The state accused the government of weaponizing the Medicaid program as ‘political punishment.’
Minnesota filed a lawsuit on March 2 to block the federal government from withholding $243 million in Medicaid funds, saying the freeze could lead to potential cuts in medical services for low-income individuals.
The Centers for Medicare and Medicaid Services (CMS) last month temporarily deferred $259 million in Medicaid funds to Minnesota over alleged fraud in the state’s program, according to the court filing.
The lawsuit, filed by Minnesota Attorney General Keith Ellison and the state’s Human Services Department, asked the court to block the withholding of $243 million of those funds that were tied to 14 services the government identified as “high-risk” and subject to “noncompliance action.”
“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,” Ellison said in a statement.
The suit called the funding freeze unlawful, alleging that the government used the program as “political punishment” against the state, citing its previous attempts to withhold other funding from the state, including funds tied to the Supplemental Nutrition Assistance Program (SNAP).
According to the lawsuit, the federal government announced in January that it would freeze more than $2 billion in annual Medicaid funding to Minnesota over allegations of noncompliance.
The state appealed but said the federal government has not clarified the alleged conduct it deemed noncompliant or how Minnesota can remedy the issue.
“Impatient that it cannot withhold the $2 billion until Minnesota is provided a hearing and other due process, the administration ‘deferred’ $243 million from the state on February 25, 2026,” it stated.
The lawsuit is seeking a temporary restraining order to block the funding freeze, saying the withholding of funds would affect more than 1 million Minnesota residents enrolled in Medicaid.
“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 lawsuit names the Department of Health and Human Services and the Centers for Medicare and Medicaid Services, as well as Dr. Mehmet Oz, in his official capacity as CMS administrator, and Robert F. Kennedy Jr., in his official capacity as health secretary.
CMS said it does not comment on litigation.
