Minnesota Slams the Door on New Medicaid Providers as Fraud Probe Widens

Billions May Be Missing From State Programs

Minnesota is freezing new provider enrollments in 13 Medicaid programs and has disenrolled about 800 inactive providers.

Federal prosecutors estimate fraud in 14 high-risk programs could reach $9 billion since 2018—though that figure is disputed by state officials and unproven.

The federal government is threatening to withhold more than $2 billion in annual Medicaid funding, which the state is appealing.

More than 1.2 million Minnesotans rely on these programs, and state officials warn that losing federal funding would have “catastrophic consequences.”

800 Providers Vanish From Rolls

In October 2025, the Minnesota Department of Human Services dropped roughly 800 providers from its Medicaid program.

The reason was simple: none of them had billed Medicaid in over a year. If they were not providing services, they had no business being on the roster.

The move was the first wave of a broader cleanup ordered by Governor Tim Walz under Executive Order 25-10.

More disenrollments followed. By spring 2025, the state had already terminated over 96,000 individual providers for inactivity.

Removing ghost providers gives investigators a clearer picture of who is actually doing the work and who is gaming the system.

13 Programs Now Frozen

In January 2026, the state announced a six-month freeze on new provider enrollments in 13 Medicaid service categories.

The programs include adult companion services, autism treatment, mental health services, home supports for disabled adults, and non-emergency medical transportation.

The freeze came at the direction of the federal Centers for Medicare and Medicaid Services, now led by Dr. Mehmet Oz.

Existing providers can keep operating, and clients can still enroll in services.

But new businesses wanting to provide care through these programs will have to wait, and any exceptions need federal approval in writing.

Prosecutors Say Half Is Fraud

Federal prosecutors dropped a bombshell in December 2025.

First Assistant U.S. Attorney Joe Thompson said 14 Medicaid programs flagged as high-risk have cost the state $18 billion since 2018.

He believes half or more of that money is fraudulent. Thompson did not mince words. He called it staggering, industrial-scale fraud that is swamping Minnesota.

The state has become a destination for people who want to exploit its generous social programs. Companies were created solely to pocket federal funds without providing any services at all.

Shell Companies and Fake Claims

The fraud works like this. Someone registers as a Medicaid provider, often through a newly created company.

They enroll clients who may or may not need services. Then they bill the state for care that never happens, or they overbill for minimal work.

In some cases, providers billed for services while clients were in jail or hospitalized. Others submitted claims for people who had already died.

The money flowed out fast.

Investigators found defendants spending stolen funds on cryptocurrency, lakefront property, designer handbags from Louis Vuitton and Burberry, and rented villas in the Maldives.

Feeding Our Future Was First

The fraud crisis traces back to a nonprofit called Feeding Our Future.

During the pandemic, the group claimed to distribute millions of meals to children through the Federal Child Nutrition Program.

Prosecutors say it was mostly fiction. The organization went from handling $3.4 million in 2019 to nearly $200 million in 2021.

Fake attendance rosters listed children who did not exist. One site surveilled by the FBI claimed to serve 6,000 meals a day but averaged around 40 visitors.

More than 50 people have been convicted so far. The scheme stole roughly $250 million, making it the largest pandemic-era fraud case in the country.

Autism Services Under Investigation

The Early Intensive Developmental and Behavioral Intervention program, which provides therapy for children with autism, is also under scrutiny.

Prosecutors say some providers hired unqualified 18- and 19-year-olds to work with children while billing Medicaid for expert services.

One defendant allegedly paid kickbacks to parents who enrolled their children, sometimes as much as $1,500 per family.

Claims in the autism program grew rapidly in recent years, mirroring the explosive growth seen in other fraud-ridden services.

Two people have already been charged, and one pleaded guilty in December 2025 to stealing $14 million.

Scammers Came From Out of State

Minnesota’s programs were so easy to exploit that people traveled from across the country to cash in.

Federal prosecutors used the term fraud tourism to describe defendants who had no connection to Minnesota but registered as providers anyway.

Two Philadelphia residents charged in the housing fraud case lived on the other side of the country and had no network in Minnesota.

They enrolled as providers, submitted fake bills, and left with hundreds of thousands of dollars. One defendant fled the country after receiving a subpoena.

He had submitted $1.4 million in fraudulent claims and used some of the money to buy cryptocurrency.

1.2 Million Minnesotans at Risk

The fraud crackdown is necessary, but it creates real problems for people who depend on Medicaid. The program covers 1.2 million Minnesotans, including about 592,000 children.

State officials have warned that withholding federal funds could have catastrophic consequences for vulnerable populations.

The 13 frozen programs serve adults with disabilities, people with mental illness, and those struggling with addiction. Legitimate providers now face payment delays as auditors review claims before releasing funds.

The state hired Optum to conduct prepayment reviews, which has slowed reimbursements even for providers doing everything right.

Feds Threaten $2 Billion Cut

On January 6, 2026, CMS Administrator Dr. Mehmet Oz sent a letter to Governor Walz accusing the state of operating its Medicaid program in substantial noncompliance with federal requirements.

Oz announced plans to withhold at least $515 million per quarter until Minnesota proves it has sufficient fraud controls in place. That adds up to more than $2 billion per year. Minnesota is appealing the decision, calling it legally deficient.

A federal judge temporarily sided with Minnesota and four other states to unfreeze payments for two weeks while the case moves forward.

Walz Drops Reelection Bid

Governor Tim Walz announced in early January 2026 that he will not seek a third term. He cited the need to focus on the fraud crisis rather than defending his political future.

Walz had faced mounting criticism from both Republicans and members of his own party. State legislators testified before Congress that his administration ignored warnings for years.

Walz maintains his administration caught problems early and has taken fast, decisive action. He signed multiple executive orders, created inspector general positions, and shut down compromised programs.

But the scale of the fraud and the federal response have overshadowed those efforts.

Services Continue for Now

For Minnesotans enrolled in Medicaid, services continue. The provider disenrollments and enrollment freezes do not affect people already receiving care.

The state says it will issue exceptions to add new providers where capacity is needed. Existing providers can keep serving clients in the areas they are already approved for.

The bigger concern is what happens if federal funding stays frozen. If the state cannot absorb over $2 billion in annual cuts, programs could shrink or disappear.

Legitimate providers may leave the market.

And the people who actually need help, the disabled, the elderly, the children, will be the ones who pay for crimes they had nothing to do with.

This article was created with AI assistance and human editing.

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