Minnesota has filed a federal lawsuit alleging the Trump administration is unlawfully withholding over $259 million in Medicaid funds as political retribution following CMS’s January 2026 noncompliance declaration and $2 billion cut threat. The state claims this “deferral”—$243 million tied to allegedly fraudulent claims and the rest to immigration status issues—bypasses due process after Minnesota’s appeal and corrective action efforts.
Dispute Background
CMS Administrator Dr. Mehmet Oz cited vulnerabilities in 14 high-risk Medicaid service areas amid federal-local tensions over immigration raids and Twin Cities childcare fraud. President Trump’s Truth Social post vowing a “reckoning and retribution” for $19 billion in purported theft is cited as evidence of politicization, shifting from prior cooperative relations.
Legal Claims
The 22-page complaint accuses violations of the Administrative Procedure Act (APA) for vague notices lacking specific claim details, rendering them “arbitrary and capricious”; procedural due process denial; spending clause breaches; and ultra vires actions. Minnesota argues deferral is misapplied as a broad penalty tool, not targeted auditing, crippling quarterly budgets.
State Response
Attorney General Keith Ellison condemned the moves as lawless punishment, demanding withheld funds be restored. The suit seeks judicial declaration and invalidation amid stalled CMS feedback on fixes.
