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A Tale of Two Medicaid States: Minnesota Fraud vs. Indiana Reform

More indictments in Tim Walz’s state, while Mike Braun’s reforms save hundreds of millions of dollars.

The Wall Street Journal
The Editorial Board
December 26, 2025
A Tale of Two Medicaid States: Minnesota Fraud vs. Indiana Reform - WSJ

Minnesota’s great welfare heist is the grift that keeps on giving for prosecutors, with the Justice Department last week filing more charges. But on a positive note, Indiana Gov. Mike Braun’s administration has announced hundreds of millions of dollars in Medicaid savings from common-sense reforms.

The Justice Department charged six new defendants in schemes to defraud Minnesota’s Medicaid program. “What we see in Minnesota is not a handful of bad actors committing crimes. It’s a staggering industrial-scale fraud,” Assistant U.S. Attorney Joe Thompson said. “When I look at the claims data and the providers, I see more red flags than I see legitimate providers.”

Mr. Thompson estimates fraud losses since 2018 could top $9 billion. Gov. Tim Walz says the fraud isn’t large or pervasive, but the latest evidence suggests it is and goes well beyond the state’s Somali community.

In one alleged scheme, two men in Philadelphia heard from a friend that Minnesota’s Medicaid program was a “good opportunity to make money.” They registered as housing providers despite no connections in the state. Minnesota was the first state to let Medicaid funds be used for housing services for the disabled and recovering addicts. The defendants billed Medicaid for fake services.

This is a pattern in the charges: Defendants set up sham companies, then submitted false claims. Two other defendants allegedly set up a company, Pristine Health, and worked with another provider, Foundation First, which was in the business of generating fake paperwork for those trying to scam Medicaid.

The indictment says Pristine and Foundation First generated fake housing service plans, which Pristine submitted to the state. The two defendants also allegedly worked with an unnamed company, which promised to help welfare fraudsters “grow [their] clientele” and achieve “BIG profit.” (The two defendants have pleaded not guilty. An individual who operated Foundation First was earlier charged in another fraud scheme.)

The Justice Department also unsealed a search warrant for a home healthcare business, which it said billed Medicaid for services for multiple individuals that weren’t provided. One individual with severe mental illness who was receiving services, according to state records, had been found dead in his apartment.

Justice says the home-care program “has been vulnerable to fraud,” as providers can bill the state for providing care up to 24 hours a day. Minnesota Medicaid spending on this in-home program surged to $170 million in 2024 from $4.6 million in 2021, which tracks a similar increase in spending on housing services.

The state’s Medicaid spending has increased by nearly two-thirds in six years. Mr. Walz says his administration has begun to inspect Medicaid claims more closely. But because the feds pick up most of the Medicaid tab, Minnesota and other states have less incentive to identify fraud and waste.

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Medicaid spending nationwide has increased by some $380 billion since the beginning of the pandemic as providers and beneficiaries dine out on the all-you-can-eat buffet. The inexorable spending growth spurred Indiana Republicans this spring to impose reforms, including more rigorous eligibility checks and guardrails to prevent excessive billing.

Last week the state said it expects to save $466 million on Medicaid over the next two years compared to its spring projections. Medicaid enrollment has declined by some 11% thanks to eligibility checks. The state also barred managed care organizations that administer the program from advertising for Medicaid patients.

Indiana’s Medicaid spending is expected to grow 3.2% this year versus its 9.5% forecast. Republicans are considering more reforms, such as stricter oversight of autism therapy services, which a federal inspector general last year found is rife with improper payments.

This year’s House GOP budget bill requires states to verify Medicaid eligibility at least twice a year and imposes work requirements for the able-bodied. But there’s far more Congress could do to curb abuse.

One ripe target is the 340B program, which lets hospitals and pharmacies they contract with buy drugs as steep discounts. They then charge insurers large markups when they administer the drugs to patients. Hospitals pocket the difference, often using the money to acquire competing providers or make investments.

Republicans have focused on Mr. Walz in the Minnesota scam because it’s easier than fixing the warped government incentives that created the Land of 10,000 Frauds. But if they want to show voters that it’s worth re-electing a Republican majority next year, they could follow the Hoosier reform example.