CMS to defer $3.75B and Minnesota freezes new enrollment in 13 high‑risk Medicaid programs after fraud concerns
Minnesota has ended its Medicaid-funded Housing Stabilization Services program amid FBI probes and widespread suspected fraud — DHS says more than 700 providers received over $100 million in HSS payments last year (far above initial estimates), that CMS approved the termination, and that it is coordinating with counties, tribes and managed-care organizations to redirect affected participants. As part of Gov. Tim Walz’s program‑integrity push, DHS has also imposed an immediate, statewide freeze on new provider enrollment and some service expansions across 13 designated high‑risk Medicaid programs while federal and state audits (including a legislatively ordered third‑party audit) review billing and oversight; officials say current clients should continue receiving services.
📌 Key Facts
- Minnesota’s Housing Stabilization Services (HSS) was formally terminated at the end of October (ending on Halloween) after FBI probes into widespread fraud; CMS approved the termination and Temporary Human Services Commissioner Shireen Gandhi gave an on‑record statement about the closure and efforts to connect participants to other services.
- Minnesota DHS says it is coordinating with counties, tribes and managed‑care organizations to redirect impacted participants; current clients should continue receiving services, but new providers and certain program expansions are on hold while billing audits and oversight are tightened.
- DHS has placed an immediate, statewide freeze on new provider enrollment — and in some cases on existing providers adding new service lines — across 13 designated high‑risk Medicaid programs as a time‑limited measure tied to fraud concerns.
- The enrollment freeze and HSS termination are part of Gov. Tim Walz’s broader program‑integrity push; Walz also ordered a third‑party audit of 14 high‑risk Medicaid services, including HSS.
- Scope and cost of the HSS program were far larger than initially estimated: more than 700 providers received over $100 million in HSS Medicaid payments last year versus an original first‑year estimate of $2.6 million.
- DHS says it considered alternatives but “cannot afford to wait,” and will work with the Legislature, providers, community partners and federal officials to redesign HSS with stronger integrity and service‑quality controls; no timeline for a redesign was provided.
- The Minnesota Tribal Collaborative criticized the HSS cancellation as an overreaction and urged the state to favor safeguards and training for providers rather than terminating the program.
📊 Relevant Data
The Somali population in Minnesota is approximately 107,000 as of 2024, representing about 1.88% of the state's total population of roughly 5.7 million.
How Misreading Somali Poverty Led Minnesota into Its Largest Welfare Scandal — American Enterprise Institute
In public benefits fraud cases in Minnesota from 2018-2025 involving $364.7 million, 78.1% of the 64 defendants with known country-of-origin information were Somali or Somali-American, despite Somalis comprising only about 1.88% of the state's population.
LONGITUDINAL ANALYSIS OF PUBLIC BENEFITS FRAUD EVOLUTION IN MINNESOTA'S SOMALI COMMUNITY — ResearchGate
The poverty rate among Somali Minnesotans is 27.9%, compared to the statewide poverty rate of about 9%.
Latest Data on Somali Minnesotans 2024 — Empowering Strategies
More than half (52%) of children in Somali immigrant homes in Minnesota live in poverty, compared to 8% of children in native-born households.
Somali Immigrants in Minnesota — Center for Immigration Studies
Somali Minnesotans generate at least $500 million in income annually and pay about $67 million in state and local taxes, with a 70% labor force participation rate.
Somali Minnesotans drive economic growth, pay $67M taxes annually — KSTP
Somali resettlement in Minnesota began in the early 1990s following the 1991 Somali civil war, facilitated by voluntary agencies such as Lutheran Immigration and Refugee Service, leading to the largest Somali community in North America.
LONGITUDINAL ANALYSIS OF PUBLIC BENEFITS FRAUD EVOLUTION IN MINNESOTA'S SOMALI COMMUNITY — ResearchGate
📰 Source Timeline (4)
Follow how coverage of this story developed over time
- Minnesota DHS has placed an immediate freeze on new provider enrollment (and in some cases, on existing providers adding new service lines) across 13 designated high‑risk Medicaid programs due to fraud risk.
- The freeze is described as a statewide, time‑limited measure layered on top of the earlier termination of Housing Stabilization Services, and is part of Gov. Walz’s broader program‑integrity push.
- DHS indicates current clients should continue receiving services, but new providers and certain program expansions are on hold while the state and federal government audit billing and tighten oversight.
- Confirms HSS formally ended Friday following FBI probes into widespread fraud.
- Scope and cost: more than 700 providers received over $100 million in HSS Medicaid payments last year, far above the initial $2.6 million first‑year estimate.
- DHS says it considered alternatives but 'cannot afford to wait,' and will work with the Legislature, providers, community partners and federal officials to redesign HSS with stronger integrity and service-quality controls; no timeline provided.
- Reaction from the Minnesota Tribal Collaborative in the Twin Cities calling the cancellation an overreaction and urging safeguards/training instead of termination.
- Reiterates that Gov. Tim Walz ordered a third‑party audit of 14 high‑risk Medicaid services, including HSS.
- Official on-record quote from Temporary Human Services Commissioner Shireen Gandhi on the termination and efforts to connect participants to other services.
- DHS says it is coordinating not only with counties and tribes but also with managed care organizations to redirect impacted participants.
- FOX 9 reiterates CMS approval for the termination and situates the decision alongside ongoing fraud investigations and a legislative-auditor push for stronger controls.