A crisis is unfolding in Minnesota — not on the streets, but in the spreadsheets. Federal officials are now pointing to what could be one of the most egregious Medicaid fraud scandals in modern U.S. history, with over $1 billion in taxpayer funds allegedly siphoned off through bloated programs, fraudulent billing, and criminal exploitation of the most vulnerable.
In a blistering statement posted Sunday, Centers for Medicare and Medicaid Services (CMS) Administrator Dr. Mehmet Oz delivered a 60-day ultimatum to Democratic Gov. Tim Walz, warning that unless the state takes immediate corrective action, federal Medicaid funding may be cut off — a dramatic and unprecedented move that could further destabilize Minnesota’s already embattled healthcare system.
“This is a clear dereliction of duty,” Oz declared. “Everyone from Gov. Tim Walz on down needs to be investigated, because they’ve been asleep at the wheel.”
You’ve probably heard the news by now: Minnesota fraudsters stole over $1 billion from Medicaid. And you deserve an explanation.
Our staff at CMS told me they’ve never seen anything like this in Medicaid — and everyone from Gov. Tim Walz on down needs to be investigated, because… pic.twitter.com/MFUoYYJoEa
— DrOzCMS (@DrOzCMS) December 5, 2025
At the heart of the scandal are two state programs that were supposed to provide support to disabled homeless individuals and children with autism. Instead, they've become poster children for systemic abuse.
The Housing Stabilization Services program — intended to cost $2.6 million a year — astonishingly paid out more than $100 million in 2023 alone. Likewise, the autism therapy reimbursement program, which had a budget of just $3 million in 2018, exploded to nearly $400 million by 2023. The numbers don't just raise eyebrows — they send sirens wailing through the corridors of federal oversight.
According to Oz, bad actors used these programs as personal piggy banks, purchasing luxury vehicles, investing in overseas real estate, and allegedly offering kickbacks to parents in exchange for enrolling their children in non-existent treatment centers. In perhaps the most alarming claim, he hinted that some of the diverted funds may have made their way to Al-Shabaab, the Somali terrorist group linked to global extremist operations.
While CMS has already moved to shut down the housing program and freeze enrollment across several high-risk sectors, Oz is demanding far more from the Walz administration. His list includes:
- Weekly fraud updates from the state
- A six-month freeze on high-risk provider enrollment
- Verification of all current Medicaid providers
- A comprehensive corrective action plan
“The message to Walz is clear,” Oz concluded, with the kind of sharp rhetoric rarely seen in official agency communication. “Either fix this in 60 days or start looking under your couch for spare change, because we’re done footing the bill for your incompetence.”
The timing couldn’t be worse for Walz, already under fire from multiple angles after explosive reports about widespread fraud in other state-funded nutrition and aid programs. Now, with federal dollars — and federal trust — on the line, he faces a ticking clock and a rapidly eroding base of political support.