Federal Government’s Attacks on Medicaid Are a Pretext to Weaken the Program and Punish Particular States

Since the beginning of the year, the Trump Administration has been threatening funding for various programs that help people meet their basic needs, using the pretext of fighting fraud, waste, and abuse. Fraud in any program is unacceptable, and so is weaponizing claims of fraud to vilify people who are immigrants and to withhold funding from Democratic-led states.

Fighting fraud is important: when fraud occurs, costs rise and people lose faith in government programs, putting assistance that helps people meet their basic needs at risk. Medicaid regulations define fraud as intentional deception or misrepresentation to receive an unauthorized benefit or payment. An example is a provider billing for services they did not deliver or charging more than they should for services they provided; indeed, in Medicaid, like in private health insurance, fraud that does exist is overwhelmingly committed by providers, not program enrollees.

Serious efforts to address fraud need to be based on evidence, done according to federal law, and aimed at improving program integrity. And fraud should not be used as a pretext to create anti-immigrant sentiment or to target people with specific health care needs; doing so is dangerous to the communities targeted and puts legitimate health care needs at risk. By those measures, the Administration’s actions to take Medicaid funding away from states have been anything but serious; its strategy to weaponize fraud is unprecedented and not a responsible exercise of the federal government’s oversight authority.

As part of this strategy, the Centers for Medicare & Medicaid Services (CMS) has focused most intently on Minnesota’s Medicaid program, with a particular focus on services that seniors and people with disabilities use to help them live and thrive in their homes rather than in institutions. Medicaid covers about 1.5 million people in Minnesota, 15 percent of whom are seniors or people enrolled based on their disability. Across the Medicaid population, 28 percent of the population 19 to 64 years old report having a disability. Cutting funding and jeopardizing support for personal care services and home- and community-based services (HCBS) — or forcing the state to consider cutting other benefits to protect these services — will profoundly affect Minnesotans of all racial and ethnic backgrounds.

The Administration’s attacks on Minnesota come after years of collaborative work between CMS and the state to address programmatic vulnerabilities, evidence of fraudulent activity, and suspicious payment patterns for a set of services that people with disabilities and other health care needs use to support their ability to live in the community. Together, CMS and the state initiated audits, terminated one benefit, and paused new provider enrollment.

The collaboration between CMS and Minnesota has followed the process for how CMS typically works with states (in conjunction with federal and state auditors and law enforcement agencies where appropriate) to prevent and prosecute actual instances of fraud in a way designed to leave the program stronger, without undermining Medicaid’s ability to provide benefits to people who are eligible to receive them, by providers qualified to deliver them.

The Administration’s recent approach is demonstrably different — relying on an unprecedented use of two different CMS authorities to put massive amounts of federal funding at risk in Minnesota, severely threatening critical health services for people in need. This is happening at the same time the state is already responding to other funding freezes and the ongoing aggressive immigration enforcement dragnet creating fear throughout communities.

• As others have explained, in early January, CMS initiated a rarely used compliance action to threaten to withhold $2 billion (or 20 percent of the state’s federal Medicaid dollars) in prospective funding for some personal care and HCBS, where fraud was previously identified.
• In late February, CMS announced that it is deferring $259.5 million in federal matching funds for Minnesota for the fourth quarter of fiscal year 2025 for both the same services as identified in the withholding action and claims involving individuals “lacking a satisfactory immigration status.” This deferral is about 9 percent of what Minnesota would have received in federal funds for that quarter, constituting a far larger share of spending than previously known deferrals in other states.

Both withholding and disallowances threaten funding for Minnesota’s Medicaid program and the low-income families, seniors, and people with disabilities who depend on it. (States have the right to appeal both actions, although the processes vary and take time to play out.) CMS has never used either authority in the way or to the degree it is now applying them to go after the same services at the same time in Minnesota, despite the state’s ongoing collaboration with CMS to address identified issues. CMS’s current approach using both authorities is not only wasteful, but the agency’s lack of clarity about how the two authorities interact is causing confusion. Indeed, in litigation filed this week challenging CMS’s deferral of $243 million, Minnesota notes that “the deferral is an end-run around the hearing process in the noncompliance case.”

The aggressive and confusing approach shows CMS’s real goal: to destabilize Medicaid in Minnesota, a state that this Administration has repeatedly targeted with vitriolic attacks on its Democratic leadership and people who are immigrants.

Based on recent remarks by the President, Vice President, and CMS Administrator Oz, this appears to be just the start of a “war on fraud” by the Administration. Indeed, California, Maine, and now New York have received pre-enforcement letters from CMS that could signal where the agency will focus its enforcement activities next.

It is not a coincidence that these states are led by Democrats and have been leaders in finding ways to provide health coverage (using state-only funds) to people who do not meet Medicaid’s restrictive eligibility requirements, including people with lawful permanent resident status but who are barred from Medicaid for their first five years with that status. Using state funds to provide health care to people ineligible for federal Medicaid is entirely lawful.

It is also not a coincidence that as part of its newly announced crackdown on fraud, CMS is soliciting specific information about immigrant providers and use of benefits by people who are immigrants as it considers new program integrity rulemaking. Or that both the recent request for information and a recent, misleading release of incomplete Medicaid data appears to paint a target on HCBS spending. These services are essential to help people live in their communities, rather than in more restrictive (and expensive) institutions. As KFF describes, federal and state governments have identified various tools to identify and protect against home care fraud.

CMS and states should share the goals of fighting provider fraud and ensuring program integrity. But weaponizing fraud and using it as a pretext to take funds away from states will destabilize their programs and ultimately take health care from people who can least afford it, increase costs for all of us, and leave people unable to keep up with the high cost of groceries, doctor’s visits, and child care. Policymakers should focus on ensuring families have the resources they need to thrive — not taking them away.