HHS defers $259.5 million in Medicaid funding to Minnesota

HHS defers $259.5 million in Medicaid funding to Minnesota The decision is part of a crackdown on fraud to prevent payment of questionable claims while further investigation is completed, HHS says. Medicare & Medicaid By Susan Morse , Executive Editor | February 26, 2026 | 11:17 AM Minnesota Gov.

Tim Waltz Photo: Stephen Maturen/Getty Images A government "crackdown on healthcare fraud" includes a decision to defer $259.5 million of quarterly federal Medicaid funding to Minnesota to prevent payment of questionable claims while further investigation is completed, according to the Department of Health and Human Services.Late Wednesday, the White House, Vice President J.D. Vance, Secretary of Health and Human Services Robert F. Kennedy, Jr., and Administrator of the Centers for Medicare & Medicaid Services Dr. Mehmet Oz announced new steps to crack down on fraud in Medicare and Medicaid.

Minnesota Human Services Commissioner Shireen Gandhi said by statement: "Today's announcement is part of a broad and sustained attack by the federal government on Medicaid in Minnesota. Deferring $259 million will significantly harm the state's health care infrastructure and the 1.2 million Minnesotans who depend on Medicaid. The federal government chose to ignore more than a year of serious and intensive work to fight fraud in our state."On Feb. 25, the federal government notified the Minnesota Department of Human Services they were deferring $259 million in federal Medicaid funding, according to the Minnesota Department of Human Services. The actions are on top of federal action to withhold more than $2 billion in annual Medicaid funding to Minnesota, the department said. The state has submitted a corrective action plan to persuade CMS to reverse course and is appealing. Since the fall of 2024, the Minnesota Human Services Department has implemented new processes and reforms to detect and prevent Medicaid fraud, the department said.CMS' review of Minnesota's Medicaid spending for the fourth quarter in FY 2025 resulted in a deferral of $259,505,491 in federal matching funds. This includes state expenditures of $243.8 million for unsupported or potentially fraudulent Medicaid claims and $15.4 million related to claims involving individuals lacking a satisfactory immigration status, HHS said. The agency said there has been unusually high spending and rapid growth in certain service areas, including personal care services, home and community-based services, and other practitioner services.CMS said it is deferring those federal funds to protect taxpayer dollars while ensuring the state has the opportunity to respond and provide information and documentation during the review. "Should Minnesota fail to clean up its significant program integrity vulnerabilities or demonstrate that the expenditures are allowable, CMS may defer more than $1 billion in federal funds over the next year," CMS said. CMS will continue to oversee Minnesota's efforts to carry out its corrective action plan to address the underlying causes of fraud, waste and abuse within the state, it said.In January, CMS notified Minnesota of its intent to withhold federal funds until it was satisfied with the state's corrective action plan to address its program integrity shortcomings. CMS also notified Minnesota of its intent to conduct a review focused on program integrity to ensure federal funds were not going toward questionable claims. HHS nationwide actions include a six-month moratorium on Medicare enrollment for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS). Last year, CMS stopped more than $1.5 billion in suspected DMEPOS fraudulent billing.CMS said it is looking to stakeholders to provide input, based on their experience and knowledge, on additional ways the agency can tackle fraud prevention to help inform the development of a possible future rule under CMS' Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) initiative.Comments on the CRUSH Request for Information must be submitted by March 20 through the Federal Register. Email the writer: [email protected] Topic: Accounting & Financial Management, Compliance & Legal, Medicare & Medicaid