On December 5, the Centers for Medicare and Medicaid Services (CMS) Administrator, Dr. Oz, sent a letter to Governor Tim Walz, warning that failure to address fraud could cost Minnesota federal dollars. In the letter, CMS has outlined certain requirements for the Walz Administration to follow going forward. As stated,
To restore the integrity of the Medicaid program Minnesota must:
1. Provide CMS with weekly updates on how the state is stopping fraud.
2. Freeze enrollment of all high-risk providers for 6 months.
3. Confirm all providers in place are legitimate or remove them.
4. Send CMS a corrective action plan of how these will prevent this from happening again.
The letter concludes:
By the end of January, 2026, if your Administration has not taken sufficient corrective steps, CMS may initiate actions to withdraw federal Medicaid funding for expenditure related to the fourteen identified high-risk programs until we are confident fraud, waste and abuse have been addressed.
The Department of Human Services (DHS) identified the cited ’14 high-risk’ programs, which include the now-ended Housing Stabilization Services (HSS) and autism treatment program, in October. Currently, the programs are under an external audit by Optum; however, as MinnPost explains, the audit is limited in scope and will look at only 10 percent of Medicaid enrollees.
Why this matters
Medicaid is Minnesota’s fastest-growing program and also the most reliant on federal dollars. According to the National Association of State Budget Officers (NASBO), Minnesota spent $19.6 billion on Medicaid in 2024. Of that amount, $11.7 billion or 60 percent, came from the federal government. The share of Medicaid spending covered by the federal government grew particularly during the pandemic, and remains elevated.
Figure 1: Medicaid Spending by Source of Funds, FY 1991-2024 (2024 Billion $)
As per the November 2025 forecast, Minnesota spent $7.6 billion in general funds on Medicaid during the 2025 fiscal year. Medicaid will grow by over 20 percent and exceed $9 billion in the 2026 fiscal year (July 2025 to June 2026), and could reach $11 billion by 2029. Including federal funds, MMB estimates that Medicaid could reach $30 billion by 2029. Long-term care programs, which comprise the majority of ‘high-risk programs,’ account for over 40 percent of that spending.
Federal dollars are already at risk due to some provisions in the One Big Beautiful Bill Act (OBBBA). Work requirements, for example, could reduce the federal share of Medicaid spending and shift more costs to the states. If Medicaid continues to grow as expected, the funding gap left by federal dollars will likely also grow, putting more strain on state revenues.
Addressing fraud, especially if it means maintaining federal funding, is more than imperative for the future sustainability of the Medicaid program. Besides, Minnesota taxpayers would like to know that steps are underway to ensure that their tax money will be spent more responsibly.