Attorney general Keith Ellison and the state Department of Human Services have sued the federal government for attempting to withhold $243 million in Medicaid payments to Minnesota.
They are also requesting a temporary restraining order to block the action.
Medicaid provides health insurance for more than one-million people in Minnesota who can't afford it.
Last week it was announced that the funds would be temporarily halted over fraud concerns.
Vice President JD Vance says this was part of an aggressive crackdown on the misuse of public funds.
In a statement, Ellison accused the Trump administration of punishing people and families who need affordable health care.