Minnesota Medicaid director questions $112M federal denial, says it’s a 1,000-fold jump

John Connolly, the temporary commissioner and state Medicaid director for the Department of Human Services, speaks at a Senate hearing in July 2026. (FILE/KSTP-TV)

The Details

Minnesota officials are questioning a federal decision to deny more than $112 million in Medicaid reimbursement.

In recent days, the federal government notified Minnesota that it won’t reimburse more than $112 million in Medicaid funds that the state already paid.

That decision relates to the Centers for Medicare & Medicaid Services (CMS) decision in February to freeze $259 million in Minnesota funding for high-risk services, the Minnesota Department of Human Services (DHS) says.

Minnesota lawmakers, providers brace for impact of feds denying $112M in Medicaid funding Since that decision earlier this year, DHS leaders say they’ve “been bracing for some sort of disallowance,” but indicated Thursday that the denial of $112 million is a shock.

DHS questions CMS process

More than 1 million Minnesotans depend on Medicaid. John Connolly, Minnesota’s Medicaid director and temporary commissioner of DHS, said more than 6 million high-risk claims were submitted from July through September 2025 — the period CMS is questioning.

Of those claims, CMS flagged 330 claims that DHS says totaled roughly $112,000 — “an expansion of roughly 1,000 times greater than the 78 disallowed claims,” Connolly noted.

“We have more questions than answers right now, including CMS’s extrapolation methodology and how they selected the 330 claims for review,” Connolly added.

More funding remains deferred

CMS based the $112 million denial on administrative paperwork deficiencies, according to DHS, but it’s not the only funding at risk.

The federal agency still hasn’t made a decision on its two remaining funding freezes totaling $350 million for services provided in two subsequent quarters.

“We are actively reviewing information we received late Friday and plan to request more information from CMS before determining next steps,” Connolly said.

DHS says it remains concerned about the transparency and fairness of the process CMS is using to deny reimbursement for claims Minnesota has already paid.

In a letter to DHS employees, Connolly said the state appears to be getting punished more for documentation mistakes than fraud. The state has 60 days to appeal the decision.