Vance and Oz freeze $259.5M in Minnesota Medicaid over fraud

On Feb. 25, 2026, Vice President JVJD Vance and CMS Administrator MOMehmet Oz held a joint press conference at the Eisenhower Executive Office Building to announce the immediate withholding of $259.5 million in quarterly Medicaid reimbursements to 🦆Minnesota. The figure was based on a CMS audit of the last three months of 2025. Medicaid providers in Minnesota had already been paid by the state — the freeze targets the federal government's reimbursement to the state for those costs.

Oz said Walz had 60 days to submit a corrective action plan, and warned: 'If 🦆Minnesota fails to clean up the systems, the state will rack up $1 billion of deferred payments this year.' Oz signaled that similar announcements targeting 🌴Florida, 🗽New York, and 🌴California were coming soon. The Minnesota freeze is explicitly framed as the opening salvo in a nationwide fraud crackdown that Trump assigned to Vance in his Feb. 24 State of the Union.

The administration's stated fraud trigger is the Feeding Our Future scandal — a Minneapolis-based nonprofit accused of stealing more than $300 million in pandemic-era federal food aid. The DOJ has charged 98 defendants in 🦆Minnesota fraud-related cases, 85 of whom are of Somali descent. The Trump administration has used the fraud cases to justify both the Minnesota ICE enforcement surge and repeated funding freezes targeting Walz.

Walz responded on X within hours: 'This has nothing to do with fraud.' His office argued the administration is punishing a Democratic-governed state for political reasons, noting the timing — the day after the SOTU — and the simultaneous public announcement before the official notification letter arrived. 🦆Minnesota Attorney General KEKeith Ellison had held a press conference the same morning to promote additional anti-fraud tools for his own office, before the federal announcement.

This is the third consecutive federal funding freeze against 🦆Minnesota since December 2025. In December, the administration froze $185 million in child care funds. In January, it announced a $10 billion freeze of social services funds across five Democratic states. The acceleration in scale — $185M, then $10B, now $259.5M quarterly — suggests a deliberate escalation strategy timed to the SOTU and Vance's new fraud portfolio.

The legal authority the administration is invoking rests on the Spending Clause and 🗿South Dakota v. Dole (1987), which allows Congress to attach conditions to federal funds. But the Supreme Court drew a limit in NFIB v. Sebelius (2012), ruling that threatening to withdraw all Medicaid funding to force states to expand the program was unconstitutionally coercive — the equivalent of a gun to the head. Legal analysts are divided on whether a partial quarterly freeze, tied to specific fraud compliance, crosses that line or stays within it. Capstone analysts wrote Wednesday that withholding funds would be 'deeply unpopular with both voters and vulnerable Republican lawmakers.'

Vance told reporters: 'I feel quite confident we have the legal authority to do this.' He described the effort as a 'whole government approach' spanning the Treasury Department, DOJ, and HHS. The freeze also halts new Medicare enrollment for durable medical equipment suppliers in 🦆Minnesota for six months — an additional pressure tool. No court has yet challenged the specific action, but legal challenges from Minnesota are considered likely given the state's history of litigating prior Trump administration funding actions.

The families and individuals directly at risk are the 1.2 million Minnesotans enrolled in Medicaid — roughly one in five residents — who depend on the program for health coverage. The state, not the federal government, has already paid providers for the services that triggered the withheld reimbursements. If the federal funds don't come, the state either absorbs the cost from its own budget or reduces services. 🦆Minnesota's Human Services Department said it was preparing a statement; no immediate assurance was given to enrollees that coverage would continue uninterrupted.