The Trump administration plans to withhold more than $2 billion in Medicaid funding from Minnesota, state officials said.
At a news conference Tuesday, Minnesota Medicaid Director John Connolly said the U.S. Centers for Medicare and Medicaid Services “has communicated its intention to withhold $515 million per quarter at this time, or more than $2 billion per year.”
Connolly said federal officials are cutting pay in 13 programs that are at high risk of fraud by fake health care providers. (The Minnesota Department of Human Services has shut down the 14th program, Housing Stabilization Services, but it remains the subject of a federal criminal investigation).
These programs, which range from assisting adults with disabilities to transporting patients to non-emergency medical appointments, were authorized by Gov. Tim Walz in October. At that time, the governor announced that the state had awarded Optum a state contract to audit provider payments in the program.
These are also the 13 programs investigated for possible criminal prosecution by Minnesota’s acting attorney general, Joseph Thompson, who has since resigned.
Connolly said the federal government’s basis for withholding taxes is “legally flawed.”
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He plans to appeal the federal government’s decision through an administrative hearing held by the Centers for Medicare and Medicaid Services.
A message left with the Centers for Medicare and Medicaid Services on Tuesday was not immediately returned.
The changes to Medicaid, which provides health care to 1.2 million Minnesotans, are important but confusing. The basics about Tuesday’s major developments:
Are we completely convinced that Connolly’s interpretation of the Trump administration’s Medicaid actions is accurate?
it’s not.
Last Wednesday, Mehmet Oz, who runs the Centers for Medicare and Medicaid Services, said: Posted in X A letter he sent to the Minnesota Department of Human Services.
“A recent study focused on 14 high-risk Medicaid services that the state itself has identified as particularly at risk of fraud,” Oz wrote. “According to a CMS analysis of Minnesota Medicaid data, these 14 programs consume $3.75 billion annually in federal and state taxpayer resources.”
Oz went on to write that federal officials will “defer funding based on findings of fraud, waste, and abuse and begin the noncompliance withholding process for future quarters.”
That means more than $2 billion will be the federal government’s share of funding for these programs.
As for the claim that all of this funding will be frozen by the federal government, Connolly acknowledged the state is “not exactly sure yet.”
Mr. Connolly allowed federal authorities to freeze only a portion of this funding. Alternatively, the funding could be reinstated, for example after the Department of Human Services has developed an audit procedure that Oz declares to be satisfactory.
What does this have to do with the Trump administration’s freeze on over $500 million in child care payments?
Technically nothing.
Minnesota receives child care funding from another source, the federal Department of Health and Human Services. The state of Minnesota sued to recover the money.
On Friday, a federal judge sided with Minnesota and four other states and asked that those payments be unfrozen for two weeks while both sides work on their lawsuits.
So far, the Department of Human Services has not filed a lawsuit to recover Medicaid funds. Again, they are simply requesting an administrative hearing.
Hasn’t the Walz administration already stopped payments for these 13 Medicaid programs because of the Optum audit?
State officials have cited Optum’s audit to show they take Medicaid fraud seriously.
However, the scope of the audit is limited. This applies only to payments for these 13 programs that are paid directly by the Department of Human Services and not by managed care organizations.
And even these payments are disbursed to health care providers after an auditor performs a prepayment review.
Indeed, Optum’s audit has delayed payments to some legitimate health care providers. But unlike this apparent freeze on federal funds, it is unlikely to shut down these Medicaid programs.
What comes next?
As fraud in social services gradually became a focus of the Walz administration, the Department of Human Services insisted it was always working with federal officials and investigators on “corrective action.”
Mr. Connolly said Oz’s actions to defer payments or withhold them entirely would make a difference.
That means any future measures will likely play out in bureaucratic hearings and possibly litigation, with a fluid impact on Medicaid providers and patients.