Minnesota sues Trump Administration for illegally withholding $243 million in Medicaid payments
Over 1 million Minnesotans rely on Medicaid for their health insurance
March 2, 2026 (SAINT PAUL) — Today, Minnesota Attorney General Keith Ellison and the Minnesota Department of Human Services (DHS) filed a federal lawsuit against the Centers for Medicare and Medicaid Services and the U.S. Department of Health and Human Services for illegally attempting to withhold $243 million in Medicaid payments from the state of Minnesota. Attorney General Ellison and DHS will also be requesting that the court issue a temporary restraining order to immediately block this unlawful action.
Medicaid, known as Medical Assistance in Minnesota, provides health insurance for more than one million Minnesotans who would not otherwise be able to afford it. Currently, a family of four may qualify for Medical Assistance if their income is at or under $42,759.
“The Trump Administration’s M.O. is to cut first, no matter what the law says or who gets hurt, and ask questions later, if at all. 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,” Attorney General Ellison said.
“My office has a strong track record of success in fighting Medicaid fraud: we’ve won more than 300 convictions and $80 million in judgments and restitution since I’ve served as Attorney General, and I’ve asked the Legislature for more tools and more resources to hold more fraudsters accountable. Fighting fraud should be bipartisan but the Trump Administration not only hasn’t helped the fight against fraud, they’ve actually harmed it. Trump's attempts to look like he's fighting fraud only punish the people and families who most need the high-quality, affordable healthcare that all Minnesotans deserve. As long as I am attorney general, I will do everything in my power to defend our tax dollars, both from fraudsters and from the Trump administration’s cruelty,” Attorney General Ellison added.
“The decision by federal officials to defer funding from Minnesota’s Medicaid program ignores the massive effort and resources we are already directing to identifying and addressing fraud – most of which are known to, or even directed by, CMS,” said John Connolly, Minnesota Department of Human Services deputy commissioner and state Medicaid director. “It is extremely concerning to us given this could have a drastic and devastating impacts on Minnesotans who rely on our health care system.”
Background
This latest attack on Minnesota’s Medicaid program began on January 6, 2026, when the Trump Administration announced that more than $2 billion annually would be withheld from Minnesota’s Medicaid funding based on vague assertions of Minnesota’s “noncompliance” with Medicaid regulations. Despite asking, Minnesota has not yet been told how it is noncompliant or what changes the Trump administration wants to see.
Minnesota appealed the noncompliance notice, which started an administrative proceeding process that is required to be completed before that $2 billion cut can lawfully be made. On January 20, 2026, CMS promised it would provide certain documents necessary for the proceeding within 45 days, yet last week, CMS requested a 45-day extension to provide those documents to DHS. According to CMS, they have been unable to obtain the documents from senior leadership. As such, no hearing has yet been scheduled on the noncompliance notice.
Clearly impatient with its own slow pace in the administrative process, the Trump administration then announced on February 25, 2026 that they would be withholding $259 million in Medicaid payments owed to Minnesota. Of that $259 million being withheld, approximately $243 million targets the same Medicaid service areas for which the Trump Administration announced it was withholding on January 6.
The Trump administration is using an auditing tool known as deferral to attempt to withhold the funding that is the subject of today’s lawsuit. Deferral is a tool used to question individual claims that lack supporting documentation justifying the claim. To DHS’s knowledge, deferrals have never been used to categorically deny funds to a state across entire service areas, as is being done here. The unprecedented February 25 deferral is more than 15 times larger than any past deferral Minnesota has been issued. By immediately denying Minnesota substantial Medicaid dollars for the very Medicaid services for which it is challenging the federal government’s January 6 claim of “noncompliance,” the deferral effectively denies Minnesota the due process, allowing CMS to improperly withhold funds before proving at a hearing that Minnesota is, in fact, noncompliant with the law.
In their lawsuit, Attorney General Ellison and DHS argue that the threatened cut violates the right to due process contained in the Fifth Amendment, as well as the Administrative Procedures Act’s prohibition against arbitrary and capricious actions by federal agencies and the Constitution’s spending clause.
The threatened cuts challenged in today’s lawsuit amount to roughly 7% of Minnesota’s quarterly Medicaid funding. If these cuts are allowed to take effect, Minnesota could be required to significantly scale back healthcare services for low-income families across the state or other government services.
