Minnesota gets federal warning on Medicaid rules

The Centers for Medicare & Medicaid Services (CMS) has issued a formal warning to Minnesota regarding alleged systemic fraud in its Medicaid programs. The federal agency demands corrective action within 60 days, citing concerns around the state’s Housing Stabilization Services and autism-related Medicaid spending.

Rapid growth raises concerns

CMS flagged the Housing Stabilization Services program after its budget surged beyond $100 million in 2024, marking an unsustainable increase. Similarly, the Early Intensive Developmental and Behavioral Intervention (EIDBI) program, which provides autism-related services, grew sharply from about $3 million in 2018 to nearly $400 million in 2023. CMS considers these escalations difficult to justify given current oversight mechanisms.

These concerns follow earlier state-level actions. In mid-2025, Minnesota’s Department of Human Services (DHS) classified both programs as “high-risk.” Under new regulations, providers now undergo enhanced background checks, required screening visits prior to enrollment, and unannounced inspections. Ultimately, DHS terminated the Housing Stabilization Services program on October 31, 2025, citing unacceptable risks to taxpayer funds.

Implications for Medicaid funding

CMS warned that Minnesota must submit a credible and detailed corrective plan. This includes weekly progress reports, immediate freezing of high-risk providers, and comprehensive validation of all program participants. Failure to comply could jeopardize federal Medicaid funding for these critical service areas.

The warning underscores federal scrutiny over Medicaid fraud vulnerabilities that threaten program integrity, particularly within behavioral health and IDD support frameworks. Providers and policymakers should monitor Minnesota’s response, as developments may influence broader state compliance strategies and federal oversight intensity.

The situation signals heightened accountability expectations for Medicaid programs sustaining rapid growth. States must balance expanding access with robust fraud prevention and compliance measures to maintain federal support. Minnesota’s case may serve as a cautionary example for agencies managing complex IDD and behavioral health services under Medicaid.