Minnesota Attorney General Keith Ellison and the Minnesota Department of Human Services (DHS) have filed a federal lawsuit against the Centers for Medicare and Medicaid Services (CMS) and the U.S. Department of Health and Human Services. The lawsuit challenges the federal government’s decision to withhold $243 million in Medicaid payments to Minnesota, an action state officials say is unlawful.
Medicaid, referred to as Medical Assistance in Minnesota, provides health insurance coverage to more than one million residents who cannot afford private insurance. A family of four may currently qualify if their income is at or below $42,759.
Attorney General Ellison criticized the move by federal officials, stating: “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.”
He added: “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.”
John Connolly, deputy commissioner of DHS and state Medicaid director said: “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. It is extremely concerning to us given this could have a drastic and devastating impacts on Minnesotans who rely on our health care system.”
According to state officials, on January 6, 2026, federal authorities notified Minnesota that over $2 billion per year would be withheld due to alleged “noncompliance” with Medicaid regulations but did not specify what changes were required for compliance. After Minnesota appealed this notice—an action that triggers an administrative process—the CMS agreed on January 20th that it would provide relevant documents within 45 days; however last week requested an additional 45-day extension citing difficulties obtaining documents from senior leadership.
Before any hearing was scheduled regarding these claims of noncompliance or documentation issues raised by CMS’s audit tool known as deferral—which typically reviews individual claims rather than entire service areas—the Trump administration announced on February 25th it would immediately withhold $259 million in Medicaid payments owed to Minnesota. Of this amount about $243 million targets service areas also affected by earlier withholding announcements.
State leaders say this approach marks a significant departure from standard practice because such large-scale deferrals have never previously been used across whole service categories within states’ programs. The February 25th deferral alone exceeds past instances issued against Minnesota by more than fifteen times.
In their legal filing Ellison and DHS contend that withholding these funds violates due process rights under the Fifth Amendment as well as provisions within both administrative law statutes prohibiting arbitrary actions by federal agencies—and constitutional limits governing how Congress allocates spending authority.
The potential reduction represents about seven percent of Minnesota’s quarterly Medicaid budget; if allowed it could force substantial reductions in medical services for low-income residents or other government programs.
For further details visit the Office of Minnesota Attorney General Keith Ellison.
