NY Attorney General Sues Trump Administration as State Gets Locked Out of Medicaid

The effects of a federal spending freeze rolled through New York on Tuesday, as the state found itself unable to process Medicaid payments and Attorney General Letitia James joined a lawsuit to reverse the sweeping Trump administration directive.

A federal judge blocked the spending freeze on Tuesday afternoon before it could officially take hold. But James, a Democrat, said during a news conference that New York was one of at least 20 states that had been barred from accessing their online Medicaid systems — before the order was supposed to be in effect.

New York receives more than $55 billion from the federal government each year to fund Medicaid, which provides healthcare to nearly 7 million low-income and disabled New Yorkers.

”This policy will disrupt the lives of millions of Americans in New York and nationwide,” James said. “Not only does this administration’s new policy put people at risk, but it is plainly unconstitutional.”

Trump’s Office of Management and Budget announced the spending freeze in a memo late Monday, directing other federal agencies to temporarily pause spending on initiatives that President Donald Trump had addressed in his executive orders. The Trump administration said it was targeting diversity and environmental protections, and that programs like Social Security, SNAP food stamps and Medicaid would not be affected.

“It is the responsibility of this president and this administration to be good stewards of taxpayer dollars,” White House Press Secretary Karoline Leavitt said. “The reason for this is to ensure that every penny that is going out the door is not conflicting with the executive orders and actions.”

But on Tuesday, confusion took hold as officials from multiple states scrambled to understand how the funding freeze affected the public services they offer. California Attorney General Rob Bonta said the directive put emergency aid payments to help victims of the Los Angeles County wildfires “at risk.” Michigan Attorney General Dana Nessel said payments for the head start program, which offers services to young children, had been impacted.

The administrative stay that a federal judge issued Tuesday is supposed to block the Trump directive until next Monday. But the states’ responses suggest the federal government had begun implementation before the policy was technically in effect.

It’s unclear how the freeze on federal funds will affect Medicaid recipients, whose benefits are administered by the state. New York receives about 50% of the funding it uses for Medicaid programs from the federal government.

New York State Health Department spokesperson Erin Clary said the OMB made it clear that Medicaid would continue without pause, but added that the state has “seen issues today accessing [the Department of Health and Human Services] Payment Management System, which is used to support a multitude of health programs.”

Speaking to reporters in Schenectady, Gov. Kathy Hochul said that she was still assessing the impact of the directive. She did say she was concerned the freeze could impact federal grants for law enforcement or transportation projects. She urged people to contact Republican members of Congress if they had concerns.

“ We are into governing, not panicking,” Hochul said. “I’m not playing whack a mole with every single initiative that comes out of Washington.”

But James pounced immediately. She said the freeze was unconstitutional because Congress has the power to approve and direct spending.

”The president does not get to decide which laws to enforce and for whom. When Congress dedicates funding for a program, the president cannot pull that funding on a whim,” James said.

James partnered with Democratic attorneys general in more than 20 other states in crafting a lawsuit, which they expected to file Tuesday in Rhode Island. Last week, Democratic attorneys general sued over Trump’s executive order revoking the right to birthright citizenship.

Story by Jimmy Vielkind/New York Public News Network
Jimmy Vielkind covers how state government and politics affect people throughout New York. He has covered Albany since 2008, most recently as a reporter for The Wall Street Journal.

Image: New York Attorney General Letitia James is seen in this screenshot of a video she released Jan. 2, 2025. (Credit: New York State Attorney General’s Office)