(The Center Square) – Minnesota lawmakers are moving to shut down a troubled taxpayer-funded program as state and federal officials continue investigating billions of dollars in alleged fraud.
The Minnesota House of Representatives unanimously voted last week to remove the Housing Stabilization Services program from state statute.
The move would codify a request from the Minnesota Department of Human Services, which asked the federal Centers for Medicare and Medicaid Services to approve terminating the program entirely. That request took effect in November 2025.
The state Senate has advanced similar legislation. Gov. Tim Walz also listed codifying the program’s removal as a priority in his anti-fraud legislative package announced last month.
The action comes amid heightened scrutiny of Minnesota’s taxpayer-funded programs, particularly Medicaid, known in the state as Medical Assistance. Nearly a month ago, Vice President J.D. Vance announced a temporary pause on Medicaid funds to Minnesota over ongoing concerns about widespread fraud.
At the time, the Trump administration halted roughly $243 million in federal payments. To release those funds, the state was required to submit a corrective action plan designed to ensure the state protects taxpayer dollars.
State officials say the corrective action plan has since been approved by the Centers for Medicare and Medicaid Services, though the withheld funds have not yet been released and it is unclear when they will be restored.
Minnesota officials have pushed back against the funding pause and filed a lawsuit seeking to restore the withheld payments. The lawsuit argues the federal government moved forward with the deferral before completing the required administrative review tied to a January noncompliance notice.
Under the program, the federal government shares costs with states to provide health coverage for low-income residents, seniors and people with disabilities. Minnesota officials say the $243 million being withheld represents roughly 7% of the state’s quarterly Medicaid funding and warn the loss—even if temporary—could force reductions in healthcare services or require lawmakers to shift money from other parts of the state budget.
While some steps are being taken nationally to address fraud, President Donald Trump recently said in February that investigations involving taxpayer-funded programs are still ongoing in Minnesota and other states.
“Minnesota and these other states, we have massive investigations going into fraud,” Trump said in an interview with NBC News. “If we captured 50% of the fraud in this country right now, we would have better than a balanced budget.”
The dispute over Medicaid funds comes as Minnesota lawmakers continue debating how to address fraud in state programs.
As previously reported by The Center Square, Minnesota lawmakers say fraud in taxpayer-funded programs must be addressed, but sharp partisan divides remain over how to do it.
While ending the Housing Stabilization Services program has received bipartisan support, broader proposals to combat fraud have proven more contentious.
Republicans are pushing for stricter oversight and accountability measures, while Democrats argue those proposals focus more on punishment than prevention and could harm legitimate program recipients or state workers.
Independent and federal investigators estimate the potential value of fraud schemes could range between $9 billion and $20 billion.
Republicans say the scale of alleged fraud underscores the need for stronger oversight, including creation of an independent statewide Office of the Inspector General to investigate fraud across state agencies. Democrats have been hesitant to support the proposal. Republicans have also introduced additional legislation aimed at increasing accountability within state agencies.
Democratic leaders say they are advancing their own efforts to combat fraud.
Walz has proposed a comprehensive anti-fraud package that would expand audit capacity, create a centralized Office of Inspector General and permanently bar individuals convicted of fraud from receiving state contracts.
No plan has been finalized though.
Additional scrutiny also emerged last week after a report from the Office of the Legislative Auditor found the Minnesota Department of Human Services incorrectly claimed it lacked authority to investigate kickback allegations involving the Early Intensive Developmental and Behavioral Intervention program.
Republican legislative leaders pointed to the findings as evidence state officials had the authority to investigate the complaints but failed to act, something that has been an ongoing concern across state programs.
“For years, credible allegations of kickbacks in the Early Intensive Developmental and Behavioral Intervention program were brought to the Walz Administration, and for years they refused to investigate, hiding behind the false claim that they lacked authority to act,” House Speaker Lisa Demuth, R-Cold Spring, and House Republican Leader Harry Niska, R-Ramsey, said in a joint statement. “Today’s report proves that excuse was never true.”
With Minnesota’s Legislature closely divided—Democrats holding a one-seat majority in the Senate and the House split 67-67—negotiations over fraud prevention proposals are expected to remain contentious.