March 11, 2026- While the last few months has seen our policy efforts focused heavily on government grants and the federal agencies that disburse them- such as SAMHSA and the CDC- these are only part of the equation when it comes to funding recovery support services. The other part of the equation is of course Medicaid, which pays for a substantial amount of these services in several states.
Late last year, it was reported that Medicaid fraud had been revealed in Minnesota. CMS cited unusually high spending and rapid growth in certain service categories, including personal care services, home and community-based services and other practitioner services. This is not surprising, as Medicaid fraud occurs in every state, with Texas, California, Florida, and New York having the most cases. Yet it is the heavy-handed response of CMS and the Trump administration that leaves us concerned.
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. Then 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. Vice President J.D. Vance, HHS Secretary Robert F. Kennedy, Jr. and CMS Administrator Dr. Mehmet Oz announced a series of actions aimed at strengthening program integrity across Medicare and Medicaid. The Administration characterized the initiative as part of a broader affordability strategy focused on preventing fraud, waste and abuse before improper payments occur. The involvement of the Vice President in this issue makes it highly charged from a political perspective, as it is unprecedented for a Vice President to be involved in matters concerning CMS penalties.
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.
It is also the category of services being targeted that has us concerned. CMS directed the state to pause provider enrollment across 13 Medicaid service categories and said the state’s corrective action plan, received on December 31, was insufficient. Singled out were personal care and home- and community-based services (HCBS). As a result, federal reimbursement to the state for Medicaid providers of the following programs are at risk:
Adult Rehabilitative Mental Health Services
Assertive Community Treatment
Community First Services and Supports
Early Intensive Developmental and Behavioral Intervention
Housing Stabilization Services
Integrated Community Supports
Intensive Residential Treatment Services
Nonemergency Medical Transportation Services
Recovery Peer Support
Our concern is that this tactic spreads to other states as well. Recently CMS Administrator Mehmet Oz announced that CMS will be examining fraud in New York, and many fear that other “blue” states will also be investigated. Minnesota has sued CMS in hopes that the federal courts will reinstate the funding. We will be closely monitoring these developments and keeping our membership informed.