Minnesota filed a federal lawsuit Monday against the Trump administration, accusing federal health officials of illegally withholding $243 million in Medicaid payments from the state.
Attorney General Keith Ellison and the Minnesota Department of Human Services sued the Centers for Medicare and Medicaid Services (CMS) and the U.S. Department of Health and Human Services (HHS), arguing the funding freeze violates federal law.
The state is seeking a temporary restraining order to immediately block the action.
The dispute stems from a January notice in which the Trump administration said it would withhold more than $2 billion annually from Minnesota’s Medicaid program over what it described as ‘noncompliance’ with federal regulations, specifically, alleged failures to ‘adequately identify, prevent, and address fraud in its Medicaid program.’
State officials say they have not been told specifically how Minnesota is out of compliance or what changes the administration wants to see.
The lawsuit follows a Feb. 25 announcement from CMS that it was deferring roughly $260 million in quarterly federal Medicaid funding to Minnesota, including about $243 million tied to ‘unsupported or potentially fraudulent’ claims.
CMS said the deferral is part of a broader fraud crackdown and cited unusually high spending and rapid growth in personal care services, home- and community-based services, and other practitioner services.
‘For decades, Medicare fraud has drained billions from American taxpayers — that ends now,’ HHS Secretary Robert F. Kennedy Jr. said in a statement. ‘We are replacing the old ‘pay and chase’ model with a real-time ‘detect and deploy’ strategy, using advanced AI tools to identify fraud instantly and stop improper payments before they go out the door.’
Minnesota officials contend the move improperly uses a funding ‘deferral’ mechanism and amounts to denying the state due process before any formal finding of noncompliance.
The threatened cuts represent about 7% of Minnesota’s quarterly Medicaid funding and could force reductions in healthcare services for low-income residents, according to Ellison’s office.
‘Trump’s M.O. is to cut first, no matter what the law says or who gets hurt, and ask questions later, if at all,’ the attorney general said. ‘These cuts are the latest in a long series of efforts to go around the law to punish Minnesotans — but just as we fought back and won when they illegally tried to cut funding for childcare, hungry families and our schools, we are suing them again today to make them follow the law.’