Centers for Medicare & Medicaid Services (CMS) Administrator Mehmet Oz has put Minnesota on an extraordinary clock: clean up alleged massive Medicaid fraud tied to two fast-growing state programs — or risk losing billions in federal funding.

In a blistering statement posted on X Friday, Oz accused Gov. Tim Walz and Minnesota’s health bureaucracy of allowing “more than $1 billion” to be siphoned out of Medicaid by “bad actors” in and around the state’s Somali community, and warned that some of the stolen money may have ended up supporting the Somalia-based terrorist group al-Shabab — a claim still under federal investigation, not publicly proven.

“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 they’ve been asleep at the wheel,”
Oz wrote.

His message was blunt:
Minnesota has 60 days to restore integrity to its Medicaid programs — or Washington “will stop paying” its share.

The Ultimatum: Four Demands, 60 Days

Oz laid out a detailed set of corrective steps that Minnesota must take if it wants to keep federal Medicaid money flowing:

Weekly fraud updates to CMS on what the state is doing.

Freeze new enrollment of “high-risk” providers for six months.

Re-verify all existing providers to confirm they’re legitimate — and purge those who aren’t.

Submit a formal corrective action plan to prevent future abuse.

“If we’re unsatisfied with the state’s plans or cooperation,” Oz warned,

“we’ll stop paying the federal share of these programs.”

Losing the federal match would be a financial earthquake for Minnesota. The feds typically cover more than half of state Medicaid costs; pulling that support would blow a multi-billion-dollar hole in Minnesota’s health budget almost overnight.

The Programs at the Center of the Storm

Oz’s warning zeroed in on two relatively new Medicaid-funded programs that ballooned far beyond their original projections:

Housing Stabilization Services (HSS)

Projected annual cost: $2.6 million

Actual 2024 payouts: over $100 million, according to Oz

Purpose: to help people at risk of homelessness remain housed

Allegations: phantom services, fake documentation, and shell providers billing for housing support that never happened

Early Intensive Developmental and Behavioral Intervention (EIDBI)

2018 spending: $3 million

2023 spending: nearly $400 million, per Oz

Purpose: autism and developmental therapy for children

Allegations: fake autism diagnoses, sham therapy centers, and cash kickbacks to parents who enrolled their kids

“These scammers used stolen taxpayer money to buy flashy cars, purchase overseas real estate and offer kickbacks to parents who enrolled their kids at fake autism treatment centers,”
Oz said. “Some of it may have even made its way to the Somalian terrorist group al-Shabab.”

That terrorism angle remains an allegation — part of a wider Treasury and Justice Department probe into whether any Minnesota fraud proceeds traveled abroad through hawala or other informal remittance networks and were then extorted by extremist groups. So far, federal prosecutors have focused on charging fraud and money laundering, not terrorism, but Treasury Secretary Scott Bessent confirmed this week that financial-intelligence teams are now “following the money” to see where the stolen funds ultimately landed.

From State Problem to Federal Flashpoint

Minnesota officials had already flagged possible abuse in these programs to CMS in prior years, but, in Oz’s telling, they never got serious about shutting it down.

“We stepped in and shut down the worst program: housing,” he wrote. “We also froze provider enrollment in a few of the most abused programs.”

That move parallels what Minnesotans have been watching unfold in other high-profile cases — most famously the Feeding Our Future scandal, where a web of operators stole at least $250 million in federal child-nutrition funds during the pandemic. Dozens of those defendants have been Somali Minnesotans, and prosecutors say they used nonprofit covers and shell companies to bill for meals that were never served.

Now, CMS is effectively telling the Walz administration: you had your chance; Washington is stepping in.

“The message to Walz is clear: 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,”
Oz wrote.

Walz Under Fire: Fraud, Identity Politics, and Somali Community Fallout

Minnesota Gov. Tim Walz has already been under intense pressure over the state’s oversight failures, especially as whistleblowers from the Department of Human Services claim they were ignored or retaliated against when they raised alarms.

Oz accused Walz of letting ideology trump enforcement:

“So why didn’t Walz stop them? That’s simple: because he went all-in on identity politics.”

The implication: state officials were hesitant to scrutinize Somali-run organizations too aggressively for fear of being branded racist — an argument increasingly echoed by conservative critics who say fraudsters hid behind accusations of bigotry to keep the money flowing.

Walz, for his part, has called the fraud “unacceptable” and insisted his administration has cooperated with federal investigators. At the same time, he has warned against demonizing Minnesota’s Somali community — the largest in the United States — stressing that the vast majority are law-abiding, tax-paying residents who contribute to the state’s economy.

Balancing those two realities — serious fraud involving some Somali actors, and the risk of smearing an entire community — has become one of the most politically explosive issues in the state.

Trump World Moves In

Oz’s ultimatum doesn’t exist in a vacuum. It comes as President Donald Trump is loudly seizing on Minnesota’s scandals as proof that the state has become, in his words, a “hub of money laundering activity” and a dumping ground for “garbage” refugees — language that has drawn condemnation from Democrats and civil-rights groups as dehumanizing and dangerous.

In recent weeks:

Trump terminated Temporary Protected Status (TPS) for Somali nationals, citing fraud and public-safety risks.

DHS has surged ICE agents into the Twin Cities to target Somali immigrants with outstanding deportation orders.

Treasury, under Secretary Scott Bessent, opened a new probe into whether welfare-fraud proceeds ended up in the hands of al-Shabab.

All of this has left Somali Minnesotans on edge — facing heightened enforcement and rhetorical attacks — even as community leaders and Rep. Ilhan Omar argue that collective punishment for the crimes of some is both unjust and counterproductive.

What’s at Stake for Minnesota

If CMS actually follows through on its threat to halt the federal share of Medicaid funding, the consequences would be immediate and severe:

Hospitals, clinics, and long-term care facilities that rely on Medicaid reimbursements could face budget shocks.

Low-income Minnesotans, including seniors and people with disabilities, could see their coverage disrupted if the state can’t plug the gap.

The Walz administration would be forced to either slash services, raise taxes, or both.

In reality, such a cutoff is often used as a nuclear bargaining chip — meant to force rapid reforms rather than to actually pull the plug. But Oz’s tone suggests CMS is willing to push much harder than typical behind-the-scenes negotiations.

Minnesota now has 60 days to convince Washington it’s serious about cleaning house.
If it fails, the state won’t just be dealing with headlines about fraud — it could be fighting for the financial survival of its safety net.