MN Faces $3.1B Medicaid Hit Under Trump Plan, Care For Kids, Rural Patients At Risk

ST. PAUL, MN — Minnesota’s top Medicaid official is warning that billions in federal funding remain at risk even after the Centers for Medicare and Medicaid Services approved the state’s corrective action plan.

According to the Minnesota Department of Human Services, a federal court ruling last week allows CMS to keep deferring $260 million in quarterly reimbursements for Medicaid claims the state has already paid.

The department said that, combined with future funding CMS is continuing to withhold, Minnesota could face a $3.1 billion annual shortfall in health care spending.

The agency said the losses could destabilize health care services and local economies across the state, with rural providers facing especially serious impacts.

“This deferral disrupts Minnesota’s health care services. If not reversed, a quarterly deferral of $260 million will dramatically impact our health care delivery systems,” said John Connolly, deputy commissioner of the Minnesota Department of Human Services and state Medicaid director.

“This disruption will increase with every additional deferral. It could blossom into $1 billion annually given CMS’ admitted expectation that it will issue more deferrals and each deferral will likely take several quarters to resolve.”

The Department of Human Services said $260 million is equal to the cost of providing health insurance for 35,000 children for an entire year. It also said that amount would cover all pharmacy services for children under 18 for 12 months.

According to the department, CMS is continuing to withhold up to $2 billion annually in future Medicaid funding.

The state is appealing that withholding and said it is also working to provide the documentation needed to lift the quarterly $260 million deferral.

At a February press conference, CMS Administrator Dr. Mehmet Oz stated that Minnesota would receive the deferred funding after the state “proposes and acts on a comprehensive corrective action plan to solve the problem.”

The Department of Human Services said CMS approved the revised plan in March and noted that Minnesota had already met the first two milestones.

“For the past 18 months, we have engaged with CMS staff in an intensive effort to harden our systems against fraud. They’ve agreed with us on the policies and procedures needed, and we’ve implemented changes they’ve suggested. But the goalposts keep moving. Rather than work with us to fight fraud while protecting programs, CMS is taking actions that punish Minnesotans who need these services,” said Connolly.

The department said the centerpiece of the approved plan is Minnesota Revalidate. By May 31, 2026, Minnesota will have reviewed 5,538 Medicaid providers in 13 high-risk program areas, and each will either be revalidated to bill Medicaid or receive a disenrollment notice.

“We are going to keep working with CMS to implement our plan and then continue improving our systems to offer services more efficiently, and harden our systems against fraud, waste and abuse,” said Connolly. “We are working to become a national leader on fighting fraud, and taking care of Minnesotans who need quality, lifesaving and life-affirming health care.”