A federal court on Friday struck down a regulation requiring state legal aid offices to report how many people they have represented and how many are being denied benefits.
The Obama administration had threatened to withhold federal aid if state legal assistance offices did not disclose whether their clients were being denied Medicaid benefits, health care or other federal benefits.
But the ruling said the regulation violated a court ruling in 2014, when the Trump administration blocked states from expanding Medicaid eligibility.
The administration is still seeking to block state efforts to expand Medicaid eligibility, which would cover more than 16 million people.
The Trump administration has also threatened to cut off federal Medicaid payments to legal aid groups.
It said the ruling was not legally enforceable.
In a letter to Justice Anthony Kennedy, Acting Assistant Attorney General Michael Carvin said the rule is unnecessary because states have the ability to make decisions on behalf of their clients, and the court did not need to decide that.
Carvin added that the rule does not impose a burden on states to determine who is eligible for Medicaid benefits.
“The law does not require the Secretary to provide a comprehensive list of people who may be denied Medicaid,” he wrote.
The legal aid organization Legal Aid America praised the ruling.
“This ruling will help ensure that every legal aid client, regardless of their level of need, will be able to receive an affordable legal assistance plan,” said Matt Krieger, a former Obama administration official who is now president of the Legal Aid Institute of California.
The Associated Press contributed to this report.