Minnesota sues over withheld Medicaid funds

Minnesota on Monday sued the Trump administration for withholding hundreds of millions in Medicaid funds to the state, alleging it is a “political punishment” that will only serve to harm the more than 1 million Minnesotans who are enrolled in the program.

Last week, Vice President Vance and Centers for Medicare and Medicaid Services Administrator Mehmet Oz announced a six-month moratorium on $259 million in Medicaid funding to Minnesota, pointing to accusations of fraud.

The lawsuit said the federal government had “weaponized Medicaid against Minnesota as political punishment,” despite it being a cooperative program with the state.

“Unless the deferral is quickly reversed, the state will be irreparably harmed. The Administration has already stated that the deferral will recur every quarter, crippling the state budget,” it stated.

“The immediate withholding of federal funding, especially if funding is delayed or denied for a protracted period or assuming Dr. Oz follows through with his promise to defer every quarter, would require Minnesota Management and Budget and the Department of Human Services to identify potential cuts to services absent a legislative appropriation that covers this shortfall.”

Minnesota has been rocked by a Medicaid fraud scandal, leading Gov. Tim Walz (D) to drop his reelection bid. About half of the $18 billion spent across 14 Medicaid programs in the state is believed to have been likely stolen.

With most of those arrested in connection to the scandal being Somali Americans, the Trump administration has targeted the community as a show of force on immigration.

When announcing the move, Vance said it was to “ensure that the state of Minnesota takes its obligation seriously to be good stewards of the American people’s tax money.”

The lawsuit noted that while national rates of payment error were 6.2 percent in 2026, Minnesota’s payment error rate was 2.2 percent that same year. It also noted that President Trump wrote on social media in January that he would bring “reckoning and retribution” to the state.

The same day the lawsuit was filed, Minnesota also filed a request for a temporary restraining order on both Oz and Health and Human Services Secretary Robert F. Kennedy Jr. to bar them from withholding the funds in question.

The deferral in funding lacks a “specificity” that would allow Minnesota to appeal the move, the suit stated, arguing it is an “end-run” around the hearing process in an ongoing noncompliance case the state is involved in with the federal government.

“The administrative process provides no avenue to Minnesota for relief,” stated the suit. “If this Court forces Minnesota to go through the administrative process, Minnesota will not be able to effectively challenge these improper and arbitrary withholdings in federal court for many months, or even years.”

Minnesota asked the court to vacate the federal government’s deferral of funds and block it from deferring the money again. It also asked for an emergency hearing on the state’s motion for a temporary restraining order on both Oz and Kennedy.

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