Walz Unveils Anti-Fraud Crackdown After Trump Administration Threatens Medicaid Freeze
Minnesota Gov. Tim Walz rolled out a sweeping anti-fraud legislative package Thursday, one day after Vice President JD Vance announced the Trump administration would temporarily halt nearly $260 million in Medicaid reimbursements to the state over what officials described as widespread fraud concerns.
Walz blasted the move as political “retribution,” accusing President Donald Trump’s administration of targeting Minnesota.
“This is a targeted retribution against a state that the president doesn’t like,” Walz said at a press conference, arguing that the White House was using “false information” about fraud as a pretext for federal action.
The funding dispute centers on $259.5 million in Medicaid reimbursements that the Centers for Medicare and Medicaid Services (CMS) said it would withhold until Minnesota implements what CMS Administrator Dr. Mehmet Oz called “a comprehensive corrective action plan.” Oz, speaking alongside Vance, gave the state 60 days to respond.
Minnesota officials say the freeze could impact as many as 1.2 million residents who rely on Medicaid services, though federal officials have maintained that providers have already been paid by the state and that the withheld funds are reimbursements to Minnesota’s government.
Walz’s legislative package, which he said was already in development before the federal announcement, includes expanded fraud detection systems, tougher oversight measures, stronger investigative authority, and enhanced criminal penalties. A centerpiece of the proposal is the creation of a centralized Office of the Inspector General to coordinate fraud prevention across state agencies.
A bipartisan inspector general bill cleared the Minnesota Senate last year but remains stalled in the state House over disagreements about whether the office should have independent law enforcement powers or limit itself to investigations, leaving enforcement to the Bureau of Criminal Apprehension.
The federal scrutiny follows high-profile fraud cases in Minnesota, including allegations involving daycare centers and other social service providers in the Minneapolis area. One federal prosecutor last summer estimated that fraud across multiple programs could total as much as $9 billion. State Medicaid Director John Connolly said Thursday that Minnesota has seen no evidence supporting that figure.
The Minnesota Department of Human Services noted that the $259.5 million freeze comes after earlier federal action that withheld more than $2 billion in annual Medicaid funding. State officials said they had already submitted a corrective action plan and are appealing prior federal determinations.
Since 2024, the state says it has implemented new anti-fraud measures, including identifying high-risk service categories, increasing unannounced site visits, and requiring stricter background checks for providers.
Walz and Minnesota Attorney General Keith Ellison are scheduled to testify next week before the U.S. House Oversight Committee regarding alleged misuse of federal funds in the state’s social service programs.
The escalating standoff sets up a broader confrontation between Minnesota’s Democratic leadership and the Trump administration’s expanding anti-fraud initiative, which has targeted multiple states and public benefit programs nationwide.