Minnesota May Never Get Back the $259 Million in Medicaid Money Trump Froze Over Fraud

Minnesota may never get back the $259 million in federal Medicaid money the Trump administration froze in February over suspected fraud, the state’s top Medicaid official has acknowledged. In a report published by Politico on Wednesday, Oct. 14, temporary Department of Human Services Commissioner John Connolly said that more than six months after federal officials told the state to prove the claims were legitimate, Minnesota still has not been able to do it.

The February freeze was only the beginning. According to Politico, the Centers for Medicare and Medicaid Services has now held back more than $550 million in Minnesota Medicaid funding since February, across several deferrals. The state went to federal court to get the first batch released. It lost the first round.

“Prove it” was the deal

The freeze was announced on Feb. 25 at a press conference with Vice President JD Vance, who leads the administration’s anti-fraud effort, and CMS Administrator Dr. Mehmet Oz. The $259 million represented the federal share of Minnesota’s Medicaid claims for the final quarter of 2025. The terms were simple: CMS would pay if Minnesota could show the claims were legitimate.

Vance was blunt about the reasoning. “The job of your government is not to open your borders and allow fraudsters to come in and take advantage of you,” he said, according to PBS NewsHour. “The job of your government is to shut the border and shut off the fraud.” Oz was equally direct: “CMS is done paying and chasing,” he said, adding that “the money is not going to ever leave the building again.”

Officials pointed to examples including Medicaid money flowing to what they called bogus centers for autistic children and a behavioral health organization that billed as though its doctors had worked around the clock for more than 450 days, according to Healthcare Dive. Vance noted that providers had already been paid; the money frozen is the federal reimbursement owed to the state.

The context matters. Minnesota is the home of the Feeding Our Future scandal, in which 79 people were charged, most of them convicted, in a scheme that reportedly stole about $300 million from child nutrition programs, according to PBS. Federal flags now cover 14 Medicaid programs deemed susceptible to fraud, including autism services for children, nonemergency medical transportation and a housing stabilization program Gov. Tim Walz shut down last year.

Minnesota sued. The judge said no.

Minnesota Attorney General Keith Ellison sued CMS in early March, arguing the freeze was political retribution dressed up as fraud prevention. On April 6, U.S. District Judge Eric Tostrud denied the state’s requests for a temporary restraining order and an expedited preliminary injunction over more than $243 million in withheld funds, according to the Washington Examiner.

Tostrud found the state had sued too early, before any cuts were final, and noted that Minnesota “has recognized it has a serious fraud problem.” He acknowledged that “Minnesota credibly complains that the federal government’s deferral is historically unprecedented in its size and timing,” but concluded the deferral likely complies with federal regulations, which do not cap how much can be deferred at once. He left the door open, writing that the state had raised reasonable concerns: “It is possible the record may support these concerns in the future. Today it does not.”

Weeks later, on April 30, Oz announced that CMS was deferring an additional $91 million, citing fraud vulnerabilities, the Associated Press reported. Of that, $76 million was tied to the 14 high-risk service categories and $14 million to program integrity concerns, including payments to ineligible people. “Minnesota state-run programs have raised serious red flags,” Oz said. “This isn’t about punishment, it’s about partnership and accountability.”

Walz called it a “continued campaign of retribution.” “While Minnesota is working to stop fraud, the Trump Administration is working to exploit it,” he said in a statement.

“We are asking for a way out”

By October, the tone from St. Paul had changed. Connolly told Politico the state wants “clarity from CMS,” and argued that federal officials may be treating documentation errors and provider mistakes as fraud, “a blurring of the lines that calls everything fraud.” Minnesota says it has revalidated every provider considered a fraud risk, including home health and autism therapy providers, and on Oct. 2 it wrote to Oz asking how CMS flagged them. “We are asking for a way out,” Connolly said.

If the money never comes, Politico reported, Minnesota may have to claw it back from the doctors, hospitals and providers it already paid. CMS told Politico it does not comment on pending litigation and is “committed to safeguarding Medicaid.” Separately, CMS and Minnesota are in court over a federal effort to withhold $2 billion in future Medicaid payments.

Walz, who is not seeking reelection, has said he wants to spend his final year in office fighting fraud in state programs.

The bottom line

Minnesota’s leaders spent months calling this a political vendetta. A federal judge looked at the record and declined to stop it. Now the state’s own Medicaid chief concedes that, months later, Minnesota still has not been able to prove the claims to the federal government’s satisfaction. Whatever share turns out to be outright theft and whatever share is sloppy paperwork, the result for taxpayers is the same: federal money should not flow until a state can show where it went.

Minnesota was told to prove its claims were real, and seven months later the proof still has not shown up.

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