How Could the Minnesota Fraud Happen — and Why Texas Didn’t See the Same Outcome

A collaboration between Lewis McLain & AI

The recent revelation that federal prosecutors believe up to half of roughly $18 billion in federal funds administered through Minnesota programs may have been fraudulently claimed has raised a deeper and more troubling question than simple criminal wrongdoing. The central issue is not whether fraud occurred — it clearly did — but how such a vast scheme could persist for years without decisive intervention, and why similar failures did not reach the same scale in other states, particularly Texas.

Answering that question requires stepping away from partisan framing and examining program design, administrative architecture, timing of awareness, and institutional decision-making.

I. The Nature of the Programs Involved

Most of the funds at issue flowed through federally funded, state-administered social service programs, including:

  • Child nutrition programs
  • Medicaid-related services (including autism therapy and home-based supports)
  • Housing and disability assistance

These programs share several structural features:

  1. Claim-based reimbursement
    Providers self-report services and are reimbursed automatically.
  2. Pay-first, audit-later design
    Verification occurs months or years after funds are disbursed.
  3. Private delivery model
    States administer eligibility and payment, but do not deliver services directly.

This structure prioritizes speed, access, and continuity of care, particularly for vulnerable populations. It also creates an inherent vulnerability: fraud can scale faster than oversight.

II. What Was the Same Across States

Minnesota’s experience was not unique in its basic mechanics. Similar fraud dynamics appeared in California, New York, Illinois, and federal pandemic programs.

Across all jurisdictions:

  • Emergency COVID waivers loosened documentation and oversight
  • Provider enrollment was expedited
  • Site visits and in-person verification were suspended
  • Payment systems remained automated

Fraud exploited time gaps, not policy intent. These systems were designed to avoid denying care — not to stop sophisticated abuse in real time.

III. Where Minnesota Was Different

Minnesota’s case diverged from other states in three critical ways.

1. Scale and concentration

Other states experienced:

  • Thousands of small or mid-sized fraud cases
  • Losses spread across geography and programs

Minnesota experienced:

  • Highly organized networks
  • Multi-program overlap
  • Extraordinary dollar concentration per scheme

Federal prosecutors described the activity as “industrial-scale fraud”, not opportunistic abuse.

2. Early warnings before peak losses

Unlike many states where fraud was discovered after funds were gone, Minnesota agencies:

  • Flagged suspicious activity as early as 2019–2020
  • Documented implausible service volumes
  • Raised concerns internally and to federal partners

In the Feeding Our Future case — the catalyst for the broader investigation — state officials attempted to halt funding, triggering litigation that slowed enforcement. Payments continued while warning signs mounted.

This is a critical distinction: Minnesota saw the smoke before the fire peaked.

3. Fragmented authority

Minnesota’s human-services system is highly decentralized:

  • Provider approval, payment, audit, and enforcement are split across agencies
  • Counties and nonprofits operate with significant autonomy
  • Courts can limit administrative action during disputes

No single entity had both the authority and speed to stop payments decisively once fraud was suspected.

IV. When the Administration Became Aware — and How

The timeline matters.

  • 2019–early 2020: Program staff note irregular claims
  • Summer 2020: State agencies formally report concerns to federal partners
  • Late 2020: State attempts to terminate funding; litigation intervenes
  • February 2021: Referral to the FBI; federal criminal investigation begins
  • January 2022: FBI raids and indictments become public
  • 2022–2025: Investigation expands across multiple programs, revealing the larger scope

Senior state leadership was aware of suspected fraud well before public disclosure, but precise documentation of when the governor’s office was formally briefed remains unclear in the public record.

What is clear is that awareness preceded full intervention, and intervention lagged the growth of the schemes.

V. Why This Did Not Dominate the 2024 Election

Despite early knowledge within agencies, the issue did not meaningfully shape the 2024 election for several reasons:

  1. The full scale was not publicly known
    The $18 billion figure emerged only in late 2025.
  2. Early cases appeared isolated
    Feeding Our Future (~$300 million) looked large but contained.
  3. Complexity discouraged amplification
    The story lacked a simple narrative during a crowded election cycle.
  4. Investigations were ongoing
    Media and campaigns avoid claims not yet fully adjudicated.

By the time the magnitude became undeniable, the election had passed.

VI. Comparison to Texas: Same Programs, Different Outcomes

Texas administers the same federal programs — yet did not experience Minnesota-scale losses. The difference lies in governance design, not moral superiority.

1. Centralized authority

Texas operates through a strongly centralized Health and Human Services Commission. Provider enrollment, payment, and termination authority are consolidated.

Result: Payments can be halted quickly.

2. Provider enrollment rigor

Texas imposes:

  • Lengthy onboarding
  • Fingerprinting and ownership scrutiny
  • Financial viability checks

This slows access — and blocks shell entities.

3. Willingness to disrupt services

Texas is institutionally willing to:

  • Suspend providers first
  • Litigate later
  • Accept short-term service disruption

Minnesota showed greater hesitation, prioritizing continuity and legal caution.

4. Enforcement posture

Texas uses:

  • An aggressive Medicaid Fraud Control Unit
  • Early Attorney General involvement
  • Parallel civil and criminal actions

Fraud is treated as law enforcement first, not program management.

5. Blunt controls over elegant analytics

Texas relies on:

  • Hard caps
  • Billing thresholds
  • Manual overrides

The system is crude — but constraining. Minnesota relied more on trust and review.

VII. The Tradeoff at the Core

The contrast reveals a fundamental governance choice:

  • Minnesota prioritized access, trust, and decentralization
  • Texas prioritized control, authority, and risk tolerance

Neither model is clean. Both have costs. Only one prevented runaway scale.

VIII. What This Case Ultimately Reveals

This was not a failure of compassion, nor evidence of coordinated state wrongdoing. It was a failure of system architecture.

Modern aid systems that optimize for:

  • Speed
  • Equity
  • Access

must also invest in:

  • Real-time anomaly detection
  • Unified authority
  • Rapid payment suspension powers

Without those, fraud will always scale faster than oversight.

Conclusion

Minnesota did not invent fraud, and Texas did not eliminate it. The difference lies in how quickly each system can say “stop” when something goes wrong.

Minnesota saw the warning signs — but lacked the integrated authority to act decisively. Texas acts decisively — sometimes harshly — and accepts the consequences.

That is the real lesson of the Minnesota case: not who failed morally, but which systems are structurally capable of stopping abuse once it begins.

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