Minnesota ends Medicaid-funded housing stabilization program beset by fraud – Twin Cities

The Minnesota Department of Human Services ended its Medicaid-funded housing assistance program on Friday as federal prosecutions continue in what authorities have described as a “massive” fraud scheme that cost the state millions.

DHS received final approval from the Centers for Medicare and Medicaid Services to terminate the program on Oct. 24, nearly two months after filing the initial request.

Housing Stabilization Services, a first-of-its-kind program launched in 2020, used Medicaid dollars to help the elderly and people with disabilities at risk of homelessness find and pay for housing. People with mental illness and addiction problems also were eligible.

But some providers acquired names and other information from facilities like addiction treatment centers to file false and inflated claims to DHS, according to the Minnesota U.S. Attorney’s Office.

In September, federal prosecutors charged eight people for allegedly stealing around $10 million from the program. It’s just one of numerous fraud cases that have come to light in Minnesota in recent years. Then-acting U.S. Attorney Joe Thompson estimated in July that fraud in the state could top $1 billion.

Minnesota initially expected the program to cost about $2.6 million, but costs quickly ballooned. Housing stabilization cost the state $105.4 million last year. There are more than 1,800 providers claiming reimbursement for assistance to around 21,000 people.

Third-party audit

Minnesota is ending Housing Stabilization Services the same week it announced a new third-party audit of 14 Medicaid-funded state programs deemed high-risk for fraud. The added layer of scrutiny could lead to reimbursement delays lasting up to 90 days.

Programs affected by the audit include housing stabilization services and autism services for youth — two programs where federal prosecutors recently announced fraud charges against providers claiming reimbursements from the state.

DHS said it moved to end housing stabilization as the scope of fraud in the program became more apparent. The agency sent its letter requesting to end the program two weeks after the FBI raided the offices of providers suspected of fraud.

“It’s upsetting that we had to take this step to stop criminals from taking advantage of services intended to help people,” temporary Human Services Commissioner Shireen Gandhi said in a statement announcing the end of the program. “We know that Housing Stabilization Services truly filled an important gap for so many participants. We’re working closely with partners to help them connect people to other services wherever possible.”

Suspending the program

The agency said it intends to create a new version of the housing stabilization program with better safeguards against fraud. It’s coordinating with counties and tribal organizations to find people who might need help now that the program has been terminated.

During a 30-day comment period ahead of the program’s suspension, more than 200 people reached out to DHS, largely concerned that suddenly ending housing stabilization would affect the program’s vulnerable beneficiaries.

“DHS acknowledges the feedback provided by commentors; however, due to the pervasive fraud taking place throughout the program, the agency has proceeded with submitting the state plan amendment seeking federal termination of the program,” the agency said in a summary of public comments.