(The Center Square) – Minnesota lawmakers say fraud in taxpayer-funded programs must be addressed, but sharp partisan divides remain over how to do it.
Republicans are pushing for stricter oversight and accountability measures, while Democrats say their proposals focus more on punishment than prevention and could harm legitimate program recipients or state workers.
The debate intensified after House Democrats recently voted down two Republican-backed bills in the Health Finance and Policy Committee that would remove deceased individuals from Medical Assistance rolls, require work requirements for able-bodied adults without children, and increase fraud safeguards.
House Republicans criticized the vote, saying the proposals were necessary to address vulnerabilities in the program.
“Not a single House Democrat articulated a plan to fill the hole in Minnesota’s Medicaid budget if we fail to comply with federal requirements,” David Anderson, deputy director of public affairs for the House Republican Caucus, said in a statement. “Instead, they preferred to talk about the Trump administration.”
The disagreement over how to address fraud comes as investigations into Minnesota programs continue. Independent and federal investigators have estimated the total value of potential schemes could reach between $9 billion and $20 billion.
Republicans say the scale of the allegations shows the need for stronger oversight, including creation of an independent statewide Office of the Inspector General to investigate fraud across agencies.
State Sen. Michael Kreun, R-Blaine, a sponsor of the proposal, said an independent office would provide nonpartisan oversight and ensure accountability.
“Operating independently ensures that audits are objective, free from political interference, and focused on protecting taxpayer funds,” Kreun previously told The Center Square.
Democrats have been hesitant to support the plan. Republican leaders say Democrats have voted against advancing the proposal multiple times.
“Weeks into the legislative session and years late on fraud, they clearly aren’t serious about stopping fraudsters,” House Speaker Lisa Demuth, R-Cold Spring, and House Floor Leader Harry Niska, R-Ramsey, said in a joint statement.
Republicans have also introduced additional legislation aimed at increasing accountability within state agencies. One proposal known as the “Fraud Isn’t Free Act” would impose salary reductions on agency commissioners if significant fraud occurs under their watch and mandate budget cuts for agencies that fail to safeguard public funds.
Supporters say similar accountability measures are common in the private sector, but labor groups and Democrats say the bill could unfairly punish rank-and-file state employees and undermine due process protections.
“It’s not ready, it’s not preventative and it is actually punitive and harmful to the Minnesotans who are both suffering from fraud, which we all agree should not occur, and it is punitive in that you just unallot these services,” said Rep. Ginny Klevorn, DFL-Plymouth.
This proposal also failed in committee.
Meanwhile, Democratic leaders say they are advancing their own efforts to combat fraud.
Minnesota Gov. Tim Walz recently proposed a comprehensive anti-fraud package that would expand audit capacity, create a centralized Office of Inspector General, and permanently bar individuals convicted of fraud from receiving state contracts.
Minnesota Attorney General Keith Ellison has also proposed bipartisan legislation known as the Medical Assistance Protection Act, which would expand the state’s Medicaid Fraud Control Unit and strengthen criminal penalties for fraud.
That bill would add 18 staff members to the unit, including investigators and attorneys, while expanding prosecutors’ ability to pursue large fraud schemes and recover stolen funds.
“Medical Assistance provides health care for Minnesotans who have fallen on hard times, and it is essential that we defend that program from thieves and fraudsters,” Ellison said.
The policy debate comes as Minnesota is locked in a legal dispute with the federal government over Medicaid funding. State officials recently filed a lawsuit after the federal government moved to withhold roughly $243 million in Medicaid payments while reviewing potential fraud-related compliance issues.
Ellison accused federal officials of attempting to cut funding before completing a formal review.
“The Trump administration’s M.O. is to cut first and ask questions later,” Ellison said.
Federal officials have framed the move as part of a nationwide effort to combat misuse of taxpayer funds. Vice President J.D. Vance said the administration would not allow Medicaid dollars to be misused.
“Far too many people have gotten rich off programs meant to serve children and vulnerable Americans,” Vance said.
The withheld funds represent about 7% of Minnesota’s quarterly Medicaid funding, according to state officials, who warn that even temporary losses could force service reductions or require lawmakers to redirect funds from other areas of the state budget.
Meanwhile, state officials are working to strengthen internal anti-fraud systems. Minnesota Program Integrity Director Tim O’Malley recently outlined recommendations that include expanding investigative capacity, strengthening enrollment screening for providers and improving fraud detection technology.
O’Malley said that previous state administrations going back to the 1970s were aware of vulnerabilities in state programs but failed to implement solutions to appropriately address fraud.
“Clearer prevention methods should have been taken,” he said. “Repeatedly, plans were put in place but not executed effectively.”
Negotiations over how to mitigate fraud in Minnesota will likely continue to be tense in the divided legislature.
In the Minnesota State Senate, the Democratic-Farmer-Labor Party holds a slim majority of one seat. DFL has 34 seats, compared to the Republicans’ 33. In the Minnesota State House, DFL and Republicans are even – both holding exactly 67 seats.
