Minnesota filed a lawsuit against CMS and HHS, as well as their respective leaders, Mehmet Oz, MD, and Robert F. Kennedy Jr., regarding $243.8 million in deferred Medicaid funds, according to March 2 documents filed through the U.S. District Court for Minnesota.
The state is claiming Fifth Amendment due process violations, Administrative Procedure Act violations, Spending Clause violations and ultra vires (beyond authority) actions.
In recent months, Minnesota has faced accusations of Medicaid fraud from the federal government. CMS recently froze about $260 million in Medicaid funds, focusing on personal care, home and community-based care, and other practitioner services. Of that total, CMS said $15.4 million implicated claims for people without satisfactory immigration status. The March lawsuit addresses the remaining amount, relating to possible fraud. The lawsuit also called out the $2 billion the agency said could be withheld annually as a result of “noncompliance.”
“By immediately denying Minnesota substantial Medicaid dollars for the very Medicaid services for which it is challenging the federal government’s Jan. 6 claim of ‘noncompliance,’ the deferral effectively denies Minnesota the due process it is entitled to prove that no withholding is warranted,” the complaint said.
Requested reliefs include vacating the deferral notice, an emergency hearing for a temporary restraining order, injunctive relief preventing the immediate withholding of $243.8 million, a declaration confirming the federal government’s unlawful activity, attorney fee coverage and other appropriate measures. Minnesota also requested a jury trial.
The complaint said CMS reported Minnesota had an error payment rate of 2.2% in both 2025 and 2022, well below the 6.1% and 15.6% national averages for each year, respectively.
Gov. Tim Walz called the Trump administration’s efforts “a campaign of retribution,” adding the cuts would harm veterans, families, working individuals and those with disabilities. The lawsuit echoed that sentiment, saying “the federal government has instead weaponized Medicaid against Minnesota as political punishment.” In January, Mr. Walz said he would not run for a third term as he focuses on fraud prevention.
Optum has been carrying out an audit in the state, as well, finding more than $52.3 million in direct recoveries due to policy violations across high-risk services.
CMS said it does not comment on litigation, and HHS had no comment.
