Minnesota Sues Federal Government to Block $243M Medicaid Deferral, Jeopardizing Beltrami County

Attorney General Keith Ellison and the Minnesota Department of Human Services filed a federal lawsuit in Minnesota on March 2, 2026, asking a court to block a Centers for Medicare and Medicaid Services and HHS deferral that state officials say would pause roughly $243 million in Medicaid payments and jeopardize health services in Beltrami County. The complaint seeks a temporary restraining order to halt the deferral while the state challenges the federal action.

The $243 million figure is part of a broader quarterly deferral the federal government announced on February 25, 2026 of about $259 million, with the January 6, 2026 noncompliance notice flagging more than $2 billion in annual Medicaid payments for potential withholding. Minnesota DHS estimates the $243 million pause equals about 7 percent of the state’s quarterly federal Medicaid funding. Rollcall reports more than 1.1 million Minnesotans are enrolled in Medicaid, including 42 percent of the state’s children, and that the federal government pays for more than half of Minnesota’s Medicaid costs.

Minnesota’s lawsuit grounds its challenge on process and statutory claims, alleging CMS moved forward with the deferral before completing the administrative review tied to the January noncompliance notice. The complaint asserts the deferral mechanism has been used in an unprecedented manner, saying the tool “has never been used to categorically deny funds to a state across entire service areas, as is being done here.” The state warns, as the suit paraphrases, “Unless the deferral is quickly reversed, the state will be irreparably harmed.” AG Ellison framed the filing politically and legally: “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.”

Federal officials have defended the deferral as part of a fraud crackdown intended to “prevent payment of questionable claims while further investigation was completed” and to target “unsupported or potentially fraudulent” claims. CMS materials and reporting cite “unusually high spending and rapid growth” in personal care services, home- and community-based services, and other practitioner services. KDHL reported the White House described fraud in Minnesota as “pervasive and disturbing,” and independent investigators have estimated potential schemes in Minnesota between $9 billion and $20 billion.

State officials say the pause could force cuts to services or require lawmakers to shift money from other budget areas; WDIO noted a family of four may qualify for Medical Assistance with income at or below $42,759. For Beltrami County, the targeted service areas—personal care and home- and community-based services—are commonly used by local residents and providers, meaning payment interruptions would reverberate through county home health and long-term care networks.

Next steps include the federal court’s decision on the TRO, the pending administrative appeal that began after the Jan. 6 notice, and scheduled congressional activity: AG Ellison and Gov. Tim Walz were called to testify before the House Oversight and Government Reform Committee. Watch for the court docket entries, the Jan. 6 noncompliance notice, the Feb. 25 deferral release, and testimony from state officials to determine whether the $243 million will be restored and how quickly payments to local providers resume.