What’s at Stake in the Medicaid Court Battle

1. Four states are challenging federal Medicaid work requirements that could put billions in healthcare funding at risk.
2. New eligibility rules taking effect in 2027 require certain recipients to document employment, education, or other qualifying activities.
3. A 2012 Supreme Court ruling could determine whether Washington can threaten existing Medicaid funding to force states into compliance.

By Samuel López | USA Herald | November 7, 2026

Minnesota and three other states have taken the Trump administration to federal court, challenging a sweeping Medicaid policy that could force states to choose between enforcing new work requirements and risking billions of dollars in federal healthcare funding.

The lawsuit, filed November 5, 2026, in the U.S. District Court for the District of Oregon, raises a constitutional question extending well beyond Medicaid eligibility. How much financial pressure can Washington place on a state before federal funding conditions become unconstitutional coercion?

Minnesota Attorney General Keith Ellison joined Oregon Attorney General Dan Rayfield, New Mexico Attorney General Raúl Torrez, and Washington Attorney General Nick Brown in bringing the action against federal health officials, including Health and Human Services Secretary Robert F. Kennedy Jr. and Centers for Medicare & Medicaid Services Administrator Mehmet Oz.

According to the 19-page federal complaint, Oregon v. Oz, Case No. 6:26-cv-02435-AA, the states contend that Congress exceeded its constitutional spending authority when it imposed new Medicaid eligibility requirements through H.R. 1, enacted in 2025.

Beginning January 1, 2027, certain Medicaid recipients will be required to demonstrate qualifying activities, generally including 80 hours of monthly employment, community service, or participation in a work program. Half-time education can also satisfy the requirement, and statutory exemptions cover certain caregivers and medically vulnerable individuals.

In Minnesota, approximately 243,000 residents are expected to face the requirements. The state's Medicaid program, known as Medical Assistance, currently covers approximately 1.2 million people.

But this lawsuit involves considerably more than whether recipients should work.

The states argue that federal officials could invoke 42 U.S.C. § 1396c to suspend or withhold existing Medicaid funding if states refuse to enforce the new rules.

That threat forms the foundation of their constitutional challenge.

The attorneys general are relying heavily on the Supreme Court's 2012 decision in National Federation of Independent Business v. Sebelius, 567 U.S. 519, which restricted Congress's ability to threaten existing Medicaid funding to compel states to participate in the Affordable Care Act's Medicaid expansion.

Congress generally possesses broad authority to attach conditions to federal funding. However, the Supreme Court has recognized limits when the financial consequences become so severe that states effectively lose their ability to refuse.

The plaintiffs contend the new work requirements cross that constitutional boundary by changing Medicaid's underlying purpose from healthcare assistance to employment-based eligibility enforcement.

There is, however, an important weakness the federal government could exploit.

Unlike the ACA expansion addressed in 2012, Congress enacted the new requirements as amendments to an existing Medicaid program. Federal lawyers could argue that states remain obligated to follow congressional eligibility changes and that the Supreme Court's earlier ruling does not prohibit such amendments.

Another overlooked detail appears in the complaint itself. The states acknowledge that federal law permits funding enforcement through an existing statutory mechanism. Their challenge is therefore aimed at the constitutionality of applying that mechanism to these particular requirements—not at an already completed cancellation of Medicaid funding.

The financial implications reach hospitals, too. The complaint warns that coverage losses could increase uncompensated emergency treatment, leaving state-supported healthcare institutions absorbing costs previously covered by Medicaid.

The Minnesota Attorney General's November 6 announcement describes those consequences as a serious threat to the state's healthcare system.

The states are seeking preliminary and permanent injunctive relief preventing federal officials from withholding existing Medicaid funding because of noncompliance with the disputed requirements.

No final ruling has established that the requirements are unconstitutional.

What the court decides could determine whether states retain meaningful freedom to reject major new federal Medicaid conditions—or must accept them to protect healthcare funding already supporting millions of Americans.

About the Author

Samuel López is an investigative journalist and legal analyst for USA Herald with more than two decades of experience in legal and insurance matters. His background includes analyzing state and federal litigation, statutory interpretation, government accountability, and complex legal disputes. His reporting examines how legal decisions affect everyday Americans, including matters involving healthcare coverage, insurance protections, and constitutional rights.

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