Minnesota Says Trump Administration ‘Weaponized’ Medicaid Funds

Minnesota sued the Trump administration for trying to withholding hundreds of millions of dollars in Medicaid payments, alleging the government “weaponized” the program against the state as “political punishment.”

The lawsuit, filed in the US District Court for the District of Minnesota, says that the Trump administration illegally deferred over $243 million in Medicaid dollars without providing grounds for the “noncompliance” with federal regulations that triggered the move.

The litigation is the latest step in an ongoing battle between the state and federal government that has touched on immigration, fraud allegations, and political tensions between President Donald Trump and the state’s Democratic governor, Tim Walz.

“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,” state attorney general Keith Ellison said in a statement dated Monday. “These cuts are the latest in a long series of efforts to go around the law to punish Minnesotans.”

Both Walz and Ellison are set to testify Wednesday to the Republican-led House Oversight and Government Reform Committee, which is alleging the state has misused federal funds.

In January, the Trump administration announced that over $2 billion would be withheld from Minnesota on an annual basis. The state in its lawsuit claimed it had appealed that finding, though has yet to hear how it was noncompliant or what remedies it can pursue to resolve the situation.

The Trump administration last week deferred $243 million from Minnesota, a move the state claims was undertaken as the federal government was “impatient that it cannot withhold the $2 billion until Minnesota is provided a hearing and other due process.”

Deferral is a maneuver for questioning claims when there’s insufficient supporting documentation to show paying Medicaid providers is unwarranted. The auditing tool, however, “has never been used to categorically deny funds to a state across entire service areas, as is being done here,” the lawsuit said.

“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 said.

Minnesota is asking the court for preliminary injunctive relief to stop the Trump administration from immediately withholding the $243 million.

The case is Minnesota v. Oz, D. Minn., No. 0:26-cv-01701, Complaint 3/2/26.