Minnesota sues Trump over $243 million in withheld Medicaid funding

MINNEAPOLIS (CN) — Minnesota officials sued the Trump administration late Monday over its decision to withhold $243 million in Medicaid funding from the state, warning such funding cuts could have devastating impacts on low-income families.

State officials asked a Minnesota federal court to issue a temporary restraining order to block the federal government’s attempted withholding — claiming the funding halt is just another instance of political retribution against the state made under the guise of combating fraud.

“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,” Minnesota Attorney General Keith Ellison said in a statement Monday.

The state is bringing constitutional and Administrative Procedure Act charges against Dr. Mehmet Oz, administrator for the Centers for Medicare and Medicaid Services, the U.S. Department of Health and Human Services, and other Trump administration officials and agencies.

The federal government has vowed to hold Minnesota officials accountable and weed out fraud that has “run rampant” in state programs.

While announcing the Medicaid funding halt last week, Vice President JD Vance said he felt “quite confident that we have the authority to do this,” and that the government had to “turn the screws on them [Minnesota] a little bit so they take this fraud seriously.”

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

Minnesota claims the federal government failed to provide the state with details about the funding halt — in violation of federal law — and that the state would be required to significantly cut health care and other government services for low-income families if the cuts take effect.

Ellison said the Trump administration is using an auditing tool known as deferral 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 said in the complaint. “The administration has already stated that the deferral will recur every quarter, crippling the state budget.”

Minnesota said the Trump administration’s decision to defer $243 million came after it expressed “impatience” over its inability to withhold over $2 billion annually — announced on Jan. 6 — based on assertions of “noncompliance.”

The Trump administration’s effort comes after serious claims of fraud in Minnesota involving Somali-run day care centers, and the massive Feeding Our Future scandal from the Covid-19 pandemic.

Nearly 100 people have been charged in connection to fraud in Minnesota’s state programs that resulted in hundreds of millions of stolen dollars — a scandal that led to Minnesota Governor Tim Walz dropping his reelection bid.

Minnesota officials maintain the federal government is engaging in a campaign of political retribution against the state — holding that the weaponization of Medicaid is yet another example.

“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.”

Walz unveiled a comprehensive antifraud package for Minnesota last week in an attempt to calm the persistent backlash over high-profile fraud cases in the state.

“Any dollar of state money, especially those being used for programs to enhance people’s lives, if that goes to the wrong place, is misspent, or in the case of this, criminals are stealing it, we need to do everything possible to prosecute that,” Walz said in a press conference Thursday.

State officials insist they are taking fraud concerns in Minnesota seriously, and are working to solve problems in social service programs — but that the Trump administration’s actions are impeding those efforts.

The funding cut follows the Trump administration’s previous attempts to withhold funding in Minnesota, including actions against food stamps in January, and the attempt to freeze billions in child care subsidies and social services last month.

Federal judges blocked both attempts.

Minnesota’s Medicaid payments primarily fund comprehensive health care services for low-income residents, children, pregnant women and the elderly and disabled population. Major expenditures include long-term care, nursing facilities and mental health services.

The cuts challenged in Monday’s lawsuit amount to roughly 7% of Minnesota’s quarterly Medicaid funding.