Minnesota Completes Medicaid Provider Review to Protect $2 Billion in Federal Funding

(KNSI) — The Minnesota Department of Human Services has completed a wide-ranging review of more than 5,500 high-risk Medicaid providers, finishing the effort on May 31st as part of the state’s plan to prevent the federal government from withholding up to $2 billion from its Medicaid program.

The five-month review required providers to demonstrate they met heightened legal and eligibility standards. Of the 5,583 high-risk providers required to revalidate, 2,061 were approved and are continuing to provide Medicaid services without interruption. Another 3,411 received disenrollment notices, the majority due to incomplete paperwork such as failure to disclose management authority, failure to maintain proper credentials like liability and surety bonds, and incomplete applications. Others failed verification during site visits and background safety checks. Dozens of those providers were also referred to the department’s Office of Inspector General for further review and several more were removed because they are no longer providing high risk services.

Providers who receive disenrollment notices have 60 days to appeal. If a provider submits an appeal along with necessary documentation, the state may reinstate billing privileges to ensure continuity of care.

The disenrollments mean some Minnesotans will need to find new providers. The state is working with counties, tribes, and managed care plans to help clients connect with alternative services. A new webpage has been launched to help Minnesotans find care.

The state says it made multiple attempts to contact providers throughout the process, including at least three written notices and more than 6,500 follow-up phone calls.

On December 5th, 2025, the Centers for Medicare & Medicaid Services gave the state 26 days to develop a corrective action plan to combat fraud. That plan was rejected less than a week after submission. On January 6th, CMS notified the state that it considered the corrective action plan deficient and intended to withhold the money until the state Department of Human Services met certain conditions.

The state appealed, and during that process, it worked with federal officials, and a revised corrective action plan was submitted to CMS on January 30th to address the federal agency’s concerns. The DHS also requested 168 qualified workers from across state agencies to help revalidate the more than 5,500 Medicaid providers in an effort to persuade CMS to reconsider its decision.

State investigators say roughly $9 billion in fraud has been committed against the state since 2018. DHS identified 14 high-risk services and established a licensing moratorium on new service providers in those programs, discontinued the Housing Stabilization Services program, audited Autism Service providers, including onsite visits, implemented licensure for autism centers, disenrolled inactive providers, and started enhanced pre-payment review before fee-for-service payments are made to providers in the 13 high-risk services.

In February, a 56-page state report revealed Minnesota agencies had ignored repeated warnings about fraud vulnerabilities for nearly fifty years. The report included audit findings flagging the same internal control failures at the Department of Human Services, the Department of Health, and the Department of Education, dating back to 1977. In many cases, agencies promised corrective action, but many findings were marked “prior finding not resolved” or “prior finding partially resolved,” meaning the same problems surfaced audit cycle after audit cycle without being corrected.

The report also takes direct aim at legislative interference, citing a 2021 example in which a bill was introduced to forgive more than $571,000 in fraudulent overpayments to a daycare center that was already disqualified from the Child Care Assistance Program for billing fraud spanning ten years. The bill did not become law, but the report uses it as an example of the kind of political pressure that undermines enforcement.

Newly signed legislation will increase staffing for the Office of Inspector General and create a new statewide oversight office. The Minnesota Attorney General’s Office will also receive funding to expand its Medicaid Fraud Control Unit.

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