JD Vance Announces Withholding Of Federal Funds To Minnesota Medicaid

JD Vance announced Wednesday that the Trump administration will temporarily halt hundreds of millions of dollars in Medicaid funding to Minnesota, citing concerns about fraud and improper payments within the state’s program.

Vance, appearing alongside Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services (CMS), said the administration is withholding $259.5 million in federal funds to ensure Minnesota “takes its obligations seriously to be good stewards of the American people’s tax money.”

“This is not a problem with the people of Minnesota, it’s a problem with the leadership of Minnesota and other states who do not take Medicaid preservation seriously,” Oz said, describing individuals who commit fraud as “self-serving scoundrels.”

According to CMS, the paused funding includes approximately $244 million in unsupported or potentially fraudulent Medicaid claims, along with about $15 million in claims involving individuals “lacking a satisfactory immigration status.” Under federal law, immigrants who are not lawfully present in the United States — and certain lawfully present immigrants — are generally ineligible for full Medicaid benefits.

Oz said Minnesota Gov. Tim Walz, a Democrat and former 2024 running mate of Kamala Harris, was being notified as the announcement was made public. He added that the state would have 60 days to propose and implement a corrective action plan before the funds are released.

“We will give them the money, but we’re going to hold it and only release it after they propose and act on a comprehensive corrective action plan to solve the problem,” Oz said. CMS indicated that failure to satisfy federal requirements could result in up to $1 billion in deferred funding over the next year.

Walz disputed the administration’s claims, calling the decision politically motivated.

“This is a campaign of retribution. Trump is weaponizing the entirety of the federal government to punish blue states like Minnesota,” Walz wrote on social media. “These cuts will be devastating for veterans, families with young kids, folks with disabilities, and working people across our state.”

A spokesperson for Keith Ellison, whose office investigates Medicaid fraud, referred questions to the state’s Department of Human Services. Earlier in the day, Ellison promoted legislation that would provide his office with additional staffing and legal tools to combat fraud.

The funding freeze comes in the wake of a broader anti-fraud campaign launched by Donald Trump, who during his State of the Union address Tuesday announced that Vance would lead a national “war on fraud.” Trump has also nominated Colin McDonald to head a new Justice Department division dedicated to rooting out fraud.

The Minnesota policy follows several high-profile cases, including the alleged $300 million pandemic aid scheme involving the nonprofit Feeding Our Future. The case, which involved funds intended for school meal programs, prompted heightened scrutiny of state oversight and led to additional federal enforcement activity in Minnesota.

Federal officials have also taken steps beyond Medicaid. Last December, the Treasury Department imposed additional verification requirements on certain money wire services used to send funds to Somalia. CMS had previously informed Minnesota in January of its intent to freeze portions of Medicaid payments deemed high-risk, which the state said could total more than $2 billion annually if sustained. Minnesota filed an administrative appeal.

The administration has recently attempted to cut off funding to other states over fraud concerns. A federal judge blocked earlier efforts to halt certain social service payments to Minnesota and four other states — California, Colorado, Illinois, and New York — while another judge prevented the government from cutting administrative funding to 22 states that declined to provide data on food assistance applicants under the Supplemental Nutrition Assistance Program.

Oz also announced new anti-fraud measures targeting Medicare, including a six-month moratorium on new enrollments for suppliers of durable medical equipment, prosthetics and orthotics. The Department of Health and Human Services’ Office of Inspector General found that Medicare improperly paid nearly $23 million to such suppliers between 2018 and 2024, though most of the improper payments occurred before reforms implemented in 2020.

In addition, CMS is launching a public crowdsourcing initiative to gather tips and suggestions from Americans about potential fraud. “All of us are smarter than any one of us,” Oz said.

Akeiisa Coleman of the Commonwealth Fund said deferring Medicaid payments could strain state finances and potentially disrupt provider payments if the state cannot backfill the funds.

As the dispute unfolds, Minnesota health care providers and Medicaid beneficiaries face uncertainty while state and federal officials negotiate over corrective actions and oversight reforms.

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