A federal judge has ruled in favor of the Trump administration’s Medicaid funding deferral to Minnesota, marking a temporary legal victory for the White House’s anti-fraud initiative.
Judge Eric Tostrud, a Trump appointee, decided this week that the Centers for Medicare and Medicaid Services (CMS) could withhold more than $259 million in Medicaid funds from the state and demand additional evidence of legitimacy for Medicaid reimbursements before releasing the funds.
The ruling represents a key moment in the Trump administration’s ongoing push against fraud, particularly in the wake of a major welfare fraud scandal in Minnesota that has garnered national attention.
The Lawsuit and Legal Arguments
Judge Tostrud’s decision came after Minnesota filed a lawsuit challenging the deferral of Medicaid funds. Minnesota’s legal team argued that the move was politically motivated and violated the Administrative Procedures Act and constitutional due process rights.
Attorney General Keith Ellison’s office contended that the federal government was “weaponizing Medicaid” against Minnesota as a form of political punishment, highlighting the unprecedented nature of the deferral.
However, Tostrud found that Minnesota’s challenge was premature, noting that the lawsuit was filed too early in the process to warrant immediate judicial intervention. He emphasized that the legal theories presented by Minnesota were “novel” and not supported by existing law.
Anti-Fraud Task Force and Increased Scrutiny
The decision gives a temporary win to the Trump administration’s aggressive anti-fraud campaign, which gained momentum after the state’s high-profile $250 million welfare fraud scandal in 2022.
In March 2025, President Trump announced the formation of a new anti-fraud task force, which was charged with targeting fraud and waste in public benefits programs across multiple states.
As part of this initiative, CMS, under the leadership of Administrator Mehmet Oz, began withholding Medicaid reimbursements to states over potential fraud, rather than waiting for proven instances.
Minnesota is not the only state under scrutiny; CMS is also considering similar deferrals for Medicaid programs in California, New York, and Maine, which could lead to more litigation and further legal challenges.
Minnesota’s Medicaid Fraud Scandal
The Feeding Our Future fraud scandal, which broke in 2022, became a flashpoint in the national debate over public benefits fraud. The scandal involved fraudulent claims for millions of dollars in federal food aid, with key figures indicted and convicted in 2025. Minnesota’s Medicaid program came under increasing scrutiny as investigations into this scandal continued.
A state-commissioned report on the Medicaid program revealed vulnerabilities in 14 “high-risk” Medicaid services, highlighting that $1.7 billion could have been “potentially improper.” This report fueled the broader push from the Trump administration to combat fraud within state Medicaid systems.
The Legal Precedent and Political Considerations
In his ruling, Judge Tostrud cited a 2019 Supreme Court case, Department of Commerce v. New York, which set a precedent for the involvement of political considerations in agency policymaking. Tostrud explained that even if the deferral was influenced by political motives, this did not necessarily make it unlawful. He emphasized that federal agencies, including CMS, are not immune from political influences in their decisions.
“A court may not set aside an agency’s policymaking decision solely because it might have been influenced by political considerations or prompted by an Administration’s priorities,” Tostrud wrote, referencing the Supreme Court’s opinion.
This ruling marks a significant step in the Trump administration’s ongoing efforts to crack down on fraud within public benefits programs. While Minnesota’s lawsuit has been temporarily halted, the broader legal battle over Medicaid funding deferrals is likely far from over.
With other states under scrutiny, additional litigation could arise, leading to more courtroom battles as federal judges weigh in on the administration’s approach to Medicaid oversight.
