Minnesota pauses new HCBS provider licenses

The Minnesota Department of Human Services (DHS) announced a two-year freeze on new 245D Home and Community Based Services (HCBS) licenses, effective January 1, 2026. The moratorium will halt new license applications, cancel currently pending requests, and refund associated fees through the end of 2026. This pause aims to address administrative backlogs amid a surge in new providers.

Surge in applications strains DHS capacity

Over the past five years, DHS reported a 283% increase in new HCBS license applications. In contrast, the population receiving waiver services expanded by only about 25% during that period. This imbalance has created a bottleneck in license reviews, which currently operate well below required federal waiver-plan standards. DHS can process approximately 404 provider reviews annually but needs to reach about 847 reviews per year to maintain compliance.

The freeze intends to give DHS time to clear the backlog and improve review processes. Without intervention, the agency risks falling further behind on federal mandates tied to Medicaid waiver oversight.

Concerns from providers and advocates

The pause on new licenses has raised concerns among some providers and advocacy groups. Critics warn that limiting new entrants may intensify existing service shortages, especially in rural communities where access is already constrained. Families and individuals relying on HCBS express worry that capacity limitations will reduce care availability at a time when demand remains strong.

The freeze creates uncertainty for behavioral health, IDD, and other agencies seeking to expand or begin operations in Minnesota. Planning efforts could be disrupted as new provider capacity stalls, potentially impacting long-term service access and network stability.

Implications for Minnesota’s HCBS landscape

The DHS decision highlights the challenge of balancing rapid growth in provider interest with the need for thorough oversight and quality control. Ensuring compliance with federal waiver requirements remains critical to sustaining funding and service standards. However, the licensing freeze underscores systemic workforce and regulatory pressures facing the IDD and HCBS sectors. Minnesota’s move reflects broader trends where states struggle to manage growth in HCBS provider networks while safeguarding service quality.