CMS Warns Minnesota of Medicaid Funding Loss Over $1B Fraud Scheme

CMS Administrator Mehmet Oz has issued a stern warning to Minnesota Governor Tim Walz regarding potential federal Medicaid funding cuts. The warning follows allegations of a substantial Medicaid fraud scheme in Minnesota, involving over $1 billion in misappropriated funds. This fraud allegedly involved actors within Minnesota's Somali community, with some funds suspected of being diverted to the terrorist group al-Shabab. Oz highlighted dramatic cost increases in two Minnesota Medicaid programs: Housing Stabilization Services and Early Intensive Developmental and Behavioral Intervention, which saw payments rise far beyond initial projections. Both programs have been flagged due to suspicious spending patterns, including allocations for luxury cars, foreign real estate, and kickbacks linked to fake autism treatment centers. CMS has responded by shutting down the Housing Stabilization Services program and freezing provider enrollment in certain high-risk areas. Oz has mandated that Minnesota take corrective action within 60 days or face cessation of federal Medicaid payments. Prior reports about these issues from Minnesota officials were deemed inadequate by CMS, prompting direct federal intervention. This situation has gained additional attention amid broader investigations and political discourse regarding fraud and money laundering activities within the state, with implications for regulatory compliance and Medicaid program oversight.