Feds withhold $113M in Medicaid funds to Minnesota, but officials unsure where the figure came from

The federal government is withholding nearly $113 million in Medicaid funds to Minnesota, and both local officials and providers are left wondering how that number was determined. This week, the Centers for Medicare and Medicaid sent a letter to Minnesota's Department of Human Services informing them that $112,752,702 in "unallowable claims" would now be terminated, pending a possible appeal from the state. The denial in reimbursement goes back to February, when CMS first announced that the feds would defer hundreds of millions in Medicaid payments to Minnesota, citing fraud across 14 state programs deemed "high risk." The disallowance referenced in this week's letter pertains to claims made in the quarter ending on September 30, 2025, with CMS primarily citing missing or improper paperwork. Josh Berg, the director of services with Accessible Space, Inc., said that he cannot understand how the federal government reached a figure of nearly $113 million. "There's not a world that I believe that this is justified," Berg said, "it feels less about fighting fraud or improving the system and it feels like something else." DHS Temporary Commissioner John Connolly has similar questions. In an email sent to DHS staff on Tuesday, Connolly said that CMS reviewed just 330 claims out of more than six million made that quarter; from there, he said that CMS identified 78 disallowed claims, amounting to about $112,000. The federal agency then extrapolated that figure to nearly $113 million, about 116 times what was disallowable on paper. "We are also bracing for the possibility that CMS will issue additional Medicaid funding deferrals," Connolly said in the email. The letter from CMS states that they used a "statistically valid sample" of 330 claims. Berg said his primary concern is whether more deferrals or payment cancellations are coming, and what that means for next year's state budget. The basic process for Medicaid is that providers spend the money and then issue a claim to the state; the state then evaluates the claim, pays about half of it, and then sends the other half of the bill to the federal government. Under this set-up, it means Minnesota risks losing money next year, given that the money that CMS is now withholding has already been spent. "It could end up with being less programs, less access," Berg said. In: Medicaid Featured Local Savings