A federal judge in St. Paul heard arguments Thursday from the state of Minnesota and the Trump administration over a halt of $259 million in Medicaid payments to the state.
The funding halt, announced two weeks ago by Vice President JD Vance and the U.S. Centers for Medicare & Medicaid Services Director Mehmet Oz, is the latest federal measure attempting to crack down on alleged fraud in state programs.
Attorney General Keith Ellison sued to block the Trump administration from withholding most of that money. Judge Eric Tostrud heard arguments on that request in court Wednesday.
Minnesota’s Assistant Attorney General Nate Brennaman said in court that the funding halt is part of a federal “reckoning and retribution” against Minnesota, quoting a January social media post by President Donald Trump.
“Everything screams that this is politically driven,” Brennaman said.
That echoed statements from Minnesota Gov. Tim Walz, who also criticized the move as politically motivated. Medicaid providers and disability advocates also said the funding halt could hurt patients. The funding goes toward health care for low-income residents and programs supporting disabled Minnesotans.
In court Thursday, Brennaman noted that $243 million included in this effort to halt funding is also part of a separate federal funding freeze. It was included in a bigger funding halt the feds announced in January.
Brennaman argued that the federal government cannot try to block that funding through two different channels at once.
In the previous case, the federal government asked the state to come up with a corrective action plan to demonstrate how it will prevent future fraud. The state has submitted that plan, but Brennaman said the federal government has not been collaborating with the state on it. He said federal staff have told them that they will not approve the plan as-is, but have not asked them to make any specific changes to it, either.
“We are completely stuck as a state,” Brennaman said. “They will not deal with us. They will not help alleviate fraud.”
Judge Tostrud asked Deputy General Counsel for the U.S. Department of Health and Human Services Matthew Zorn — representing the federal government in this case — what the federal government wants in the corrective action plan that is not there yet.
“I wish I could tell you,” Zorn said. “I don’t think it’s relevant to this case.”
Zorn argued that there is nothing in federal laws and regulations preventing the government from pursuing two cases at once to halt the same sum of money. But he acknowledged that it is “unprecedented.” He said it’s a necessary measure to address fraud in the state.
Zorn’s appearance caused confusion in the courtroom at the start of the hearing. Judge Tostrud said Zorn’s motion to be admitted in court to represent the federal government was only submitted Thursday morning, soon before the hearing began. It had not yet been approved when the hearing started.
In federal court, attorneys are required to file a notice that they intend to appear and get court approval before arguing in a hearing.
“I don’t know that I’ve ever had someone argue who isn’t admitted,” Tostrud said.
Zorn said he had issues logging into the court’s online system. Tostrud allowed him to argue in court anyway.
Tostrud said he will issue a ruling “as expeditiously as possible.”
