State Says the Federal Government Approved Minnesota’s Medicaid Fix, But Kept Withholding Money Anyway

(KNSI) — The State of Minnesota and the federal government are locked in a financial standoff over Medicaid funding.

State Medicaid Director John Connolly is warning that billions in federal health care funding remain at risk, even after the federal government approved the proposed plan to fix fraud vulnerabilities in the program. The feds are withholding or deferring $260 million in Medicaid reimbursements to Minnesota. It’s money the state has already paid out to health care providers and is owed back from Washington. The Centers for Medicare and Medicaid Services could withhold up to $2 billion more annually going forward. Combined, that puts $3.1 billion in annual Medicaid funding at risk.

A federal court ruling last week cleared the way for CMS to continue that deferral.

Connolly says the $260 million alone is equal to the cost of health insurance for 35,000 children for an entire year, and warns the impact on rural health care providers could be severe.

“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,” Connolly said.

CMS Administrator Dr. Mehmet Oz said in February that Minnesota would receive the deferred funds back after submitting and implementing a corrective action plan. CMS approved that plan in March and acknowledged the state had already met the first two milestones, but has not released the money.

“The goalposts keep moving,” Connolly said, adding that rather than working with Minnesota to fight fraud while protecting services, CMS is “taking actions that punish Minnesotans who need these services.”

State investigators say roughly $9 billion in fraud has been committed against the state since 2018. A CMS review released this month of improper Medicaid payments found Minnesota’s error rate at 2.1%, well below the national average of 6.1%. The agency reviewed billing and compared payments to medical records to verify the actual services performed.

“Even one dollar lost to fraud, waste or abuse is too much. It’s a dollar that isn’t being used to offer lifesaving or life-enhancing medical care. The State of Minnesota and CMS are both mandated by law to provide that care, and we’re committed to carrying out that mission,” said Connolly.

DHS has identified 14 high-risk services and has taken several steps to tighten oversight, including licensing moratoriums on new high-risk providers, audits of autism service providers, and enhanced pre-payment reviews.

The state is appealing the withheld funding and says it will complete a review of more than 5,500 Medicaid providers in high-risk program areas by May 31st.

In Minnesota, Medicaid covers roughly 22% of residents. That breaks down to one in three children, along with thousands of seniors, veterans and people with disabilities.

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