Minnesota’s Department of Human Services is moving to terminate a Medicaid-funded housing assistance program after federal law enforcement announced it was investigating a “massive” fraud scheme that likely lost the state millions.
DHS on Friday said it sent a letter to the Centers for Medicare and Medicaid Services asking to end the Housing Stabilization Services program, describing the move as an “unprecedented step.” The agency said it intends to redesign and relaunch the program to avoid fraud in the future.
In the letter, temporary Human Services Commissioner Shireen Gandhi said there are not enough controls in the program to stop “bad actors” from taking advantage of the system. The agency’s Office of Inspector General recommended termination of the program, she said.
“DHS is rooting out fraud wherever we find it. We cannot allow one more cent of taxpayer money going out the door to providers who claim to serve Minnesotans in need of stable housing while lining their pockets for personal gain,” Gandhi said in a statement.
Payments cut off
The request to terminate the program comes as the department cuts off payments to housing providers it suspects are defrauding the government. Gov. Tim Walz on Monday said he had directed DHS to cut off payments to 50 housing providers following news of the federal investigation earlier in July.
Eleven more housing stability providers lost funding on Thursday, according to DHS. A total of 77 programs have lost payments due to “credible allegations of fraud” this year, the agency said.
Gandhi has credited recent legislation that went into effect on July 1 with providing her agency the ability to cut off payments when there is credible evidence of fraud.
Minnesota’s Housing Stabilization Services, a first-of-its-kind program authorized in 2018, helps the elderly and people with disabilities at risk of homelessness find and pay for housing. People with mental illness and addiction problems also are eligible.
Susceptible to fraud
But the program is susceptible to fraud, according to an FBI search warrant affidavit. Dozens of companies emerged to provide state-funded services, and many claimed reimbursements for services they did not actually offer, investigators claim.
The state initially expected the program would cost about $2.6 million a year. But from January 2024 to April 2025, 14 providers “received more than $22 million in taxpayer money for housing stabilization services they purportedly provided,” according to the warrant. Each of the 14 received more than $1.2 million through the program.
On July 16, the FBI searched eight locations in St. Paul, Roseville and Little Canada tied to five providers, though no one was arrested.
One of the providers, Brilliant Minds Services LLC, is located in the Griggs-Midway building on University Avenue in St. Paul, where about 22 providers are “purporting to operate,” according to the warrant. Those groups received about $8 million in Medicaid payments between January 2024 and May 2025.
Officials with the human services department said they will work with the federal government, the Legislature and community partners to fix the program and relaunch the benefit.
GOP accuse Walz of trying to ‘dodge accountability’
In a statement on the DHS plan to terminate the program, Senate Republicans accused the Walz administration of attempting to “dodge accountability” for another high-profile government fraud scandal.
“Today we learned Governor Walz is shutting down a housing program riddled with fraud, not to fix it, but to prevent any more embarrassment,” said Senate Minority Leader Mark Johnson, R-East Grand Forks. “Instead of holding anyone accountable, they’re pulling the plug before an audit can expose just how badly they mismanaged millions in taxpayer funds.”
In July, House Republicans sent a letter to the U.S. Department of Health and Human Services asking for an audit of the Minnesota Department of Human Services amid a “wave” of Medicaid billing fraud investigations.
Rep. Kristin Robbins, R-Maple Grove, the chair of the House Fraud Prevention and State Agency Oversight Committee, called the termination request an “admission” of how deep the fraud in the program has become.
“This was a program initially expected to cost taxpayers just $2.6 million a year, yet it ballooned to over $100 million, with fraud so rampant that the agency now admits it cannot guarantee basic program integrity,” she said. “The shutdown of this program confirms what we feared all along: this fraud goes far deeper than the few raids and arrests made public so far.”
A string of fraud cases
Housing Stabilization Services is the latest DHS-administered program in Minnesota to fall under investigation for fraud. Child care, substance abuse treatment and autism support programs have also seen allegations of abuse.
All that comes on top of the single largest known instance of fraud, where federal prosecutors say a scheme centered around the nonprofit Feeding Our Future defrauded the government of $250 million in federal funds from a pandemic-era meal program. In that case, the money was administered by the Minnesota Department of Education.
“Minnesota has a fraud problem — and not a small one,” Acting U.S. Attorney Joe Thompson said in a statement announcing the investigation into housing fraud a few weeks ago.
In a subsequent interview with KSTP-TV, Thompson said the total amount of fraud under investigation by federal authorities could top $1 billion.
Republican joins 2 DFLers in race for Nicole Mitchell’s former Senate seat
Trespasser incident prompts more calls for security boost at MN Capitol
Gov. Tim Walz calls special elections for 2 vacant Senate seats
DWI reform, service dogs: New laws take effect Aug. 1 in Minnesota
Minnesota’s new consumer data tracking protections start July 31
