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Ellison pushed back hard, filing the case—Minnesota v. Oz—in an attempt to compel CMS to release the funds while the review continues. He argued that the freeze amounts to political retaliation disguised as anti-fraud enforcement.
But Judge Tostrud wasn’t persuaded. He emphasized that federal courts typically intervene only after an agency has made a final determination—not while an internal review is still underway. In doing so, he pointed to a key admission from Minnesota itself.
“Minnesota has recognized it has a serious fraud problem,” Tostrud noted.
The judge further explained that Minnesota’s legal argument relied too heavily on speculation about what might happen next rather than what has already occurred.
“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.”
According to the court, the deferral process Minnesota is challenging is still in its early stages and has not yet determined whether the disputed funds will ultimately be approved or denied.
Tostrud clarified that CMS’s February 25 notice did not accuse the state of wrongdoing outright. Instead, it flagged questionable billing practices from certain providers and requested documentation to justify releasing the funds.
“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.”
Still, the judge acknowledged Minnesota’s complaint that the scale and timing of the funding deferral are unusual. He noted that such a large and sudden pause in funding is “historically unprecedented,” though he ultimately concluded that the move likely falls within federal regulatory authority.
Minnesota officials argued in their complaint that deferrals are typically used as a narrow auditing tool focused on individual claims—not broad categories of funding. They also claimed it was highly unusual for CMS to both withhold and defer payments simultaneously, especially targeting a single state.
Ellison’s office warned of dire consequences if the funding freeze continues.
“Unless the deferral is quickly reversed, the state will be irreparably harmed,” the complaint stated. “The administration has already stated that the deferral will recur every quarter, crippling the state budget.”
However, Tostrud found that federal regulations do not impose strict limits on the size of deferrals or prevent CMS from combining multiple enforcement tools, such as payment pauses and deferrals, against a single state.
The ruling also highlighted prior comments from Vice President JD Vance, who has been described as the administration’s “fraud czar.” Vance previously stated that the federal government needed to “turn the screws on [Minnesota] so that they take this fraud seriously.”
Similarly, CMS Administrator Mehmet Oz weighed in at the time of the funding delay.
“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.
Minnesota argued that such remarks reveal an improper motive—suggesting that the administration is using the funding freeze to pressure the state into adopting a federally approved corrective action plan.
But the judge stopped short of agreeing with that interpretation. While acknowledging that the comments from Vance and Oz could blur the lines between different regulatory tools, Tostrud said they do not prove bad faith or unlawful coercion by the federal government.
Importantly, the judge left the door open for Minnesota to continue its fight.
“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.”
For now, the Trump administration’s crackdown remains in place—sending a clear signal that federal officials are prepared to take aggressive action when billions in taxpayer-funded programs are at stake.
