The Elmer L. Andersen Human Services Building in St. Paul, MN Thursday Jan. 15, 2026. (Photo by Alyssa Chen/Minnesota Reformer)
ST. PAUL, Minn. (Minnesota Reformer) – Minnesota’s spending across 14 Medicaid programs more than doubled in the five years before the Walz administration deemed them “high risk” for fraud, waste and abuse — and began taking drastic measures to rein in spending.
Total spending across the programs, which include therapy for autistic children and services helping disabled people live independently, increased from $2.06 billion in 2021 to $4.32 billion in 2025, according to annual spending data from the Department of Human Services obtained through a public records request submitted in December.
Some programs grew particularly fast.
Spending on Integrated Community Supports, one of the fastest growing programs, increased 40-fold in five years, from $4.6 million in its first year in 2021 to $193.6 million in 2025.
Early autism treatment services spending increased 4-fold, from $83 million in 2021 to $433 million in 2025, up from $6.1 million when it effectively began in 2018. Spending on overnight supervision for people with disabilities increased over 3-fold from 2021 to 2025, from $68 million to $305 million.
Following numerous reports and prosecutions of fraud, the explosion of growth seems like it should have alarmed agency leaders and legislators sooner.
By the time the Gov. Tim Walz announced the administration was ending Housing Stabilization Services last fall — citing widespread suspected fraud and “exponential growth” in spending — the state had spent more than $338.9 million on the program in just six years.
Despite what its name implies, the program did not provide housing or rental assistance, but rather paid businesses to help people find housing. Spending jumped 30-fold — from $3.3 million when it started in 2020 to $108.8 million in 2024.
The program was so easy to scam, former Assistant U.S. Attorney Joseph Thompson said that it led to “fraud tourism,” with two men traveling from Philadelphia to enroll their companies as Housing Stabilization Services providers.
When announcing charges against the men in December, Thompson said he thought half or more of $18 billion spent across the 14 programs since 2018 is likely fraudulent, though no evidence for the figure has emerged since. Data obtained by the Reformer show spending on the programs from 2018 through 2025 actually topped $20.3 billion, though how much was fraud and waste has not been fully accounted for.
The Trump administration has used alleged fraud in the 14 Medicaid services, which are funded through both state and federal dollars, to threaten to withhold $2 billion in annual Medicaid payments to the state, as well as claw back over $200 million in Medicaid payments from 2025. The status of the threats is unclear now that the federal government approved Minnesota’s anti-fraud plan.
Minnesota’s Medicaid program, also known as Medical Assistance, cost $18 billion in 2024, with 60% paid by the federal government.
Spending growth was desired in some services
An increase in spending was to be expected — even welcomed — as the state invested in programs to serve vulnerable residents, partly in an effort to keep people out of institutions, according to the Department of Human Services, some lawmakers and service providers.
Spending growth was also driven by inflation and legislatively-mandated policy changes. The Department of Human Services pointed out in a statement that at least three of the high-risk services — Night Supervision, Individualized Home Supports and Integrated Community Supports — saw “significant” rate increases from inflation adjustments and policy changes, including a 15% increase in 2024.
In the case of early autism treatment services Sen. Jim Abeler, R-Anoka, said that some growth “was desirable because the program was expanding the way it was designed to go.”
“As a policymaker, I was hoping more kids could take advantage of it so they could work on their autism problem as a young child and actually get better,” Abeler said.
Yet, the expectation that costs would go up seems to have created a blind spot for suspicious growth, especially at an agency that “emphasized compassion over compliance,” according to a recent state report.
Some providers seized the opportunity to defraud the rapidly expanding state-run Medicaid program. In September, federal prosecutors charged Asha Farhan Hassan, 28, alleging she defrauded Medicaid by qualifying children for autism services when they didn’t have a diagnosis and offering kickbacks to families to sign up, all while delivering a fraction of the services billed.
Former Department of Human Services Assistant Commissioner Natasha Merz previously told the Reformer that the growth in the early autism treatment program was comparable to growth in other programs like Housing Stabilization Services, and therefore not alarming. Housing Stabilization Services was later shut down for widespread suspected fraud.
In its recent statement, the agency acknowledged that looking at spending growth is “one aspect of oversight.”
The statement continues: “Across the country, increasingly sophisticated fraud and abuse schemes threaten health care systems. Bad actors are adapting faster than ever – exposing gaps in aging technology, disconnected data and manual processes that were built for a different era. That’s why we’re moving aggressively to update and strengthen data analytics in new ways to fight fraud and become the best state in the country for Medicaid program integrity.”
Integrated Community Supports, another program federal prosecutors have been investigating for fraud, was implemented in 2021 as a partial replacement for an older service called customized living and designed to help give services to disabled people living in their own apartments.
At the time, Minnesota was transitioning to offering more at-home services for disabled and elderly people in response to a 2014 federal rule that required states to give services in the most “integrated settings” — in other words, offering options other than just nursing homes and other facilities that cordoned people off from the rest of society.
When the program first launched, the Department of Human Services said it found that customized living recipients were transitioning to ICS at a slower rate than it first projected — a fact that Josh Berg, an ICS provider and advocate for providers at the Capitol, noted to lawmakers at a recent House human services committee hearing.
Berg said that characterizing the growth of ICS as “exponential” is misleading given the program’s history.
“The context matters because mischaracterizing growth leads to policy over-corrections, and those over-corrections land hardest on people receiving services and providers acting in good faith,” Berg said.
As with the autism program, however, the growth was also fueled by bad actors taking advantage of that expansion.
An ongoing federal investigation has found that instead of providing services, many ICS providers simply rent apartments to recipients and bill the program for services they don’t provide, former Assistant U.S. Attorney Joe Thompson said. The program allows providers to bill hundreds of dollars a day, often adding up to $100,000 to $200,000 a year, per client, he said.
One ICS recipient showed the Reformer that his provider billed Medicaid $419 a day to provide him with 10 hours of services, but only showed up to his apartment a few hours a week.
Shift from nursing homes to home care
The number of people living in institutions like nursing homes has steadily declined as part of a national push to help people live independently or in small group homes, known as home and community-based waiver services.
Medicaid spending on home and community-based services — such as personal care assistance and Integrated Community Supports — now far exceeds payments to institutions, $7.6 billion annually in Minnesota compared to $1.3 billion, respectively.
At-home services are far less costly per capita than nursing homes (and cannot be more expensive under federal law). Seniors and disabled people also prefer to stay at home and often fare better as well.
One potential tradeoff, however, is oversight. Home care services are generally harder to oversee compared to institutions, according to Chuck Johnson, a former deputy commissioner at the Department of Human Services.
“The actual services are happening all over the place, so you can’t necessarily be following around every single person to make sure they’re going where they should be going,” Johnson said.
Jane Tavares, a researcher at the Gerontology Institute at UMass Boston, recently co-authored an article in the academic health policy journal Health Affairs cautioning that fraud allegations are needlessly threatening home and community-based services.
“To say fraud doesn’t exist is completely incorrect — it’s happening in every system that we have,” Tavares said. But the current focus on the spending growth in home and community-based services as indicative of widespread fraud is misguided, she said, because there are explanations for growth other than fraud, like the country’s aging population and an intentional policy shift away from institutionalization.
“Why are we suddenly so shocked that (home and community-based services) are going up in price? We knew this years ago — this is what we were building towards, we wanted to see more (services) expansion in states,” Tavares said.
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