Burcum: Amid housing program fraud scandal, bring on a federal audit of Minnesota DHS

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Would it have been cheaper to actually pay for needy Minnesotans’ rent vs. simply assisting them in finding a place to live?

It’s an unavoidable question after a fraud investigation prompted the state Department of Human Services to take the extraordinary step of shutting down the pioneering Housing Stabilization Services program late last week. At best, it’s unclear whether taxpayer dollars spent actually helped people or whether they mainly lined the pockets of private sector contractors ostensibly paid to help program participants find a home.

It’s important to note that the program’s struggling enrollees don’t appear to be targeted in the investigation, though sadly they will lose out on services that could have helped them get a new start on life.

The state launched the housing stabilization program in 2020 with noble intentions. Believed to be the first of its kind in the nation, it leveraged dollars from Medicaid, the safety net medical assistance program jointly run by the federal and state governments, to help the poor and those with disabilities stay off the streets. It seemed logical: having a roof over your head is foundational for good health, potentially preventing costly care down the road.

Initial estimates put the price tag at reasonable $2.6 million a year. But its actual costs weren’t even in the same galaxy.

In 2023, the bill came to more than $74 million for 16,900 enrollees. By 2024, the tab came to an eye-watering $104 million for 21,300 people.

It’s absolutely mind-boggling that a program whose costs so far outstripped the initial price tag continued for four years. This is a publicly funded program with oversight responsibilities shared by the state Department of Human Services (DHS), Gov. Tim Walz, as well as the lawmakers who sit on the committees with jurisdiction over social services. Because the feds jointly fund Medicaid, they also have oversight authority.

A bravura KARE-11 investigation in May finally put a spotlight on what appear to be widespread abuses.

There’s a whole host of questions that this shameful chapter in Minnesota history raises. At some point, you’d think cost overruns of this caliber would tip off public watchdogs somewhere to take a hard look.

But here we are. That grim reality makes clear that a comprehensive federal audit of the state’s DHS is urgent. Four Minnesota House Republican lawmakers merit commendation for taking the lead on this.

“This fraud has gone unchecked for years, despite numerous reports by our Office of Legislative Auditor about the lack of proper internal controls, problems with verifying eligibility and overpayments or double billing.”

They add that they fear the abuses are “just the tip of the iceberg.” The letter’s four signatories are Rep. Kristin Robbins, House Speaker Lisa Demuth, Rep. Jeff Backer and Rep. Joe Schomacker.

On Tuesday, Robbins said she had not gotten an answer on whether the feds will perform an audit. I reached out to Hodgkins’ staff and received this reply Wednesday: “Our office has received the letter and are reviewing for its appropriate action.”

On Wednesday, a Walz spokesperson told me that the governor is open to a federal audit. DHS leadership supports an audit, too. This spring, Walz also proposed a $39 million antifraud plan.

I urge Hodgkins to investigate as well and add that this should be a wide-ranging audit of DHS’ organization and internal controls. The review should also include recommendations about strengthening the Office of Legislative Auditor’s authority or determining whether another entity is necessary.

Anyone who’s regularly followed the Legislature has sat through hearings in which the agency’s commissioners routinely pledge to ramp up oversight.

Jodi Harpstead, who resigned in February, was the most recent. She touted “Operation Swiss Watch” soon after taking the job in 2019 to tighten agency financial controls after millions in improper payments for opioid addiction treatment happened before she joined the agency.

Harpstead brought extensive leadership experience to the position, previously serving as a Medtronic executive and then president and CEO of Lutheran Social Service of Minnesota. She was not a lightweight, and yet again, here we are with disturbing allegations about lack of control over taxpayer dollars.

A systemic review of how DHS operates is overdue. Some might worry that the Trump administration will see this as a political opportunity to release a damaging audit if Walz decides to run for re-election next year. The circumstances certainly are not ideal for the incumbent but political concerns like this are dwarfed by the need for a comprehensive audit.

Some other important context is in order. Medicaid abuse isn’t unique to Minnesota. In fiscal year 2024, the feds’ Medicaid Fraud Control Units recovered $1.4 billion nationally, with their activities resulting in 1,151 convictions and 493 civil judgments or settlements.