CMS Finds Minnesota Medicaid Out of Compliance on Fraud Controls and Offers a Hearing

On January 14, 2026, the Centers for Medicare and Medicaid Services (CMS) published a notice in the Federal Register offering Minnesota a hearing on a finding that its Medicaid program is substantially out of compliance with federal fraud control rules. CMS Administrator Mehmet Oz found that the Minnesota Medicaid agency fails to adequately identify, prevent, and address fraud, waste, and abuse. The finding is the basis for withholding part of Minnesota’s federal Medicaid funding, estimated at $515,154,947.56 a quarter, tied to 14 high-risk services. Nonemergency medical transportation (NEMT) is one of them.

The notice reprints CMS’s January 6, 2026 letter to Governor Tim Walz, which cites a 2017 federal audit of Minnesota’s NEMT oversight. For NEMT companies, the fallout came through the state: a freeze on enrolling new NEMT companies in the seven-county metro from January 27, 2026, and a statewide push to revalidate every provider of a high-risk service by May 31, 2026.

What CMS found

The letter and notice say Minnesota violates two federal requirements:

Rule	What it requires
Section 1902(a)(64) of the Social Security Act	The state plan must provide a way to receive reports from members and others and to compile data on alleged fraud, waste, and abuse
42 CFR part 455, subpart A	The state must have methods to identify, investigate, and refer suspected Medicaid fraud, including a way to take complaints from any source

CMS gave this history in the notice:

• July 2024. CMS began working with Minnesota on possible fraud in its housing stabilization services program, through federal contractor audits.
• December 5, 2025. CMS formally notified the Minnesota Medicaid Director and directed the state to submit a corrective action plan by December 31, 2025.
• December 2025. CMS staff met onsite with state staff and law enforcement.
• December 31, 2025. Minnesota submitted a plan. CMS found it deficient because it relied on temporary or future measures, lacked enforceable timelines and performance measures, and gave limited assurance of accountability for past misconduct.

CMS said its analysis of Minnesota data showed the 14 high-risk services cost $3.75 billion in federal and state funds. It asked the revised plan to cover the state’s prior authorization program, training for providers on enrollment, billing, and documentation, training for state staff, a surveillance and utilization review system, and oversight of managed care plans, including payment suspensions and recovery of overpayments. CMS also said it would start a focused review of the state’s federal expense reports for all 14 services, beginning with the fourth quarter of federal fiscal year 2025, and could defer or disallow federal funds that do not meet federal rules.

Where NEMT fits

The letter points to three earlier reviews of Minnesota’s oversight. One is a September 15, 2017 audit by the HHS Office of Inspector General (A-05-15-00026). It sampled 104 NEMT lines of service the state claimed from October 1, 2012 through September 30, 2013 and found that 79 did not meet federal and state requirements. The Inspector General recommended that Minnesota refund $1,871,457 to the federal government and strengthen its policies so providers document every service. The state agreed with the recommendations.

CMS’s letter says the 14 high-risk services are ones the state itself identified, and it links DHS’s program integrity page. They are the 14 services Governor Walz named on October 29, 2025 for prepayment review of fee-for-service claims, and NEMT is one of them. See Minnesota’s prepayment review for how those reviews work.

DHS’s March 2, 2026 briefing to the Minnesota House Fraud Prevention Committee said 80 percent of NEMT spending is overseen by managed care plans, and each plan must run its own special investigations unit.

The hearing and the money at stake

Item	Detail
Legal basis	Section 1904 of the Social Security Act and 42 CFR 430.35, with hearings under 42 CFR part 430, subpart D
Letter	January 6, 2026, from CMS Administrator Mehmet Oz to Governor Walz
Federal Register notice	January 14, 2026, 91 FR 1539 to 1542, document 2026-00512
Time to ask for a hearing	10 days from the date of the letter
Others who want to take part	Requests to join as a party were due to the presiding officer within 15 days of the notice
Where and when	The CMS regional office in Chicago, no sooner than 30 days after the notice, unless the parties agreed on a later date
Hearing officer	Benjamin R. Cohen, CMS, 410-786-3169
Issues	Whether Minnesota failed to substantially comply, and whether that supports withholding part of its federal funding
Proposed withholding	The federal share of one quarter of the prior year’s paid spending on the 14 services, estimated at $515,154,947.56 a quarter, or another amount the state can substantiate. It could grow
How it ends	When Minnesota fully carries out a comprehensive corrective action plan for the 14 services
Revised plan due	January 30, 2026

Under 42 CFR 430.35, CMS may withhold payments only after reasonable notice and a chance for a hearing. Once it finds noncompliance, the withholding continues until the Administrator is satisfied the state’s plan and practice comply.

What Minnesota did next

Date	What happened
January 23 to 28, 2026	DHS began sending off-cycle revalidation letters to providers of high-risk services through their MN-ITS mailbox, or by mail to providers without one
January 26, 2026	Minnesota Revalidate 2026 launched. DHS said CMS required it or threatened to withhold up to $2 billion
January 27, 2026	Enrollment freeze on 13 high-risk services took effect. For NEMT it covers providers located in the seven-county metro
May 31, 2026	Revalidation deadline. DHS finished its review of nearly 5,600 high-risk providers on time
June 11 and June 19, 2026	Payment suspensions lifted for providers who had appealed a revalidation disenrollment by June 9 or June 16
July 14, 2026	DHS said providers in the appeals process are not terminated until a decision is made
July 23, 2026	The NEMT metro enrollment moratorium was extended to January 27, 2027
August 24, 2026	DHS said Myers and Stauffer will review NEMT provider claims throughout 2026

In its June 2026 provider news, DHS called the completed review a key part of its plan to stop the federal government from withholding up to $2 billion. As of July 2026, DHS’s program integrity page reported these results for the 5,583 providers of high-risk services, with appeals data through June 9, 2026:

Result	Providers
Revalidation approved	2,061
Disenrolled for incomplete or inaccurate administrative data	2,491
Disenrolled for failing the site visit	916
Disenrolled for failing the background study	2
Appeals filed	2,055

These figures cover all high-risk service types together, not NEMT alone. For the freeze in detail, see the Minnesota metro NEMT enrollment freeze.

What NEMT providers in Minnesota should do now

1. Keep owner background studies and your location ready. NEMT is a high-risk provider type in Minnesota. As of January 2026, that means a fingerprint-based background study for every direct or indirect owner with 5 percent or more, at $44 per study plus the fingerprint fee, and an unannounced site visit before a revalidation is approved. See what happens in a Medicaid site visit.
2. Appeal each location separately if you were disenrolled. Send appeal materials to the DHS appeals mailbox in the table below, and answer any request for more information within seven business days.
3. Keep trip records ready. Fee-for-service NEMT claims go through prepayment review, which DHS calls a permanent process, and Myers and Stauffer is reviewing NEMT claims for DHS through 2026. See NEMT trip documentation.
4. Plan around the metro freeze. New NEMT companies located in the seven metro counties cannot enroll before January 27, 2027. Companies outside the metro can.
5. Watch for the outcome. Follow DHS provider news and the Federal Register for CMS’s decision on the corrective action plan and any withholding.

Who to contact

For	Contact
Revalidation appeals	provider.enrollment.appeals.dhs@state.mn.us
Revalidation questions	revalidation.inquiries.dhs@state.mn.us
NEMT enrollment and the metro moratorium	transportation.DHS@state.mn.us
NEMT claim reviews by Myers and Stauffer	844-987-0492
General provider questions	MHCP Provider Resource Center, 651-431-2700 or 800-366-5411

For how federal fraud rules reach small companies, see NEMT fraud, and for Minnesota enrollment in full, the Minnesota state guide.