Vice President JD Vance and Centers for Medicare and Medicaid Services administrator Dr. Mehmet Oz announced Wednesday that the Trump administration is deferring $259 million in Medicaid payments to Minnesota amid concerns over fraud.

The deferral covers approximately $244 million in unsupported or potentially fraudulent claims and $15 million related to individuals lacking satisfactory immigration status, based on a federal audit of Minnesota's Medicaid spending in the fourth quarter of 2025. Vance described the move as part of the administration's "war on fraud," giving Democratic Gov. Tim Walz 60 days to propose and implement a comprehensive corrective action plan before releasing the funds.

Oz called the action the largest fraud crackdown in CMS history, stating the payments would be held until Minnesota demonstrates better stewardship of federal tax dollars. He specified that fraudsters, whom he labeled "self-serving scoundrels," had diverted funds meant for services like after-school care for autistic children in Minneapolis, benefiting criminals instead.

Vance emphasized vulnerabilities in Minnesota's program, noting disproportionate involvement from immigrant communities and schemes dating back to the COVID-19 pandemic. Federal investigators estimate potential fraud could exceed $9 billion statewide, with President Donald Trump citing $19 billion or more linked to the Somali community during his State of the Union address Tuesday.

Trump tasked Vance with leading the national effort against such abuses, which officials say plague other states like California and Massachusetts as well. The announcement follows earlier scrutiny, including the Feeding Our Future scandal where a nonprofit allegedly stole $300 million in pandemic-era meal funds.

Minnesota officials pushed back, with Walz posting on social media that the freeze weaponizes federal power against Democratic-led states and would harm veterans, families and people with disabilities. The state has appealed prior CMS notices threatening up to $2 billion in annual withholdings for high-risk programs and maintains strong program integrity efforts, including investigations by Attorney General Keith Ellison's office.

Walz's office and the Minnesota Department of Human Services had not issued a formal statement by Wednesday evening. If unresolved, officials warned deferrals could escalate to $1 billion this year.

The action aligns with broader Trump administration measures, such as suspending Medicare enrollments for equipment suppliers and crowdsourcing fraud tips. Treasury has also targeted wire services to Somalia amid related probes.