Judge refuses to block Trump's $243 million Medicaid deferral in Minnesota

MINNEAPOLIS (CN) — A federal judge on Monday handed a temporary victory to the Trump administration, declining to block the federal government’s decision to halt more than $243 million in Medicaid funding from Minnesota.

U.S. District Judge Eric Tostrud denied the state’s request for a temporary restraining order and preliminary injunction, ruling the lawsuit is premature because the administrative process surrounding the funding “deferral” hasn’t reached a conclusion.

In his 42-page ruling, the Donald Trump appointee said courts generally only interfere when an agency action is final — while still conceding the federal government’s deferral action to be historically unprecedented.

“Minnesota’s request for a preliminary injunction depends on assuming that predicted future events come to pass,” he wrote. “As a rule, the law does not allow a preliminary injunction to be issued based on assumptions like these. All of this is not to say that Minnesota cannot prevail.”

While not ruling in the state’s favor, Tostrud did acknowledge Minnesota’s reasonable legal concerns regarding the motivations of the Trump administration. Still, the judge pointed out that federal regulations don’t put a cap on how much money can be deferred at once.

State officials, including Minnesota Governor Tim Walz, and Attorney General Keith Ellison, claim the cuts — and other Trump administration actions — are political retribution under the guise of fraud prevention.

“Trump’s attempts to look like he’s fighting fraud only punish the people and families who most need the high-quality, affordable health care that all Minnesotans deserve,” Ellison said in a statement on Mar. 3.

Ellison said the Trump administration is using this deferral tool to withhold funding and evade due process — adding that deferral has never been used to deny funds to a state across entire service areas “as is being done here.”

“Unless the deferral is quickly reversed, the state will be irreparably harmed,” Minnesota says in initial complaint. “The administration has already stated that the deferral will recur every quarter, crippling the state budget.”

While noting the $243 million number is unprecedented — measuring more than 15 times larger than any other deferral the state has faced — Tostrud found lacking evidence to concretely prove the government acted in bad faith by implementing it.

“It is possible the record may support these concerns in the future,” Tostrud wrote. “Today it does not.”

The judge also addressed comments by Vice President JD Vance, who suggested the government had to “turn the screws on them [Minnesota] so that they take this fraud seriously.”

“Administrator Oz and Vice President Vance’s comments concern the possibility of future deferrals and sometimes seem to muddle the regulatory distinctions between deferrals and withholdings,” Tostrud wrote. “Their comments do not support a ‘strong showing of bad faith or improper behavior.’”

Vance — who President Trump said would spearhead a national “war on fraud” during his State of the Union address in February — said Minnesota is handing out “millions and billions” of dollars without confirming that the recipient needs that money.

In its complaint, Minnesota says the loss of funds would force immediate, devastating impacts to services for thousands of residents, including mental health programs and nonemergency medical transportation.

Tosturd found these claims are merely speculative, and do not carry enough weight to support a preliminary injunction before the administrative process of the deferral concludes.

The Trump administration’s effort to withhold Medicaid funding from Minnesota comes after years of fraud investigations in the state regarding Somali-run day care centers, and the massive Covid-19 era Feeding Our Future scandal — controversies that led Walz to drop his reelection bid, albeit still bent on stopping the Trump administration’s attacks on his state.

“Trump is weaponizing the entirety of the federal government to punish blue states like Minnesota,” Walz said in a post on X on Feb. 25. “These cuts will be devastating for veterans, families with young kids, folks with disabilities, and working people across our state.”

Minnesota’s Medicaid payments primarily fund comprehensive health care services for low-income residents, children, pregnant women and the elderly and disabled population. The cuts challenged in the lawsuit amount to roughly 7% of Minnesota’s quarterly Medicaid funding.

The Minnesota Attorney Generals Office and the U.S. Department of Health and Human Services did not immediately respond to requests for comment late Monday.