Judge Lets CMS Withhold $259 Million in Minnesota Medicaid Funds Amid Fraud Crackdown
A federal judge in Minnesota has refused to block the Trump administration’s decision to defer more than $259 million in Medicaid reimbursements to the state, giving CMS and the White House a significant early court win in their new anti-fraud campaign. U.S. District Judge Eric Tostrud, a Trump appointee, issued a 42-page order finding that Minnesota’s lawsuit was premature and that its novel legal theories did not justify a preliminary injunction, allowing CMS Administrator Mehmet Oz to continue demanding case-by-case proof of legitimate claims before releasing money. The deferral follows a state-commissioned review that identified vulnerabilities in 14 'high-risk' Medicaid services and flagged about $1.7 billion as 'potentially improper' over four years, data the administration has seized on as Exhibit A in what Trump and 'fraud czar' Vice President JD Vance call a national war on public-benefits fraud. Democratic Attorney General Keith Ellison alleges the move 'weaponized Medicaid' as political punishment and cites due-process and Administrative Procedure Act violations, but Tostrud, invoking Department of Commerce v. New York, noted that even a political motive would not automatically make the policy illegal. With CMS reportedly eyeing similar deferrals in California, New York and Maine, the ruling sets an early marker for how far Washington can go in using funding leverage to force states into granular documentation and shifts the fraud debate from headlines about scandals like Minnesota’s $250 million Feeding Our Future case into courtroom battles over federal power and state budgets.
📌 Key Facts
- Judge Eric Tostrud declined to grant Minnesota a preliminary injunction blocking a CMS deferral of more than $259 million in Medicaid funds.
- CMS, under Administrator Mehmet Oz, is requiring Minnesota to provide piecemeal evidence that Medicaid reimbursements are legitimate before releasing the money.
- A Minnesota Medicaid review flagged vulnerabilities in 14 'high-risk' services and identified about $1.7 billion as 'potentially improper' over a four-year period.
- Minnesota Attorney General Keith Ellison’s lawsuit claims the Trump administration has 'weaponized Medicaid' against the state, but Tostrud ruled the challenge is currently premature.
- CMS is also considering Medicaid funding deferrals in California, New York and Maine, suggesting similar legal clashes are likely in other states.
📊 Relevant Data
Minnesota has the largest Somali population in the United States, with 64,354 Somalis making up 1.12% of the state's total population.
Somali Population by State 2026 — World Population Review
The Somali population in Minnesota grew significantly due to refugee resettlement starting in the 1990s, driven by the Somali Civil War, with many arriving as refugees and later through family reunification and secondary migration for job opportunities.
How Minnesota became the center of the Somali diaspora — Sahan Journal
In the Feeding Our Future fraud scheme, as of early 2026, out of 79 suspects indicted, 56 had pled guilty, with many defendants being of Somali descent involved in wire fraud and money laundering.
Feeding Our Future — Wikipedia
In Minnesota, Black households have a poverty rate of 20.9%, compared to 7.9% for White households, with median household income of $51,320 for Black households versus $85,697 for White households.
Changes in the public perceptions of poverty during an economic downturn: the case of Southwest Minnesota — Springer Link
U.S. Attorney estimates fraud in Minnesota-run Medicaid services likely exceeds $9 billion, including vulnerabilities in disability programs.
U.S. Attorney: Fraud likely exceeds $9 billion in Minnesota-run Medicaid services — Minnesota Reformer
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