REGIONAL — Minnesota Attorney General Keith Ellison and the Minnesota Department of Human Services, or DHS, filed a federal lawsuit this week that seeks to block efforts by the Trump administration to cut off the state’s Medicaid funding over unspecified claims of non-compliance. That lawsuit includes a request for a temporary injunction to restore the funding while the case moves forward.
Last week, Vice President J.D. Vance and Mehmet Oz, the director of the Centers for Medicare and Medicaid Services, or CMS, announced they would be suspending $259 million in Medicaid funding to Minnesota each quarter until state officials bring the state’s oversight over the program into compliance.
State officials have blasted that announcement as political punishment against a state that has opposed the administration’s policies. In their lawsuit filed this week, state officials allege the administration has “weaponized” the Medicaid program against the state and that the administration’s actions have more to do with political motivations than actual concern about compliance with the payment rules established for the Medicaid program.
That claim is bolstered by a report issued by the CMS just last month, which found that Minnesota has long performed above the national average in terms of compliance with federal Medicaid funding rules and that the state continued to do so in 2025. That report found that payments issued by the state under the Medicaid program met federal requirements 97.8 percent of the time. That was above the national rolling average among the 50 states of approximately 94 percent compliance.
While the state did experience a significant and wide-ranging fraud by the Feeding Our Future organization several years ago, COVID relief funds, rather than Medicaid dollars, were involved in that case.
While the state’s handling of some Medicaid-funded programs has come under intense scrutiny, the number of cases charged to date involves about 15 defendants who are alleged to have stolen about $34 million, or a tiny fraction of the numbers being touted by GOP politicians. It’s also far less than the amount of Medicaid fraud reported found in many other states in recent years.
Federal investigators have claimed that Medicaid fraud involving far larger amounts, as much as several billion dollars, is possible given perceived weaknesses in oversight of just over a dozen separate programs, but no evidence of such amounts has been made public to date. Those federal investigations are in doubt at this point given that half of the U.S. attorneys in the state have left the Justice Department over the administration’s mishandling of the federal ICE surge in Minnesota.

Medicaid cuts could have serious
ramifications
State officials say the administration’s efforts to cut off federal funds to Minnesota will have dire consequences for the state’s budget as well as for Minnesotans who depend on the Medicaid program for a wide range of health services.
According to the lawsuit, approximately 1.164 million Minnesotans are enrolled in Medicaid, including 42 percent of the state’s children. The federal government provides 54 percent of the funding for the program, with the state providing the rest. The lawsuit states that the loss of the federal portion of funding would force the state into a budget crisis and could negatively impact Medicaid-funded services for as many as a million Minnesotans.
“Medicaid plays a critical role as the single largest funder of mental health care,” in the state,” said Marcus Schmit, with the National Association on Mental Illness, or NAMI. Schmit that those needing mental health services will now face longer wait lists and fewer providers. He predicted it would also increase the pressure on emergency rooms, as a treatment place of last resort, as well as police departments that are often called when individuals experience mental health crises. “This is a manufactured crisis by the federal government, and it needs to end now,” he added.

Cutoff seen as an attempt to deny the state due process
The lawsuit notes that the Trump administration announced in early January that it would be withholding $2 billion in Medicaid funding for “noncompliance.” But under that announcement, the state had a legal right to appeal, which it did. That appeal includes a right to a hearing and other due process, according to the lawsuit, but no hearing was ever provided and the administration has failed to offer the state any indication of how it is failing to comply with payment rules.
Rather than provide the state due process, the lawsuit alleges that the administration went another route, claiming it would “defer” $243 million each quarter, which it did on Feb. 25. As the lawsuit states, that deferral is an auditing tool that is employed to question “a claim or a portion of a claim” for which there is a lack of supporting documentation. “Deferral has never been used to categorically deny funds to a state across the entire service areas, as is being done here.”
The lawsuit alleges that the Trump administration is using the deferral as a way to deny the state its opportunity to prove that the funding cutoff is unwarranted. The lawsuit notes that state and CMS officials have worked together cooperatively for years and that the federal agency never provided any indication that the state was out of compliance.
John Connolly, deputy director of DHS, said during a Tuesday press conference that the state has been “working intensely” for more than a year and a half on addressing oversight deficiencies in its programs in an effort to reduce or eliminate fraud. He said the department has provided the Trump administration with increasingly detailed reports on those efforts and the new policies enacted to address concerns. Rather than provide feedback on those steps, he said, the administration has opted to cut off payments.
In a Feb. 25 letter announcing the deferral, Dorothy Ferguson, Director of CMS’s Division of Financial Operations West, cited $243 million in expenditures from programs previously identified as “vulnerable” to fraud or abuse, but provided no finding of fraud. Instead, the letter requests additional verification of some of the expenses.
Connolly said the department has been working aggressively to provide the additional verification, but he noted some frustration that CMS officials constantly ask for more information but fail to respond or acknowledge the information the state has provided as well as the work the state has completed over the past year and a half to improve its oversight of its health care programs. “We have given them everything they have asked for,” he said.
The Timberjay reached out to the CMS for response to this story but received no reply.