Medicaid Meltdown: Feds Threaten to Cut Off Minnesota Over $9B Fraud

Paul Riverbank, 12/21/2025Alleged Medicaid fraud in Minnesota, totaling $9 billion, prompts federal threats of funding cuts and ignites national scrutiny, underscoring urgent calls for robust oversight and accountability in public spending.

As the figure hung in the air, the usual playbook for discussing government waste didn’t quite seem adequate. This isn’t some audit catching a handful of rotten apples. It’s nearly half of all the public money Minnesota put into 14 separate programs—everything from housing support and autism therapy to meals for children—gone. Just gone.

Thompson, pushing through another folder of notes, reminded the press, “This isn’t a statistic. Every line I run on these claims flags another provider, and for a while there I was starting to see more glaring red than green.” He didn’t sound exasperated so much as tired, as if he’d been pulling at a thread and found there was no end.

The fallout has now landed squarely on Governor Tim Walz’s desk, and the federal government has taken notice in a way that goes far beyond bureaucratic nudges. On air, CMS Administrator Dr. Mehmet Oz—yes, that Dr. Oz, now in a regulatory chair—spelled it out sharply enough to cut through the political fog. “We’re not going to underwrite failure. If Minnesota drags its feet, we’ll start cutting off funds.” According to one pointed message from Oz to Walz, the clock is running: fix it in 60 days, or prepare for the feds to slam the door shut.

Oz wasn’t one for euphemisms, particularly on the airwaves. He rattled off examples that would feel almost farcical if they weren’t true. Take the story surrounding the “Feeding Our Future” program—at least eighty people charged, including one operator claiming to serve tens of thousands of invisible meals. “Fake invoices, phantom kids... classic scam playbook,” quipped one investigator, only half joking.

Autism therapy, supposedly a bright spot in expanded care, proved to be another minefield. The number of providers exploded—41 clinics became 328 in just five years. State funding for autism services ballooned by more than thirtyfold. Yet little about this growth suggested actual children benefiting. Some clinics, warrants revealed, were staffed by little more than teenagers barely out of high school. One operation managed to bill the program nearly a million dollars for a single client. “Some days, it feels like the state was just handing out blank checks for anyone with a clipboard,” muttered a source from the AG’s office.

The schemes weren’t always sophisticated—sometimes it just came down to sloppiness meeting opportunity. And greed did not discriminate. “People bought luxury cars, invested in properties as far away as Nigeria or Somalia. The paper trail is hard to miss once someone starts looking,” Oz pointed out to the radio audience, needles of exasperation threading through his voice.

For Governor Walz, the heat is now insistent and unrelenting. He’s answered critics by insisting the fix is underway, arguing that bad rules and loopholes left the door too wide open—though he’s accused Thompson and federal officials of inflating the numbers. “We’re working the problem. You’ll see results, and you’ll see them soon,” he promised, eyes fixed on the cameras as if daring anyone to challenge his resolve.

But federal prosecutors and regulators smell something bigger. They point to other “progressive” initiatives—housing, transportation for medical appointments—as equally vulnerable, all but inviting an army of fraudsters to ride the same old schemes across programs. As Oz put it bluntly, “If you don’t shut it down hard, they just try the same racket somewhere else.”

The lessons here are not subtle. Where money flows with minimal oversight, someone inevitably finds a way to divert the stream. The looming question now is whether Minnesota can build real guardrails, and fast, or if Washington will follow through on its threat to choke off funding entirely. Other states, watching this train wreck unfold, have already begun quietly reviewing their own books.

For ordinary Minnesotans—the families who rely on these programs—the stakes aren’t measured in billions, but in whether the safety net is still there tomorrow. And that’s a reckoning that cuts through any politician’s press conference, no matter how carefully worded.

At a recent presser in St. Paul, you could sense the tension as reporters crowded into a windowless chamber, bracing for a number that would, by the time it echoed through the hall, become impossible to ignore. $9 billion. That’s the sum First Assistant Attorney Joe Thompson dropped—almost with a wince—in reference to how much Minnesota’s Medicaid programs have allegedly hemorrhaged to fraud since 2018. “Staggering doesn’t begin to describe it,” he admitted, pausing as if he too was still trying to process what the data was telling him.As the figure hung in the air, the usual playbook for discussing government waste didn’t quite seem adequate. This isn’t some audit catching a handful of rotten apples. It’s nearly half of all the public money Minnesota put into 14 separate programs—everything from housing support and autism therapy to meals for children—gone. Just gone.Thompson, pushing through another folder of notes, reminded the press, “This isn’t a statistic. Every line I run on these claims flags another provider, and for a while there I was starting to see more glaring red than green.” He didn’t sound exasperated so much as tired, as if he’d been pulling at a thread and found there was no end.The fallout has now landed squarely on Governor Tim Walz’s desk, and the federal government has taken notice in a way that goes far beyond bureaucratic nudges. On air, CMS Administrator Dr. Mehmet Oz—yes, that Dr. Oz, now in a regulatory chair—spelled it out sharply enough to cut through the political fog. “We’re not going to underwrite failure. If Minnesota drags its feet, we’ll start cutting off funds.” According to one pointed message from Oz to Walz, the clock is running: fix it in 60 days, or prepare for the feds to slam the door shut.Oz wasn’t one for euphemisms, particularly on the airwaves. He rattled off examples that would feel almost farcical if they weren’t true. Take the story surrounding the “Feeding Our Future” program—at least eighty people charged, including one operator claiming to serve tens of thousands of invisible meals. “Fake invoices, phantom kids... classic scam playbook,” quipped one investigator, only half joking.Autism therapy, supposedly a bright spot in expanded care, proved to be another minefield. The number of providers exploded—41 clinics became 328 in just five years. State funding for autism services ballooned by more than thirtyfold. Yet little about this growth suggested actual children benefiting. Some clinics, warrants revealed, were staffed by little more than teenagers barely out of high school. One operation managed to bill the program nearly a million dollars for a single client. “Some days, it feels like the state was just handing out blank checks for anyone with a clipboard,” muttered a source from the AG’s office.The schemes weren’t always sophisticated—sometimes it just came down to sloppiness meeting opportunity. And greed did not discriminate. “People bought luxury cars, invested in properties as far away as Nigeria or Somalia. The paper trail is hard to miss once someone starts looking,” Oz pointed out to the radio audience, needles of exasperation threading through his voice.For Governor Walz, the heat is now insistent and unrelenting. He’s answered critics by insisting the fix is underway, arguing that bad rules and loopholes left the door too wide open—though he’s accused Thompson and federal officials of inflating the numbers. “We’re working the problem. You’ll see results, and you’ll see them soon,” he promised, eyes fixed on the cameras as if daring anyone to challenge his resolve.But federal prosecutors and regulators smell something bigger. They point to other “progressive” initiatives—housing, transportation for medical appointments—as equally vulnerable, all but inviting an army of fraudsters to ride the same old schemes across programs. As Oz put it bluntly, “If you don’t shut it down hard, they just try the same racket somewhere else.”The lessons here are not subtle. Where money flows with minimal oversight, someone inevitably finds a way to divert the stream. The looming question now is whether Minnesota can build real guardrails, and fast, or if Washington will follow through on its threat to choke off funding entirely. Other states, watching this train wreck unfold, have already begun quietly reviewing their own books.For ordinary Minnesotans—the families who rely on these programs—the stakes aren’t measured in billions, but in whether the safety net is still there tomorrow. And that’s a reckoning that cuts through any politician’s press conference, no matter how carefully worded.