Vice President JD Vance announced Wednesday that the Trump administration will withhold nearly $260 million in Medicaid reimbursements to the Democrat-controlled state of Minnesota following what officials describe as a sweeping fraud scandal.
Vance, whom President Donald Trump tapped during Tuesday night’s State of the Union address to spearhead a federal anti-fraud crackdown, said the move is aimed at ensuring accountability for taxpayer dollars. According to the vice president, Minnesota must demonstrate that it “takes its obligation seriously to be good stewards of the American people’s tax money” before federal reimbursements resume.
The withheld funds represent federal reimbursements for Medicaid services that Minnesota has already paid for using its own state budget.
“What this means is that first of all, the providers on the ground in Minnesota have actually already been paid,” Vance said at a press conference alongside Dr. Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services. “What we’re doing is we’re stopping the federal payments that will go to the state government until the state government takes its obligations seriously to stop the fraud that’s being perpetrated against the American taxpayer.”
Dr. Oz confirmed that Minnesota leaders, including Democratic Governor Tim Walz, were informed of the administration’s decision. He said the federal government will hold back Medicaid reimbursements until the state takes meaningful action to address fraud within its systems.
“If Minnesota fails to clean up the systems, the state will rack up $1 billion of deferred payments this year,” Oz warned.
Oz emphasized that the funding freeze would not harm Minnesota residents, noting that the state has a “rainy-day fund” capable of covering the temporary gap in federal reimbursements.
“If providers and beneficiaries are worried about getting their money and services, please call your governor,” Oz said. “These are services the governor has already paid for. We are just not reimbursing the state.” He added, “This is not a problem with the people of Minnesota, it’s a problem with the leadership of Minnesota and other states who do not take Medicaid preservation seriously.”
Vance said the administration has identified 14 Minnesota state programs it believes are particularly vulnerable to fraud, including autism service providers and medical transport services. The state has been given 60 days to respond to a formal letter outlining the freeze.
Federal prosecutors have already uncovered a major fraud scheme in Minnesota, resulting in dozens of convictions. One program under scrutiny, “Feeding Our Future,” received federal funds during the COVID pandemic and claimed to provide meals to hungry children. Authorities allege the meals were never distributed. The majority of those charged in the case were of Somali descent.
Vance also pointed to a Minnesota autism program that he said enriched fraudsters instead of serving children in need. Dr. Oz described what he called the largest anti-fraud effort in the history of the Centers for Medicare & Medicaid Services, citing a scheme in which mothers were allegedly paid around $1,000 to falsely enroll their children as autistic, leading to millions in Medicaid bills for services never rendered.
“These schemes disproportionately involve immigrant communities,” Oz said, adding that resources are ultimately diverted away from children who genuinely need care.
Daycare and learning centers linked to Somali immigrants in the Minneapolis area have also faced scrutiny after independent journalist Nick Shirley released a video in December showing multiple state-funded facilities that appeared to have no children present.
The administration says the message is clear: federal tax dollars will not flow unchecked to states that fail to root out fraud.
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