The Minnesota Department of Human Services on Monday announced a new push to scrutinize providers in state-run Medicaid programs at high risk for fraud, including a significant expansion of unannounced site visits.
Human Services’ plan to significantly expand on-site validations comes as federal officials threaten to cut off Medicaid funding amid accusations of significant, widespread fraud in programs administered by the agency.
The state is currently appealing a January decision by the administration of President Donald Trump to withhold more than $2 billion in Medicaid funding from 14 high-risk programs. Funding remains in place as the appeals process continues.
Visits to provider in all 87 counties
Starting this week, Human Services is making a call out to Minnesota’s tens of thousands of state employees seeking individuals to fill 168 new positions to visit providers in all 87 counties, according to state Medicaid Director John Connolly.
Officials said the agency currently has “nowhere near” that number of staff for direct site visits, which typically happen every few years to verify that businesses claiming reimbursement from the state are indeed operating where they say they are. Training of new site inspectors is set to begin this month.
“We’ve never done anything on this scale before with provider revalidations, but the people of Minnesota deserve this level of effort so they can be confident in the programming that we offer,” Connolly told reporters on a call announcing the change.
Between now and May, Human Services plans to revalidate more than 5,800 Medicaid providers, including verification of ownership, credentials, background checks and locations. Providers fall under the 13 high-risk programs that are still running but not accepting new licenses.
Federal scrutiny
Changes are part of efforts to engage with the Centers for Medicare and Medicaid Services, which has ramped up threats against the state due to accusations of fraud.
While the exact numbers remain in dispute, former assistant U.S. Attorney Joe Thompson estimated that at least half of the $18 billion in payments in “high-risk” state-run Medicaid programs since 2018 could have been lost to fraud.
State officials, including Gov. Tim Walz, have called that number speculative, and Human Services said available evidence suggested a figure in the hundreds of millions in the same timeframe.
Programs affected by fraud include Housing Stabilization Services — which Human Services moved to shutter in August 2025 after a federal fraud investigation came to light and autism support services.
Centers for Medicare and Medicaid Services head Dr. Mehmet Oz, a Trump appointee, threatened federal funding to Minnesota in December and demanded that state officials put together a “corrective action plan” on fraud.
State appeal may drag on for months
What followed was a series of changes by Human Services — including cutting off new licenses and provider enrollments in more than a dozen programs at high risk for fraud. But federal officials ultimately found the changes unsatisfactory and moved to cut off funding in January.
Connolly said he was disappointed by federal officials’ rejection of their draft action plan, and in a Jan 9 response letter, disputed the legality and legitimacy of Oz’s announcement that he would cut off funding.
The appeal likely will drag out for months. There is no hearing set for Minnesota’s appeal of Oz’s decision, but state officials expect a hearing officer to get the case sometime in mid-March. Once that happens, the officer will set a date.
Meanwhile, the state continues to revise its fraud action plan, Connolly said.
High risk programs
Programs deemed high risk by Minnesota include: Early Intensive Developmental and Behavioral Intervention Services for Autism; Integrated Community Supports; Nonemergency Medical Transportation; Peer Recovery Services; Adult Rehabilitative Mental Health Services; Adult Day Services; Personal Care Assistance/Community First Services and Supports; Recuperative Care; Individualized
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Home Supports; Adult Companion Services; Night Supervision; Assertive Community Treatment; Intensive Residential Treatment Services; and Housing Stabilization Services.
One of the 14 programs, Housing Stabilization Services, is no longer operating. Human Services ended the program in October after learning of a federal investigation into allegations of significant fraud.