CMS Administrator Dr. Mehmet Oz issued an extraordinary public rebuke of Minnesota officials after federal investigators uncovered what he described as one of the largest Medicaid fraud operations in American history. More than $1 billion was siphoned from programs designed to help vulnerable residents—including homeless individuals with disabilities and children with autism—while state leaders failed to intervene despite mounting evidence of abuse.

Oz stated that career experts inside the Centers for Medicare & Medicaid Services had “never seen anything like this,” pointing to years of rapid, unexplained spending spikes inside Minnesota’s Medicaid system. Two major programs were at the center of the collapse: Housing Stabilization Services, which was supposed to cost just $2.6 million annually but exploded to over $100 million last year; and the Early Intensive Developmental and Behavioral Intervention program, which ballooned from $3 million in 2018 to nearly $400 million in 2023.

Federal investigators say the scheme involved coordinated fraud by criminal networks that exploited Medicaid rules, fabricated treatment services, offered kickbacks to families, and used taxpayer dollars to enrich themselves through luxury purchases and overseas property. Some of the diverted funds may have even reached foreign extremist groups, according to federal officials familiar with the investigation.

Oz emphasized that the problem was not caused by the communities the programs were meant to serve but by a small group of deliberate fraudsters—and by state leaders who failed to act. He accused Minnesota Governor Tim Walz and his administration of prioritizing political considerations over fiscal responsibility, citing testimony from a Somali-American fraud investigator who told The New York Times that officials feared addressing the problem aggressively because it might “cause political backlash.”

Oz argued that this hesitation created a culture of permissiveness where fraud flourished, calling it “a clear dereliction of duty.” He noted that despite assurances from Minnesota that they were handling the situation, the state’s actions were insufficient, forcing CMS to intervene directly. Federal officials shut down the housing program entirely and froze enrollment in several others deemed high-risk for continued abuse.

To restore integrity to the Medicaid system, CMS is now imposing strict federal requirements on the state. Minnesota must provide weekly updates on fraud prevention progress, freeze new enrollment of high-risk providers for six months, verify all existing providers or remove them, and submit a comprehensive corrective action plan to prevent future abuses. If Minnesota fails to comply within 60 days, Oz warned, CMS may withhold the federal share of funding for the affected programs.

“The message to Governor Walz is clear,” Oz said. “Either fix this or start finding the money yourself, because we’re done paying for incompetence.” He vowed that CMS will continue rooting out corruption to protect both the taxpayers who fund Medicaid and the vulnerable Americans who depend on it. “These scammers and their bureaucratic enablers have nowhere left to hide,” Oz declared.