During a press conference on Wednesday, VP JD Vance announced that it had notified the state of Minnesota that it is “deferring” $259 million in quarterly Medicaid payments to the state until it acts to get its fraud under control.”
Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, firmly closed a valve, reported the WSJ. Mr. Oz said that Minnesota was not the only state floundering. “We have more announcements of other states coming soon.”
The WSJ calls this unprecedented. Different from the administration’s moves to pause grant disbursements to high-fraud states.
Minnesota is already on the hook for these Medicaid services. The federal check now in deferment limbo was supposed to reimburse the state for the federal government’s share of that spending. Mr. Oz made clear that “we will give them the money” after “they propose and act on a comprehensive corrective action plan to solve the problem.” Future payments are also at risk.
According to CMS head, “If Minnesota dawdles, it will rack up $1 billion of deferred payments this year.”
This powerful approach, as the Journal explains, attacks the key structural flaw in the current system.
Medicaid is a joint federal-state program, but states make all the decisions and send the feds a bill. States have little interest in policing fraud—in making sure that a “nonprofit” they send money to is real, qualified or successful—since the federal government “matches” at multiples. For some Medicaid populations, every dollar a state pays brings $9 from federal taxpayers. Spend more, get more. This is how you get an estimated $9 billion in fraudulent Minnesota claims.
Paying Legit People for Legit Services
Mr. Oz estimates that some $300 billion annually is lost to healthcare fraud and abuse, much of it from poorly structured, barely monitored state Medicaid programs everywhere. Both red and blue states have grown fat and lazy in the confidence that the feds would just keep loading the ATM. Now caught, they can’t deny responsibility.
Gov. Tim Walz decried the deferral as a “campaign of retribution” and a “weaponizing” of the federal government to “punish blue states.” It’s hard to argue retribution when your state so obviously has a problem and failed to act. That explains the Minnesota Department of Human Services’s more contrite statement to the Hill, in which it essentially begged clemency, acknowledging it had “submitted a corrective action plan to convince CMS to reverse course and is appealing.”
These particular Minnesota services were delivered. Now the question is reimbursement?
The withholding of a federal check shouldn’t immediately close any programs. Indeed, Mr. Oz brightly noted that Minnesota has a “rainy-day fund” (of about $3 billion) that it can use to continue to pay for services while it gets its house in order.
Minnesota AG Keith Ellison immediately threatened to sue. The question now is, does the administration have no right to withhold congressionally mandated funds?
Mr. Vance said the administration was “confident” it has the “legal authority” on the following simple grounds: Inherent in the administration’s job of dispensing the money that Congress has appropriated is “making sure that it only goes to the people that Congress says it should go to. We shouldn’t be sending money to fraudsters.” The courts will decide.
As the Journal notes, at least for now, the administration is refocusing on the right Minnesota target (fraud) and taking an action that might go some way to helping stop fraud before it happens.
Here’s to hoping it signals a new and continued interest by the feds in holding programs—in all states—to far better account.
