Minnesota faces federal scrutiny over Medicaid

Federal authorities have issued a stern warning to Minnesota regarding alleged fraud within its Medicaid programs, placing the state’s federal funding at risk. The Centers for Medicare & Medicaid Services (CMS) has called on Minnesota to take immediate, concrete steps to address these concerns or face possible suspension of Medicaid payments in roughly 60 days.

CMS Administrator Mehmet Oz has emphasized the need for Minnesota to improve oversight and accountability. The agency demands that the state provide regular updates on anti-fraud efforts, enforce a freeze on enrolling high-risk providers, verify the legitimacy of existing providers, and submit a comprehensive corrective action plan. These measures respond to reports indicating substantial fraud across multiple Medicaid programs in Minnesota, highlighting vulnerabilities in current monitoring systems.

In alignment with federal scrutiny, the Minnesota Department of Human Services (DHS) announced a two-year moratorium on new licenses for home- and community-based services (HCBS). This pause, effective January 1, 2026, and lasting through December 31, 2027, suspends new applications, cancels pending submissions, and halts expansions of authorized service types. Minnesota officials state this action aims to strengthen oversight over existing providers and reduce potential fraud, as mandated by a recent state executive order focused on anti-fraud initiatives.

The combination of federal pressure and the state-level licensing freeze illustrates growing concern over the rapid expansion of Medicaid providers without sufficient controls. DHS and CMS intend for these measures to create an environment that prioritizes program integrity and efficient use of funds. Providers currently licensed can expect intensified scrutiny, while new entrants to the market will face delays. This period serves as an opportunity for Minnesota to bolster its regulatory framework and regain federal confidence in its Medicaid operations.