Minnesota Sues Trump Admin Over $240 Million in 'Unlawful' Medicaid Cuts

Minnesota has sued the administration of President Donald Trump, accusing federal officials of “unlawfully withholding millions of dollars in Medicaid payments” as part of an escalating dispute over the state’s compliance with federal health program rules.

In January, Centers for Medicare & Medicaid Services (CMS) Administrator Dr. Mehmet Oz announced Minnesota was in “noncompliance” with the Medicaid program and threatened $2 billion in funding cuts, according to a Law&Crime report. Minnesota appealed that decision.

Later in February, CMS “deferred” $259.5 million from the state, with over $243 million based on “unsupported or potentially fraudulent Medicaid claims” and the remainder based on “claims involving individuals lacking a satisfactory immigration status”.

In the latest lawsuit, the plaintiffs claimed CMS is trying to perform an end-run around the administrative process by using the deferral process after Minnesota appealed the earlier noncompliance effort.

“Deferral has never been used to categorically deny funds to a state across entire service areas, as is being done here. 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 it is entitled to prove that no withholding is warranted,” the lawsuit claims.

The lawsuit states that just months earlier, the state and CMS “worked cooperatively” to administer the in-state Medicaid program.

“To the best of [Minnesota’s] knowledge, information, and belief, CMS has never determined [Minnesota] in substantial noncompliance with Medicaid regulations; throughout its working relationship, [Minnesota] proactively identified and discussed issues and vulnerabilities with CMS, and when CMS raised similar issues, the parties worked together on solutions,” the complaint reads.

“Recently this changed,” the lawsuit notes.

Even after the January noncompliance determination, the state was intent on working with federal authorities, the lawsuit claimed. “[Minnesota] has also asked CMS to tell it how it is noncompliant with federal statutes or regulations, given the vagueness of the January 6, 2026, notice. [Minnesota] asked for an amended notice, but CMS’s hearing officer denied the request…At the parties’ February 25, 2026, meeting, CMS told [Minnesota] that it continued to have no information for Minnesota about its revised corrective action plan,” the lawsuit claimed.

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, Minnesota Attorney General Keith Ellison, a Democratic-Farmer-Labor Party member, said in a statement this week. “These cuts are the latest in a long series of efforts to go around the law to punish Minnesotans.”