Minnesota Worries It’s Not Getting Back $259 Million Trump Froze

Minnesota is bracing for the Trump administration to cut more of its Medicaid funding — permanently.

The state’s top Medicaid official is concerned Minnesota could lose hundreds of millions of dollars for claims it's already paid out. If that comes to pass, Minnesota would be forced to claw the money back from doctors, hospitals and other people who care for the low-income people in the program.

“We want clarity from CMS,” John Connolly, the state’s temporary commissioner of the Department of Human Services, said in an interview with POLITICO, referencing the federal agency that oversees Medicaid. “The concern that we have is how these different freezes and clawbacks are justified.”

The Centers for Medicare and Medicaid Services has frozen more than $550 million in Minnesota Medicaid funding since February, making the state a focal point in President Donald Trump’s fraud crackdown. The frozen funds followed a scandal involving rampant fraud in a now-shuttered Minnesota housing program. In response, Democratic Gov. Tim Walz, Kamala Harris’ running mate in the 2024 presidential election, decided not to seek reelection. Walz said he wanted to spend his last year in office fighting fraud in state programs, not campaigning.

Minnesota says it's taken swift action to clamp down on fraud, including revalidating all providers of health care services thought to be fraud risks, such as home health and autism therapy.

CMS told POLITICO it does not comment on matters that are in litigation. The agency is in court with Minnesota over a separate administration effort to withhold $2 billion to the state in future Medicaid payments. CMS is “committed to safeguarding Medicaid” by protecting taxpayer dollars, a spokesperson told POLITICO in a statement.

Medicaid is jointly funded by the state and the federal government. States pay out claims that providers submit and are then partially reimbursed by the federal government.

But in February, CMS withheld $259 million in federal funding from Minnesota for its share of the claims for the last quarter of 2025. The agency has previously said it believes the claims are suspicious and potentially fraudulent.

CMS Administrator Mehmet Oz and Vice President JD Vance, whom Trump tapped as the White House fraud czar, said at a press conference in February that CMS would pay if Minnesota could prove the claims were legitimate.

More than six months later, Minnesota has not been able to, Connolly said.

He's worried CMS is confusing documentation issues and mistakes made by providers with fraud.

“The concern there is a blurring of the lines that calls everything fraud, as opposed to a compliance or documentation issue,” he said.

The $259 million was the first of several deferrals CMS has announced — totaling up to $550 million. The state is worried about the fate of the initial deferral of $259 million and is negotiating the remaining deferral amounts.

If CMS never pays Minnesota, the state may have to ask providers to give the money back.

In February, Oz told Minnesota it could tap its rainy day funds to ensure Minnesotans don't lose benefits. Connolly says the state legislature would have to approve that.

The state sent a letter to Oz on Oct. 2 requesting information on the methodology the agency used to identify providers as fraud risks, a process the agency has said involved flagging providers through fraud-detection analytics.

"We are asking for a way out,” he said.