Minnesota Asks Dr. Oz to Show the Math Behind a $199 Million Medicaid Hold

ST. PAUL, MINNESOTA – Minnesota’s Medicaid director is asking federal officials to explain how they selected claims for a $199 million funding hold. In an Oct. 2 letter to Dr. Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services (CMS), John Connolly, the state’s temporary human services commissioner, asked for answers by Oct. 15. The five-page letter lays out eight questions about the July deferral and the evidence behind it.

Connolly argues that most of the July hold stems from the state’s enrollment screening rather than a fraud finding. By the state’s account, $153 million covers claims from providers who were enrolled when they delivered care but later received disenrollment notices in its revalidation review. The review, completed May 31, examined providers’ enrollment records and included site visits and background checks. Connolly wrote that more than half of those who received notices had since met the requirements and been revalidated.

“Revalidation is an enrollment and screening process, not a fraud determination,” Connolly wrote. “Just as amounts deferred, withheld, or potentially disallowed are not an amount of fraud identified, disenrollment of a provider does not establish fraud, waste or abuse.”

The July deferral was the third announced this year. The Department of Human Services (DHS) put the total at about $550 million in an Oct. 6 update. KSTP reported the amounts as about $260 million in February, $91 million in April, and $199 million in July. A deferral temporarily holds the federal share of expenditures the state has reported while CMS seeks documentation that the claims are allowable. CMS can later reject claims through a disallowance, which the state can challenge. DHS has warned that a disallowance could lead it to recover money from providers.

How CMS Explained the Hold

Oz announced the deferral on July 21, calling it part of a “proactive new approach to program integrity” in a U.S. Department of Health and Human Services statement that said CMS was “stopping waste and fraud before the check clears.” CMS’s notice that day put the total at $199,033,607 and said $195.7 million covered claims from providers flagged as high-risk “for fraud or aberrant billing practices based on historical billing and CMS data analytics.” It requested supporting documentation within 60 days.

At a briefing that day, according to Connolly’s letter, Oz said providers had been flagged through “fraud detection analytics” and described the payments as “claims that smell like fraud.” The letter also quotes Jetson Leder-Luis, identified as a deputy director of the White House Task Force to Eliminate Fraud, saying CMS was using “machine learning,” which he described as “a form of AI that allows us to analyze the Medicaid claims.”

Connolly wrote that CMS had shared a list of 870 providers it considered high-risk, tied to $42.5 million of the deferred claims, without explaining the criteria, metrics, or analytics used or whether the analysis involved AI. CMS’s notice identified another $3.3 million across 14 service categories it called “particularly vulnerable to fraud or abuse.” Minnesota now counts 13 active high-risk services after closing its Housing Stabilization Services benefit.

The letter requests the evidence behind suspected fraud, including “the criteria, methodology, use of machine learning, artificial intelligence, or fraud detection analytics of any kind used to identify suspected fraud,” so DHS can evaluate it and act. The last of the eight questions asks how CMS will distinguish the dollar value of deferrals and other administrative actions from “law enforcement actions and alleged or identified fraud.”

Behind the 58% Figure

In a June 30 X post quoted in Connolly’s letter, Oz said Minnesota “DISENROLLED more than 3,400, roughly 58%, for failures to maintain required documentation, pass site visits, and clear background checks.” DHS says it reviewed nearly 5,600 providers over five months and sent disenrollment notices to 3,411, with 59 referred to its inspector general. Most appealed. FactCheck.org reported in August that almost three-quarters of the initial notices involved incomplete or inaccurate paperwork, most of the rest involved failed site visits, and two involved failed background checks.

“Minnesota has repeatedly asked CMS and federal law enforcement to provide evidence supporting public claims of fraud in Minnesota’s Medicaid program… To date, no such evidence has been shared with the Department of Human Services.” – John Connolly, Temporary Commissioner, Minnesota Department of Human Services, Oct. 2, 2026

By July 23, 748 of the notice recipients had been revalidated and 550 had actually been disenrolled, DHS told FactCheck.org. The agency’s guidance says it may reinstate billing when a provider appeals and submits the necessary documentation. Connolly’s letter questions why a notice over incomplete documentation makes earlier claims a fraud risk. The July deferral concerns expenditures reported for the quarter ending March 31, before the revalidation review was completed.

What the Dispute Means for Autism Providers

Autism services are among the programs affected by the broader oversight effort. Early Intensive Developmental and Behavioral Intervention (EIDBI), a Minnesota health care benefit for people under 21 with autism or related conditions, is among the high-risk services subject to revalidation. Connolly’s letter lists autism-provider audits among the state’s enforcement efforts. In a July 6 update, DHS reported 444 EIDBI site visits, 73 investigations, 25 law-enforcement referrals, and 35 administrative sanctions since October 2024. A moratorium on enrolling new EIDBI agencies is scheduled through Oct. 31; agencies enrolled before Nov. 1, 2025, may add locations, and qualified individual providers may still enroll.

Providers also face uncertainty over possible repayment demands. DHS said it was “bracing for a disallowance” that could require recovering money from Medicaid providers, the Pioneer Press reported Oct. 6. State officials told the newspaper that more than $500 million could be disallowed within weeks. In an Oct. 8 StateScoop report, DHS said it expected a decision on the February deferral but did not know what amount, if any, CMS would reject. The Connolly letter does not identify the EIDBI share of the July hold or which autism providers’ claims are affected.

In that Oct. 8 report, state officials said they “still have not heard from Administrator Oz or CMS leadership about a path toward resolution.” The lawsuit over the first deferral remains stayed under a Sept. 4 court order, with a joint status notice due Jan. 4, 2027. The parties’ Sept. 3 filing said they were working to resolve all three deferrals. Connolly requested answers to his letter by Thursday, Oct. 15.

AT A GLANCE

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