Vice President JD Vance announced Wednesday that the Trump administration would withhold $259 million in Medicaid payments for Minnesota, escalating its fight with the state as the White House seeks to elevate health care fraud as an election-year issue.
“We have decided to temporarily halt certain amounts of Medicaid funding that are going to the state of Minnesota in order to ensure that the state of Minnesota takes its obligation seriously to be good stewards of the American people’s tax money,” Vance said at a news conference, standing alongside Mehmet Oz, the administrator of the Centers for Medicare and Medicaid Services.
Vance said the decision could presage similar crackdowns in other states, including California, as part of a “war on fraud” that President Donald Trump announced Tuesday in his State of the Union address. Trump’s administration has been at odds on a wide range of fronts with Minnesota Gov. Tim Walz, a Democrat.
The governor’s office did not immediately respond to a request for comment. Walz late Wednesday called the move part of a “campaign of retribution.”
“Trump is weaponizing the entirety of the federal government to punish blue states like Minnesota,” Walz wrote in a social media post. “These cuts will be devastating for veterans, families with young kids, folks with disabilities, and working people across our state.”
Federal authorities in Minnesota have investigated the sweeping abuse of safety net programs for years, but in recent months news reports, a viral video, and a flood of criticism from right-wing influencers and politicians have drawn new national attention to the issue. At a news conference in December, Joe Thompson, a prosecutor with the U.S. attorney’s office in Minnesota, said that authorities had identified “significant fraud” in 14 state Medicaid programs — and that fraud may account for more than half of the $18 billion that went to those programs since 2018.
The payments have already gone to providers, but the federal decision means that, for the time being, the state of Minnesota won’t be reimbursed. Oz claimed that the initial impacts may not be severe for the state, with money in a rainy-day fund it could use to cover the shortfall.
“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,” he said.
Medicaid, a safety net program that helps low-income Americans, children and older adults access health and social services, is funded jointly by states and the federal government. Health officials said the decision to halt payments could affect services for people receiving treatment for substance-use disorder, mental illnesses and other conditions.
Randy Anderson, an addiction counselor in Minnesota, said state officials have already warned that a prolonged freeze on Medicaid reimbursement could force significant operational changes because the financial burden shifts entirely to the state. The extended standoff with the Trump administration has been compounded by limited communication from Minnesota officials, he added.
“We aren’t even sure what this means yet,” Anderson wrote in a text message Wednesday night.
Oz visited Minnesota in January, framing the trip as a “fact-finding mission,” after Nick Shirley, a conservative activist, drew attention to Somali-run day cares and alleged in a widely shared video that the centers were fraudulently billing the government.
Minnesota officials have disputed Shirley’s account, and some day care operators have said he misrepresented their encounters.
But the viral video energized the president’s MAGA base, with conservatives demanding accountability and consequences for those involved in the alleged fraud schemes. Walz soon ended his reelection bid. Federal officials and House Republicans quickly opened their own investigations into Minnesota’s Medicaid program, with Oz announcing plans last month to withhold more than $2 billion in annual Medicaid funding from the state. Minnesota officials quickly appealed the decision.
Trump directed Cabinet officials to prioritize the issue, too. One Treasury official is leaving his post after privately raising objections to the crackdown, The Washington Post reported Wednesday.
“This is disgraceful. It’s happened for too long,” Vance said Wednesday. “Our social safety net will disappear unless we take fraud more seriously.”
Trump on Tuesday night suggested without evidence that the federal government could balance its budget by cracking down on waste, fraud and abuse. Experts and analysts have cast doubt on similar claims in the past.
Oz has said that he believes the total amount of annual Medicaid fraud is $100 billion.
“The timing [of Trump’s announcement] was advantageous for the administration,” Capstone, an investment research firm, wrote to clients Wednesday. “Republicans face deteriorating favorability ratings on health care and affordability just as these issues are surging among voters’ top priorities ahead of the 2026 midterm elections.”
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