The Trump administration on Wednesday launched a nationwide offensive against healthcare fraud, immediately deferring $259.5 million in federal Medicaid funding for Minnesota and imposing a moratorium on new medical equipment suppliers.
Vice President J.D. Vance, Health and Human Services (HHS) Secretary Robert F. Kennedy Jr., and CMS Administrator Dr. Mehmet Oz announced the measures at the White House, detailing a strategy to “crush” fraud through real-time enforcement and data analytics.
The funding freeze in Minnesota follows a federal review of the state’s Medicaid spending for the fourth quarter of fiscal year 2025. The audit identified $243.8 million in “unsupported or potentially fraudulent” claims, largely in personal care and home-based services, and $15.4 million tied to individuals lacking satisfactory immigration status.
“I feel quite confident we have the legal authority to do this,” Vance told reporters, noting that the federal government is withholding funding for a quarter in which the state has already paid providers. Officials warned that Minnesota could face more than $1 billion in deferred federal funds over the next year if it does not address “program integrity vulnerabilities.”
The administration is also implementing a six-month nationwide moratorium on new Medicare enrollment for certain suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). CMS officials said the freeze builds on efforts that stopped $1.5 billion in suspected fraudulent billing in that sector last year.
Secretary Kennedy said the administration is moving away from a traditional “pay and chase” model toward a “detect and deploy” strategy using advanced AI tools to stop improper payments before they are issued.
“CMS is done trying to catch fraudsters with their hands in the cookie jar—instead, we’re padlocking the jar and letting them starve,” said Oz.
As part of the broader initiative, the administration introduced the CRUSH initiative (Comprehensive Regulations to Uncover Suspicious Healthcare), which includes a request for stakeholder input on new regulatory approaches to protect Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).
The crackdown has met with sharp resistance from Minnesota governor Tim Walz, a Democrat, who claimed the action “has nothing to do with fraud.” Walz accused the administration of politicizing enforcement and “gutting” the U.S. Attorney’s Office, which he said has crippled the ability to prosecute actual fraud.
The administration previously cited Minnesota’s inability to control fraud as a justification for an ICE enforcement surge targeting the state’s Somali community.
Market analysts suggested the move may face political hurdles. Analysts at Capstone wrote in a note that withholding health funding could be “deeply unpopular” with both voters and Republican lawmakers, and suggested the administration’s actions might be “more of a threat than a tangible concern.”
CMS reported that its fraud-fighting efforts in 2025 resulted in the suspension of $5.7 billion in suspected fraudulent Medicare payments and the revocation of billing privileges for 5,586 providers.