Minnesota Ends Medicaid-Funded Housing Stabilization Program Due to Widespread Fraud
The Minnesota Department of Human Services has terminated its Medicaid-funded housing assistance program, Housing Stabilization Services, due to a “massive” fraud scheme that cost the state millions of dollars. The program, which was launched in 2020, aimed to help the elderly, people with disabilities, and those struggling with mental illness and addiction find and pay for housing.
The decision to end the program comes after federal prosecutors charged eight people with allegedly stealing around $10 million from the program. This is just one of several fraud cases that have come to light in Minnesota in recent years, with estimated losses potentially topping $1 billion, according to then-acting U.S. Attorney Joe Thompson.
Scope of the Problem
The Housing Stabilization Services program was initially expected to cost around $2.6 million, but costs quickly ballooned to $105.4 million last year. The program had over 1,800 providers claiming reimbursement for assistance to approximately 21,000 people. However, some providers were found to have acquired names and other information from facilities like addiction treatment centers to file false and inflated claims to the Department of Human Services.
The Minnesota Department of Human Services received final approval from the Centers for Medicare and Medicaid Services to terminate the program on October 24, nearly two months after filing the initial request. The agency has announced a new third-party audit of 14 Medicaid-funded state programs deemed high-risk for fraud, which may lead to reimbursement delays of up to 90 days.
Response and Next Steps
Temporary Human Services Commissioner Shireen Gandhi expressed disappointment that the program had to be ended due to fraudulent activities, stating, “It’s upsetting that we had to take this step to stop criminals from taking advantage of services intended to help people.” The agency is working to create a new version of the housing stabilization program with better safeguards against fraud and is coordinating with counties and tribal organizations to find alternative services for those affected.
During a 30-day comment period, over 200 people reached out to the Department of Human Services, expressing concerns that ending the program would harm its vulnerable beneficiaries. Despite these concerns, the agency proceeded with terminating the program due to the pervasive fraud.
This incident is not an isolated case, as several other DHS-administered programs in Minnesota have faced allegations of fraud, including child care, substance abuse treatment, and autism support programs. The state is taking steps to address these issues and prevent future instances of fraud.
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