Vice President JD Vance announced that the federal government will withhold $259 million in Medicaid reimbursements from Minnesota, marking the first major action in President Trump’s newly declared war on fraud in government programs.

Federal Action Targets Fraud Concerns

Vance, appearing alongside Centers for Medicare and Medicaid Services Administrator Mehmet Oz, said the administration will temporarily halt the monthly payment to ensure Minnesota properly addresses ongoing fraud investigations involving day care centers. The state faces allegations of misusing federal funds, with the Justice Department having charged 98 individuals with $1 billion in fraud. Oz stated that Minnesota Governor Tim Walz has 60 days to submit a comprehensive corrective action plan before the funds will be released.

The vice president defended the administration’s legal authority to withhold congressionally appropriated funds, saying the executive branch controls how money gets spent and must ensure it reaches only legitimate recipients. Vance emphasized the action stems from Minnesota’s alleged carelessness with taxpayer dollars, adding that the administration prefers not to take such measures but feels compelled to make the state take fraud seriously.

Governor Pushes Back on Claims

Governor Walz responded on social media, calling the move politically motivated rather than fraud-focused. He warned that withholding reimbursements would hurt veterans, families with young children, people with disabilities, and working residents across Minnesota. Oz countered that Minnesota maintains a rainy day fund sufficient to cover services already paid for by the state, asserting residents will not suffer while reimbursements remain frozen. The administrator said concerned providers and beneficiaries should contact their governor rather than federal officials.

Broader Anti-Fraud Initiative

President Trump assigned Vance this anti-fraud portfolio during his State of the Union address, expressing confidence that the vice president will deliver results. Trump suggested finding sufficient fraud could balance the federal budget overnight, signaling ambitious expectations for the initiative. The president also named other Democratic-led states, including California, Maine, and Massachusetts, as potential targets. If Minnesota fails to implement satisfactory reforms, the state could face $1 billion in deferred payments throughout the year, according to Oz’s projections based on recent audit findings.