon a corrective action plan that would be implemented,” said Connolly.

The department has been working with CMS on addressing fraud since October of 2024. They say they are not sure what steps CMS wants them to take.

“If the state cannot get a handle on this fraud, as we find more, we intend to withhold more payments moving forward. Until the state cleans up its act. This ensures that Minnesotans who are truly in need and eligible for benefits can access Medicaid services. But the state is going to be forced to clean up and stop wasting taxpayer dollars,” said Dr. Oz.

Minnesota DHS says they are not sure when the funding freeze will affect Minnesotans, but says that the loss will affect everyone.