The Elmer L. Andersen Human Services Building in St. Paul, MN Thursday Jan. 15, 2026. (Photo by Alyssa Chen/Minnesota Reformer)
ST. PAUL, Minn. (Minnesota Reformer) — Poorly written or vague policies may have cost state-run Medicaid services $1.7 billion in payments over nearly four years, a new state-commissioned report finds.
The report from Optum, a third party hired by the Minnesota Department of Human Services, also identified $52.3 million in Medicaid claims that did unambiguously violate clearly stated policy over that time, from January 2022 through October 2025. The report said that neither amount necessarily implies fraud, waste or abuse.
Optum reviewed a total of $9.4 billion in claims for 14 Medicaid services deemed high risk of fraud, waste and abuse by DHS, funded through a combination of state and federal dollars.
DHS Deputy Commissioner John Connolly noted in a press briefing that claims from early autism intervention centers were flagged by Optum’s analysis at a particularly high rate — over 90% of claims didn’t clearly match policies or procedures. And, of the $1.7 billion that could have been saved from better-written policies, $1 billion was spent on early autism intervention centers.
Connolly said, however, the fact that the claims raised red flags for Optum does not necessarily indicate fraud, waste or abuse. Instead, they could represent instances where claims that deserve to be approved are unnecessarily flagged, or providers may not have training file claims correctly.
“We won’t know until we do the work to understand,” Connolly said.
The report distinguishes between “potential savings” from improvements in policies, which led to the $1.7 billion figure, and “direct recoveries” from clearly stated violations of existing policies, which led to the $52.3 million figure. The services that had the highest dollar amounts of “direct recoveries” were non-emergency medical transportation, at $23.9 million, and overnight assistance and supervision, at $11.5 million.
The report, released Friday, also includes lists of vulnerabilities in the Medicaid services and policy recommendations to address those vulnerabilities, which were all redacted in the publicly available files for containing “security” or “trade secret information” under Minnesota’s government data laws. Connolly said that the information was redacted partly to protect against people who could use the information to defraud the state.
Connolly said that DHS will review the policy recommendations and present them to the Legislature, which convenes Feb. 17, as needed. Some policy recommendations might also be made administratively and not through changes to state law, Connolly said.
Report is part of Optum contract to review new claims
The report comes three months into a yearlong, $2.3 million contract that the state has with Optum to develop an “AI-enabled” prepayment review of claims for the high-risk Medicaid services. Optum reviewed 46 months of old claims and produced the report in order to guide the prepayment review of new claims.
(Optum is a division of Minnesota-based UnitedHealth Group. In 2025, The Wall Street Journal reported that the Department of Justice’s health care fraud unit is investigating the health care giant’s Medicare Advantage billing practices. Also, citing “people familiar with the matter,” Bloomberg reported in August that the Justice Department’s criminal division is “digging into UnitedHealth Group Inc.’s prescription management services as well as how it reimburses its own doctors under an ongoing probe into the firm’s operations.”)
Prepayment review has been touted by Gov. Tim Walz and DHS officials as one of several efforts to stop fraud in Minnesota human service programs ever since the anti-fraud measure was introduced by Walz in October.
The 13 current high-risk Medicaid programs under review provide critical services to disabled and vulnerable Minnesotans. Another program, Housing Stabilization Services, was so riddled with fraud the state shut it down. Housing Stabilization Services is still included in Optum and DHS’ prepayment review because providers can submit claims up to a year after providing a service.
DHS abruptly delayed payments to all providers in the 14 Medicaid services in December as part of the prepayment review process, a move which providers said caught them by surprise and interrupted payrolls, leaving Medicaid recipients without care.
The new system has yet to turn up claims indicating fraud. Optum, the third-party auditor, and DHS are currently processing 100,000 claims every two weeks. More than 70 in the first two-week cycle were denied, though none were flagged for fraud, said DHS Temporary Commissioner Shireen Gandhi in a hearing last week, who added that she expects to catch more fraud “as the system matures.”
The state also announced Monday that it plans to “revalidate” all 5,800 providers of the high-risk Medicaid services through unannounced site checks, among other steps.
The state’s efforts to mitigate fraud in Medicaid services come as the Walz administration faces significant national scrutiny for how it has handled fraud in Minnesota’s public programs. The Trump administration has said that it intends to withhold $2 billion in Medicaid funding to Minnesota in relation to the 14 high-risk Medicaid services. Minnesota has since appealed that decision.
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