The Trump administration has indicated on Mar. 20 that it may stop billions of dollars in federal health payments to several states, following similar actions taken against Minnesota. The main focus is Medicaid, the joint state and federal health insurance program. Federal officials have already announced they could withhold over $2 billion in payments to Minnesota and seek repayment of nearly $260 million from the previous year.
This move is part of a broader effort by the administration to address what it describes as widespread fraud in Medicaid. However, critics argue that such sweeping measures risk harming patients who depend on the program for essential care rather than targeting those responsible for fraudulent activities.
"It's going to hurt a lot of people if they end up going through with this," said Sumukha Terakanambi, a public policy consultant with the Minnesota Council on Disability who relies on Medicaid services. "Of course we support going after fraud," Terakanambi said, but "this overly aggressive action is missing the point. It's not punishing fraudsters. It's punishing the people."
Jocelyn Guyer, senior managing director at Manatt, said these types of punitive actions by the federal government are unprecedented and questioned their effectiveness: "really never been an effective way to address fraud." Meanwhile, prosecutions related to Medicaid fraud have slowed in Minnesota due to staffing shortages at the U.S. attorney's office and increased immigration cases.
Mehmet Oz, head of Centers for Medicare & Medicaid Services (CMS), said that strategies used in Minnesota could be applied elsewhere and has launched social media campaigns about alleged high-value public benefit fraud in California, Florida, Maine, and New York. Andy Schneider from Georgetown University described withholding $2 billion from Minnesota's Medicaid program as "the nuclear option." Scrutiny intensified after FBI raids on autism treatment providers and further investigations into housing stabilization services prompted by local media reports.
Minnesota responded by investigating numerous providers and delaying payments for certain high-risk services—many serving people with disabilities at home—which some advocates say destabilized care systems. In one case during this period, a man died after losing his in-home care services.
Sue Schettle, CEO of ARRM—a nonprofit supporting people with disabilities—said: "We're losing sight of the people that have done nothing wrong... It becomes a political football." Despite meetings between advocates and state officials, subsequent federal actions left her "shell-shocked." A video alleging widespread child care center fraud was later contradicted by a state investigation finding all centers operated as expected.
In January, Oz sent Governor Tim Walz a letter claiming noncompliance with federal rules on fraud prevention and set up moves to withhold funds; Minnesota is appealing these decisions. Chris Medrano from Paragon Health Institute supported stricter enforcement: "That will spur states to take necessary action... ensuring that Medicaid funds go to those who are truly eligible." Schneider questioned whether withholding money would actually reduce fraud given existing state efforts.
Oz later announced deferral of an additional $260 million pending corrective action plans from Minnesota; Walz’s administration expressed confusion over this requirement since they were awaiting CMS feedback on their plan. Oz also sent letters regarding potential issues in other states including Florida and Maine following audits revealing improper payments there.
Maine Governor Janet Mills criticized Oz’s approach as politically motivated while CMS spokesperson Chris Krepich emphasized their focus remains on oversight and accountability for vulnerable patients’ access to services.
Terakanambi warned that such funding cuts could jeopardize critical supports for Minnesotans with disabilities: “People will die,” he said. “People will lose critical supports and will no longer be able to participate in their community the way they want to.”
With anticipated reductions stemming from recent legislation projected to cut more than $900 billion from federal Medicaid spending over ten years, many observers expect further challenges ahead for state-run programs.
