Gov. Tim Walz released his anti-fraud package for the 2026 legislative session and denounced the Trump administration for new cuts to Minnesota’s Medicaid program made as part of what it says is a crackdown on fraud.
The anti-fraud package, which Walz introduced Thursday at a Capitol press briefing, has 18 proposals, including prohibiting legislators from making direct appropriations to nonprofits and establishing a centralized Office of Inspector General, which would be a new spending oversight entity.
A bipartisan bill to create an Office of Inspector General that included an independent law enforcement arm passed the Senate in 2025 but didn’t advance in the House. Supporters are back again this year, but an OIG bill has stalled in House committees twice this week, KSTP reported, with House Democrats contending that a new law enforcement agency is unnecessary.
Another point of contention: Who should select the head of the new Office of Inspector General? Asked whether the governor should have the power to appoint the person, Walz didn’t answer.
Sen. Bobby Joe Champion, DFL-Minneapolis, denounced the governor’s proposal to end legislators’ ability to earmark money to nonprofits — also known as legislatively named grants — which allow legislators to name specific recipients in budget bills, foregoing the normal competitive grant process. Champion previously steered millions of dollars to the nonprofit of a political ally and legal client. (He said the client was pro-bono.)
Walz’s proposal dovetails with a letter sent in 2025 from members of both parties of the House fraud prevention committee advising budget writers to avoid these earmarks to nonprofits.
At the Thursday press briefing, Department of Human Services Commissioner Shireen Gandhi emphasized the department’s need for support from legislators to tackle fraud. The state agency previously published a heavily redacted report by health services firm Optum, which is auditing 14 Medicaid services deemed high-risk for fraud. The Optum report includes redacted policy recommendations that legislators have yet to see. State Medicaid Director John Connolly said that the agency’s policy teams are still looking through Optum’s policy recommendations to see what can be made public and shared with legislators. (The Walz administration says unredacted policy prescriptions would give fraudsters clues about how to operate.)
The Walz anti-fraud package also proposes to strengthen oversight of claims submitted to managed care organizations, which are health insurance companies that manage claim payments for around 80% of Minnesota’s Medicaid enrollees.
Senate Republicans and House Democrats released their own anti-fraud plans earlier this week.
Walz also denounced the Trump administration’s $259 million cut in Medicaid funding to the state announced Wednesday, which he described as “an incredibly damaging continuation of the reckoning and retribution campaign by the Trump administration.” Minnesota’s Medicaid budget is $18 billion, with 60% paid by the federal government.
Walz cited data from the U.S. Centers for Medicare and Medicaid Services which show that Minnesota’s rate of improper payment for Medicaid overall is 2.1%, far lower than the national average of 6.1%. However, the bulk of the $259 million in question focuses on claims in the 14 high-risk Medicaid services that it identified as having “questionable variances,” according to the federal agency’s letter to Minnesota.
The state has 60 days to defend the Medicaid claims in question, the letter said. The Trump administration separately moved to withhold $2 billion in Medicaid payments to Minnesota in January, also in connection to the 14 high-risk Medicaid services, which Minnesota is currently appealing.
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