ST. PAUL, Minn. — A judge has declined to block the federal government from withholding $243 million in Medicaid funding from the state of Minnesota over allegations of fraud in state programs.

The Trump administration has been threatening to withhold federal money from Minnesota for months and, in late February, moved to freeze $259 million in Medicaid funding until the state created a “corrective action plan” to address fraud in its programs.

Minnesota Attorney General Keith Ellison filed a lawsuit on March 2 to challenge the deferred Medicaid funding, claiming the Trump administration had “illegally attempted” to withhold money from the state.

However, U.S. District Court Judge Eric C. Tostrud declined the state’s bid to keep the administration from withholding $243 million in deferred payments to 14 high-risk state Medicaid programs. The lawsuit is ongoing, but for now, Minnesota won’t be able to stop the federal government from withholding the money.

Tostrud, who said he believed the state might have a good argument, denied the motion for several reasons, including that federal courts normally have to wait until a federal agency’s proceedings are complete to determine whether its actions were lawful. Since the funding freeze is still being processed, a court can’t act yet, he wrote.

“Minnesota has identified reasonable legal concerns regarding the deferral’s nature and scope and the federal government’s motivations for initiating it,” the judge said in his ruling declining a preliminary injunction. “It is possible the record may support these concerns in the future. Today it does not.”

Tostrud also doubted Minnesota’s argument that the federal government’s actions were illegal overall, though he acknowledged the state might have legitimate concerns about its “size and timing.”

Attorneys for Minnesota had argued that a Republican administration was exacting political retribution on a state run by Democrats. Tostrud said there wasn’t enough evidence of that to block the deferral immediately and that he doubted they’d be able to prove it in the future.

In a statement, the Minnesota Attorney General’s Office said it was “disappointed in the ruling.”

“We are currently reviewing it and will work with the Department of Human Services to determine next steps,” a spokesman said.

Vice President JD Vance and CMS administrator Mehmet Oz announced their plan to cut off funding to Minnesota on Feb 25. Oz said they would release the funds if his agency approved a state plan to address fraud.

Oz and CMS had been threatening Minnesota Medicaid funding since December, after extensive fraud in federally funded state programs in recent years gained national media attention.

What followed were demands for a corrective action plan in Medicaid-funded programs, and threats to suspend roughly $2 billion in annual funding if the state didn’t take action on more than a dozen programs deemed at high risk for fraud.

Vance and Oz moved to defer payments because the $2 billion they threatened to withhold was subject to a lengthy administrative review process, the attorney general’s office argued in its lawsuit

They also argued the state would be “irreparably harmed” by lost funding. Minnesota Medical Assistance, the state’s Medicaid program, provides care and services to 1.2 million people, according to state officials.

“The immediate withholding of federal funding, especially if funding is delayed or denied for a protracted period or assuming Dr. Oz follows through with his promise to defer every quarter, would require Minnesota Management and Budget and the Department of Human Services to identify potential cuts to services absent a legislative appropriation that covers this shortfall,” the state argued.

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