The Trump administration plans to withhold over $2 billion in Medicaid funding to the state of Minnesota, state officials said.
At a press conference Tuesday, John Connolly, director for Minnesota Medicaid, said that the U.S. Centers for Medicare and Medicaid Services communicated “their intention at this point to withhold $515 million quarterly” — or over $2 billion over the course of a year.
According to Connolly, the feds are cutting off pay in 13 programs at high-risk for being scammed by phony health care providers. (The Minnesota Department of Human Services shut down a 14th program — Housing Stabilization Services — but it is still subject to a federal criminal investigation).
These programs — they range from helping adults with disabilities to driving patients to nonemergency medical appointments — were identified by Gov. Tim Walz in October. At that time, the governor announced that the state awarded Optum a state contract to audit provider payments in the programs.
Also, these are the 13 programs investigated for possible criminal prosecution by Joseph Thompson, the since resigned acting U.S. Attorney General for the state of Minnesota.
Connolly called the reasoning behind this federal withholding “legally deficient.”
Related: Thompson, colleague resignations cast scrutiny on Justice Department’s probe into Renee Good’s death
He seeks to appeal the federal decision through an administrative hearing held by the Centers for Medicare and Medicaid Services.
Messages left Tuesday with the Centers for Medicare and Medicaid Services were not immediately returned.
Changes in Medicaid, which provides health care for 1.2 million Minnesotans, are important — and confusing. The basics about Tuesday’s major development:
Are we totally sure that Connolly’s interpretations of the Trump administration’s Medicaid actions are accurate?
We are not.
Last Wednesday, Mehmet Oz, who runs the Center for Medicare and Medicaid Services, posted on X a letter he sent to Minnesota’s Department of Human Services.
“Recent investigations have focused on fourteen high-risk Medicaid services that the state itself has identified as particularly vulnerable to fraud,” Oz wrote. “According to CMS’s analysis of Minnesota Medicaid data, these fourteen programs consume $3.75 billion annually in federal and state taxpayer resources.”
Oz went on to write that the feds will “defer funding based on findings of fraud, waste and abuse, as well as initiating non-compliance withhold processes for future quarters.”
So, the over $2 billion is the federal government’s share of funding in these programs.
As to the assertion that all of this money would be frozen by the feds, Connolly acknowledged that the state “was not exactly sure yet.”
Connolly allowed that the feds could freeze just a portion of this money. Or, they could reinstate funds after the Department of Human Services, for example, develops auditing procedures that Oz declares to be satisfactory.
What does this have to do with the Trump administration freezing over $500 million in child care payments?
Technically, nothing.
Minnesota gets child care payments from separate funding sources at the federal Health and Human Services. The state of Minnesota has sued to recoup this money.
On Friday, a federal judge sided with Minnesota and four other states to unfreeze these payments for two weeks as both sides worked on their legal case.
So far, the Department of Human Services has not sued to recoup Medicaid money. Again, they are simply requesting an administrative hearing.
Hasn’t the Walz administration already suspended payments in these 13 Medicaid programs because of the Optum audit?
State officials cite the Optum audit to show that they take Medicaid fraud seriously.
But the audit is limited in scope. It only applies to payments in these 13 programs that are directly paid by the Department of Human Services instead of a managed-care organization.
And even these payments are pushed out to health care providers after auditors conduct a prepayment review.
To be sure, the Optum audit has slowed payments to some legitimate health care providers. But — unlike this apparent federal funding freeze — it hardly shuts these Medicaid programs down.
What comes next?
As social services fraud gradually then suddenly became the focus of the Walz administration, the Department of Human Services always maintained that it works cooperatively with federal officials and investigators on “corrective action.”
According to Connolly, Oz’s action to defer or outright withhold payments changes that.
That means future actions are likely to play out in bureaucratic hearings — or perhaps litigation — with fluid effects on Medicaid providers and patients.