Feds Threaten Billions in Medicaid Cuts to Multiple States Over Fraud Claims

Concerns raised that aggressive federal action could harm vulnerable patients who rely on Medicaid

Mar. 31, 2026 at 5:32am

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The Trump administration is signaling it might halt billions of dollars in federal health payments to multiple states, including Minnesota, over claims of Medicaid fraud. However, health policy experts warn that punitive measures against states are often ineffective in addressing fraud and could put critical services and supports for Medicaid patients in jeopardy.

Why it matters

The federal government's accelerated push to withhold Medicaid funds and heavily scrutinize state oversight comes amid broader concerns about the impact of federal actions on vulnerable patients who rely on the program. Experts say fraud prosecutions have stalled in Minnesota following an exodus of U.S. attorneys, and that punitive measures against states are often ineffective in addressing fraud.

The details

The Trump administration recently warned it could withhold more than $2 billion in payments for Minnesota and claw back nearly $250 million from 2025 over claims of Medicaid fraud. The threats might disappear after new oversight plans from the state were approved, but the moves have heightened concerns about harming patients who rely on Medicaid. Centers for Medicare and Medicaid Services head Mehmet Oz said the funding threats in Minnesota could be applied elsewhere, alleging high-dollar public benefit fraud in California, Florida, Maine and New York.

  • The Trump administration recently warned it could withhold more than $2 billion in payments for Minnesota and claw back nearly $250 million from 2025.
  • The Biden administration had already begun looking into Medicaid activity in Minnesota prior to the Trump administration's actions.

The players

Sumukha Terakanambi

A Lakeville resident with muscular dystrophy and public policy consultant with the Minnesota Council on Disability.

Mehmet Oz

The head of the Centers for Medicare and Medicaid Services.

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What they’re saying

“Of course we support going after fraud, but this overly aggressive action is missing the point. It's not punishing fraudsters. It's punishing the people.”

— Sumukha Terakanambi, Public policy consultant with the Minnesota Council on Disability

“People will die. People will lose critical supports and will no longer be able to participate in their community the way they want to.”

— Sumukha Terakanambi, Public policy consultant with the Minnesota Council on Disability

What’s next

The judge in the case will decide on Tuesday whether or not to allow the federal government to proceed with withholding Medicaid funds from the states.

The takeaway

This case highlights the ongoing tension between the federal government's efforts to crack down on Medicaid fraud and the potential harm that aggressive funding cuts could have on vulnerable patients who rely on the program. It raises questions about the effectiveness of punitive measures against states and the need for more nuanced approaches to addressing fraud without jeopardizing critical health services.