A federal judge has rejected the Minnesota government’s request to stop the Trump administration from halting more than $243 million in Medicaid funds from flowing to the fraud-fraught state pending an administrative review.
Judge Eric Tostrud, an appointee of President Donald Trump, denied the state’s motions for a temporary restraining order and an expedited preliminary injunction on Monday, ruling that Minnesota officials prematurely filed the lawsuit before any Medicaid cuts were finalized.
Minnesota Attorney General Keith Ellison, a Democrat, sued the Centers for Medicare and Medicaid Services in early March after the Trump administration paused the state’s Medicaid payments following rampant theft of Medicaid dollars from the state-administered social services programs.
CMS had initiated an administrative process through which Minnesota submits documentation showing that the deferred amounts would be paid out to legitimate reimbursement claims. During the back-and-forth verification process, Minnesota does not have access to these funds.
Ellison brought the case, Minnesota v. Oz, to require CMS to restore Minnesota’s Medicaid funding in the interim, claiming that the funding freeze is an act of political retribution against the state under the pretense of fraud prevention.
Tostrud ruled this week that a federal court ordinarily only intervenes when an agency’s action is final and noted that even “Minnesota has recognized it has a serious fraud problem.”
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“Minnesota’s request for a preliminary injunction depends on assuming that predicted future events come to pass,” Tostrud wrote. “As a rule, the law does not allow a preliminary injunction to be issued based on assumptions like these.”
The deferral proceedings that Minnesota is challenging “just started,” Tostrud said, and have not reached a determination on whether the flagged funds can or cannot be disbursed.
CMS’s Feb. 25 deferral notice simply identified questionable billing from certain care providers and asked that Minnesota accordingly provide documentation to support the disbursement of the funds in question.
“CMS, in other words, identified concerns and requested documents,” Tostrud continued. “It did not express a conclusion that these claims or any part of them would be disallowed.”
Tostrud, however, acknowledged that “Minnesota credibly complains that the federal government’s deferral is historically unprecedented in its size and timing,” though he concluded that the deferral likely complies with federal regulations.
In its complaint, Minnesota asserted that deferrals typically serve as an auditing tool focused on a specific claim, “not … wide swaths of Medicaid funding,” and that it was unusual for CMS to withhold and defer funding at the same time, especially with regard to a single state.
“Unless the deferral is quickly reversed, the state will be irreparably harmed,” Ellison’s office claimed. “The administration has already stated that the deferral will recur every quarter, crippling the state budget.”
Tostrud countered that federal regulations do not limit the amount of money that can be deferred at once, nor do they prohibit CMS from pursuing deferrals and payment pauses concurrently against one state.
The judge also addressed previous remarks from Vice President JD Vance, the Trump administration’s “fraud czar,” who said the federal government had to “turn the screws on [Minnesota] so that they take this fraud seriously.”
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Tostrud similarly examined CMS Administrator Mehmet Oz’s announcement of the deferral.
“This quarter-billion-dollar deferment is hopefully going to get on the radar screen for the state of Minnesota and make sure they are responsive to our requests,” Oz stated at the time.
In its initial filing, Minnesota argued that Oz and Vance suggested that the deferral, which is intended to be backward-looking, took into account future funding considerations: “Defendant Oz and Vice President Vance made clear that the only way for Plaintiffs to recoup the withheld money is for [the Minnesota Department of Human Services] to act on a corrective action plan that meets their approval.”
Tostrud said Oz’s and Vance’s comments “concern the possibility of future deferrals and sometimes seem to muddle the regulatory distinctions between deferrals and withholdings.” However, he said their statements do not indicate that the Trump administration acted in bad faith or is improperly trying to compel compliance.
“All of this is not to say that Minnesota cannot prevail,” Tostrud added. “Minnesota has identified reasonable legal concerns regarding the deferral’s nature and scope and the federal government’s motivations for initiating it. It is possible the record may support these concerns in the future. Today it does not.”