Human Services Policy & Budget

With rising health care costs and Republicans in D.C. defunding Medicaid, Minnesota lawmakers had to ensure fiscal stability. As a result, the supplemental 2026 human services budget had a negative target. Despite this constraint, the Senate DFL prioritized protecting services and did not eliminate services or create years-long waitlists to access services.

Protecting services for people with disabilities and seniors entailed developing continuity-of-care protocols and a dedicated team focused on preserving access to services within the Department of Human Services (DHS). Minnesota lawmakers stepped in again where the federal government failed and secured funding for nursing facility workers. Senate DFLers also passed several resident protections for people in long-term care facilities.   

The Senate DFL majority addressed fraud in Medicaid programs by securing personnel to conduct more onsite visits, collect evidence for investigations, and analyze data to identify patterns before issues become crises. Investments in technology and training are also provisions in the final bill that address both fraud and improve services for Minnesotans.  

If Minnesota does not successfully complete the CMS approved corrective action plan, the state could lose billions in federal Medicaid funds. Following the auditing and utilization reviews required by the federal government, the legislature passed several disability rate modifications and billing limits. In addition to closing policy loopholes identified in the first round of the Optum prepayment review process, these changes preserved services and connected a person’s needs with the services provided.   

Senate DFLers also pushed to hold DHS accountable by requiring DHS to release the preliminary Medicaid billing audit report conducted by Optum to legislators. Statutory changes were enacted following two reports by the Office of the Legislative Auditor highlighting issues at DHS. Senate DFLers also prohibited DHS from terminating Medicaid programs without legislative approval.   

The 2026 human services supplemental budget bill brings Minnesota closer to a disability services system that truly prioritizes the needs of the people it serves and protects taxpayer money. It is also a response to the financial pressures from the Trump administration, which is looking for any excuse to defund Medicaid at the risk of the health and safety of people with disabilities and seniors across the country.

Continuity of Care & Resident Protections 

Continuity of Care (SF 476 & SF 4476 Hoffman)   

Protect Services:  

• The new law clarifies that nonpayment resulting from the interruption of a person’s public benefits does not mean that the person accessing services loses the right to be notified of service suspensions or terminations within a reasonable timeframe.  

• It also establishes that all service recipients of residential services are treated the same if a provider is temporarily suspending services or permanently terminating services.   

• The continuity of care law ensures people accessing services have flexibility and control of their care. Service recipients will be able to continue services without being locked into the same provider who also controls their living situation.   

Protect Housing:  

• The law now states that each service recipient has the right to clear and accurate bank records of their housing costs. This provision provides service recipients with literal receipts if they are facing eviction.   

• Housing Support capacity grants are for housing support providers that assist recipients of HCBS services to prevent homelessness and institutionalization.   

Continuity-of-Care Protocols and DHS Support Team:  

The continuity-of-care law establishes clear responsibilities and duties of Medicaid providers, lead agencies, and the state if an event threatens a recipient’s access to services. DHS is directed to maintain a continuity-of-care team within the department to assist and provide oversight to all parties when a person accessing services experiences an event that places their safety and well-being at risk.   

If the continuity-of-care plan is insufficient to meet the recipient’s needs, DHS must assist lead agencies in implementing a “complex transition plan,” which includes a template with strict criteria that must be met within 14 days to complete it and ensure the recipient’s safety is prioritized.   

As a last resort, if alternative services are not found or the complex transition plan is incomplete, DHS must determine:  

• If there exists a good cause exemption under federal law to not suspend payments.  

• If a delay in the administrative action is needed to support the complex transition.  

• If there is a cause to begin the receivership process to operate a residential program.   

Finally, DHS must publish on its website data that provides specific information on the successes, failures, statuses, and notifications for continuity-of-care plans and complex transition plans. The public must be able to search by region and county for the data.

Local Oversight & License Application Scrutiny for Group Homes (SF 4279 Hoffman)  

Effective July 1, 2026, DHS must not approve licensing applications for residential settings or programs unless the proposed setting meets specific setting standards. The heightened standard established in the proposal are similar to the federal HCBS location rule. The law directs MDH and DHS to develop an interagency agreement and DHS will review the assisted living properties on MDH’s behalf. The State must also notify affected municipalities after approving a license, along with the licensee’s detailed business information. Local authorities may also request that DHS delegate inspection authority to them.  

Funding the Cost of Living for Nursing Home Workers (SF 4476 Hoffman)   

Last year, the legislature passed funding to allow the new minimum wage set by the Nursing Home Workforce Standards Board to take effect. However, the minimum wage is delayed pending Federal approval. The human services supplemental budget bill provides $11.5 million in one-time funding for a $400 check to any nursing home worker who worked at least 260 hours in the first half of 2026 and did not receive the minimum wage that was scheduled to take effect on January 1, 2026. The remainder of the funds will provide checks up to $200 to all other nursing home workers who worked at least 260 hours in the first half of the year. It is estimated that roughly 15,000 workers are in each category.  

Long-Term Care Facility Resident Protections   

• A nursing home and an assisted living facility are prohibited from requiring a current or prospective resident to have or obtain a guardian or conservator as a condition of admission to or continued residence in the nursing home/facility (SF 3844 Mann).   

• An assisted living facility may use a person-centered strategy to provide a means for residents to request assistance. If effective, it may allow residents to use a technological device to require assistance. Provides for accommodations for residents who cannot use a device (SF 3844 Mann).   

• Establishes statutory guidance regarding the limited use of restraints in assisted living settings, an area where current statute is silent. The provision is intended to provide clear parameters for when emergency restraints may be used, while emphasizing resident safety, rights, and appropriate oversight (SF 4418 Wiklund).   

• Effective August 1, 2027, assisted living facilities must ensure that one or more unlicensed personnel are available 24/7 and are responsible for responding to the requests of residents. Additionally, a facility must ensure that a plan is in place for facility staff to attend to residents in the event of an emergency and to meet nonemergency medical needs resulting from falls, including needs for lift assistance. These new requirements are in response to the horrific story of a long-term care resident dying while awaiting lift assistance (SF 476 Hoffman).

Medicaid Fraud Prevention 

Electronic Visit Verification (SF 4400 Mohamed)  

The new EVV law strengthens the responsibilities and duties for EVV vendors and HCBS providers. It also reinforces DHS’s oversight responsibilities and authority to review EVV records. Additionally, the Senate DFL advanced an expanded list of services that require EVV. For further fraud prevention, the new law includes a component that connects EVV data to the DHS Medicaid billing system.   

EVV documents:   

• The type of service performed  

• Who received the service   

• Date of service   

• Location of service delivery   

• Who provided the service   

• When the service begins and ends  

Minnesota began implementing EVV in 2022 for the personal care assistance (PCA) program and some waiver services. The expanded law adds the following services subject to EVV documentation requirements:  

• Nonemergency Medical Transportation (NEMT)  

• Adult companion services  

• Adult day services  

• Adult rehabilitative mental health services (ARMHS)  

• Assertive Community Treatment (ACT)  

• Early intensive developmental and behavioral health intervention (EIDBI)   

• Integrated Community Supports (ICS)  

• Recovery peer support  

• All HCBS waivered services that are billed at hourly and unit-based rates  

Mandatory Compliance Training for High-Risk Services (SF 3861 Mohamed)  

Separate from licensing, providers must enroll with and revalidate their enrollment with Minnesota Health Care Programs (MHCP) as medical assistance providers to be reimbursed for services. The new law requires owners, managers, and supervisory employees of any agency that provides a service designated by DHS as high-risk to complete mandatory compliance training. Training criteria must include billing and service delivery requirements, fraud prevention measures, workplace safety requirements, and more.   

Early and Often HCBS Provider Compliance Team (SF 4595 Mohamed)  

The new law clearly outlines the Early and Often responsibilities, which include:  

• Delivering proactive and coordinated support to HCBS applicants through the application process and to license holders during the first year of operation.  

• Conducting an initial scheduled technical assistance visit three months after the 
  effective date of an initial license.  

• Conducting three unscheduled visits between 6-18 months of the license’s effective date.   

• Issuing a licensing and compliance review report (instead of a correction order) with recommendations for achieving and maintaining compliance if licensing violations do not endanger the health, safety, or rights of people served.   

HCBS Provider Technical Support (SF 4596 Mohamed)   

Home and community-based (HCBS) providers must understand complicated and overlapping local, state, and federal regulations, licensing compliance, new laws, and billing standards. The HCBS technical support team will help providers navigate the layers of administrative work to comply with all laws and regulations. The team must also:   

• Serve as a provider liaison and help desk for providers’ technical, regulatory, and operational questions.  

• Develop training and onboarding materials for home and community-based services 
  providers.  

• Collect data on home and community-based provider challenges.  

• Make recommendations to DHS regarding changes to the operations of the department or to the design and implementation of HCBS that would improve the delivery of services and improve program integrity.   

Responding to the Office of Legislative Auditor Reports   

• The new definition of “fraud” now references “illegal remuneration,” AKA “kickbacks.” DHS is also directed to update this definition through rulemaking (in response to the OLA report on sanctions related to kickbacks).   

• Technical changes to the DHS grant statutes make it absolutely clear what DHS’s responsibilities are regarding grant oversight (response to OLA report on DHS grant management).

Strengthening Program Integrity for the Child Care Assistance Program (CCAP)  

Spending
Who	Proposal	FY 26/27	FY 28/29
DCYF & MNIT	CCAP Investigators, County Grants, & Compliance Training	2,189	5,876

 
The DFL trifecta passed legislation in 2023 and 2024 that strengthened program integrity measures in CCAP. A new agency was created to take over the licensing and oversight of child care centers (the Department of Children, Youth, and Families). Additionally, DCYF now has a dedicated Office of Inspector General to conduct program oversight separate from DHS. In 2025, the legislature established criminal anti-kickback penalties for CCAP providers and invested in a statewide electronic CCAP attendance tracking system.   

In 2026, DFLers in the Senate advanced additional fraud-prevention measures in CCAP, even as the tied House did not include any anti-fraud policies for child care centers. The following investments in personnel and resources are the key anti-fraud provisions regarding child care centers:

Increased investigative capacity:   

Funds six positions at DCYF to expand investigative capacity, which doubles DCYF’s existing CCAP investigative capacity. This will allow DCYF to conduct more proactive, unannounced site visits to child care providers receiving CCAP.   

Expanding data analytics:  

Expands data analytics capacity with four new positions and investments in information technology. This aligns with the Office of the Legislative Auditor’s 2019 report that recommended a more proactive investigative approach to identify potential fraud before it occurs.   

Increasing local agency capacity for program integrity investigations:   

Expands counties’ capacity to investigate fraud through Fraud Prevention Investigation (FPI) Grants. This investment is a 35% increase in the grant funds available. Additionally, funding will support one new staff member to increase coordination and support for local agency grantees.   

Mandatory child care provider fraud prevention training:   

The new law requires fraud prevention training for all child care providers registered to receive CCAP payments. This provision includes funding for two CCAP training policy specialists, information technology costs, and curriculum updates to support implementation of the new fraud prevention training requirement.  

Improving Program Integrity for Autism Services for Children  

In 2023, the Senate DFL began work to reform Minnesota’s autism services system by appropriating funding to analyze how the state could thoughtfully reform the program without jeopardizing services for children.   

The study was released in 2024, and in 2025, the Senate DFL passed major reforms for autism providers, such as designating these services as “high risk” and implementing an autism provider moratorium. In 2025, DFLers also developed a provisional autism agency licensure process to serve as a stopgap until the legislature approves robust licensing standards.   

The legislature passed critical reforms again in 2026 to continue the work of protecting access to behavioral therapy services for children:   

• Updated the definition of “clinical supervision” to conform to Minnesota’s federally approved state plan amendment.   

• Required that EIDBI intervention observation and direction can only be provided by a qualified supervising professional (QSP) or Level I provider.   

• Established documentation requirements for EIDBI providers. Agencies must maintain comprehensive, consistent records documenting staff qualifications, training, supervision, and performance.   

• Each instance of EIDBI service must be documented in a progress note that includes the service type and date, clinical decision making and medical necessity, and provider signature and credentials. 

Enhanced Prepayment and Post Payment Review Process   

Savings
Subject	Proposal	FY 26/27	FY 28/29
DHS	Modernizing Program and Payment Integrity Safeguards    (prepayment review)	(85,572)	8,879

 
An enhanced auditing process for all Medicaid billing will begin in April 2027. This reduces the state budget by $85 million in FY 26/27 through a shift in spending. This shift in spending will result in a two-week delay in reimbursement for Medicaid providers.  

As part of the federal corrective action plan, Minnesota implemented this prepayment review process for providers offering high-risk services. The preliminary results showed the initial prepayment review of Medicaid claims prevented sloppy billing and reduced fraudulent claims.   

Other auditing measures that are now law:  

• DHS is authorized to conduct post-payment reviews to identify potential improper payments and seek recovery.  

• Managed care plans are required to conduct prepayment review of all claims and to publish program integrity metrics.

DHS Accountability (Optum report and program termination)   

• DHS must release the initial Optum report to legislators serving on the health and human services committees, without redactions or edits, except for redactions requested by Optum to protect proprietary information. Legislators or legislative staff who receive the initial Optum report must not disseminate or publicize any non-public data (SF 3861 Mohamed).   

• DHS is prohibited from terminating Medicaid programs without legislative approval. DHS must notify the legislature within 60 days and the legislature must schedule a hearing on the proposed action within 30 days of the notification. If the standing committees with jurisdiction over DHS advise DHS that the action should not be implemented as proposed, DHS must not implement the action until the legislature adjourns the annual legislative session that began after the committee’s vote.  

Medicaid Business Operator Accountability   

• As a condition of being approved to bill for Medicaid, provider businesses must annually purchase a surety bond.   

• An applicant or license holder who elects to receive publicly funded reimbursement for providing high-risk services must disclose whether the applicant received assistance in preparing the application from a paid third-party consultant (SF 3861 Mohamed).   

• DHS now has the authority to review health service and financial records through site visits when the provider has not yet submitted claims. This authority was authorized for EIDBI services in 2025; this provision expands the ability to all Medicaid providers.   

• DHS is authorized to complete a Pre-Enrollment Risk Assessment (PERA) as a condition of provider enrollment to bill for Medicaid services. DHS must use a risk-score framework as part of the assessment to identify service-specific fraud risk indicators. These indicators can include, but are not limited to, organizational readiness, financial stability, compliance history, and service necessity. DHS may deem the applicant ineligible and deny or rescind enrollment based on the assessment. 

Rate Reform and Billing Limits  

Savings
Subject	Proposal	FY 26/27	FY 28/29
DHS	Billing Limits – HCBS and BH	(8,873)	(18,166)
DHS	Customized Living Rate Modifications	(7,569)	(175,411)
DHS	Community Residential Services Rate Modifications	(275)	(45,233)
DHS	Integrated Community Supports Rate & Program Modifications	2,140	(4,236)
DHS	Market and Receipt-Based Rate Reform for Disability and Older Adults Services	(2,167)	(4,536)

 
The provisions that had the most significant impact on meeting the negative target included modifications to disability rates and the establishment of billing limits for certain services. Many billing limits aim to align services with a person’s needs. While the disability rate modifications recommended by DHS result from the corrective action plan approved by CMS.   

The corrective action plan outlines DHS’s commitment to enhancing fraud detection through strengthened expenditure and utilization reviews. Part of this work included the audit conducted by Optum. The preliminary Optum report highlighted several vulnerabilities and policy loopholes within Minnesota’s billing system and procedures.  

The Senate DFL did not accept all of DHS’s billing modifications. However, if Minnesota does not successfully complete the corrective action plan, billions of dollars of Medicaid funding are at risk. It is critical that the legislature address these billing vulnerabilities and loopholes – especially if new policies prioritize a person’s need over a provider’s profits.

Billing Limits for HCBS and Behavioral Health Services:  

Setting billing limitations for HCBS and behavioral health services reduced state spending by $36 million over four years. Some populations are overserved, creating a system of over-institutionalization even if they live in the community. While others are underserved due to a lack of resources. Many of the billing modifications prioritize a person’s needs and reduce opportunities for providers to overbill or falsify records for higher rates.   

For example, children with autism should not be over-medicalized. The new law limits intensive behavioral therapy services for children to no more than 40 hours a week. For provider-controlled mental health settings designated as high-risk, such as Intensive Residential Treatment Services (IRTS), reducing the standard service limit from 90 days to 30 days ensures continued compliance with medical necessity while also providing individuals a path to receive treatment beyond 30 days if needed.

Disability Rate Modifications – Customized Living and Community Residential Settings:  

Rate modifications in customized living settings (CL) and community residential settings (CRS) reduced spending the most, totaling about $220 million in FY 28/29. Reforming these rate methodologies attempts to equalize a convoluted rate system.   

• Customized living settings serve two different populations and have different rate methodologies. The new law equalizes the two population types served by CL providers by requiring CADI/BI recipients to have the same aggregate monthly service rate limits as Elderly Waiver (EW) recipients. However, the CADI/BI services will still be reimbursed at a higher rate as required by the recipient’s higher needs compared to individuals on EW.

• For CRS, one-to-one services will be based on a person’s needs, whereas currently there is no set limit on these higher-paid, more intensive services (shared staffing remains the same).   

 
Disability Rate Modifications – Integrated Community Supports:  

Integrated Community Supports (ICS) is a setting type that has frequently been in the news and discussed by federal officials for its susceptibility to fraud. ICS is a unique provider-controlled setting due to its structure, which offers semi-independent living for people who need either consistent or “as-needed” services. The existing ICS rate uses a methodology that doesn’t match its unique setting. The following program and rate modifications are now law for ICS providers:  

• No earlier than October 1, 2027, a new ICS rate method will be used. The method incorporates a direct service rate in addition to an “access” unit to account for on-call staffing and incidental, unplanned support needs.  

• Clear standards are outlined for on-call staffing and services, such as being required to respond within ten minutes to individuals who are physically present in the building and documenting each instance of on-call support.   

• Electronic visit verification (EVV) is required for documenting ICS services.   

• Case managers must review documentation for individuals in ICS settings every 120 days. If no incidental support encounters are documented, the case manager must determine if the ICS setting is appropriate for the care recipient’s needs.

Disability Rate Modifications – Market and Receipt-Based Services:  

Currently, there is no explicit limit on the administrative fees that may be charged for arranging or delivering these services. Examples of market and receipt-based services are chore services, transitional services, and assistive technology services. This arrangement has allowed providers to demand the maximum allowable rate, regardless of the actual cost of the specific task or service provided. This practice can inflate authorized costs and create inequities in the use of waiver funding. The new law does the following:  

• Clarifies allowable expenses for market-rate or receipt-based services, limiting administrative fees to a maximum of 6%.
  
  

Due Process for Medicaid Business Operators   
Payment withhold authority for Medicaid services must follow federal guidelines and is not subject to state law in Chapter 15. Minnesota law did not include a review process for Medicaid business operators to challenge credible allegations of fraud, as allowed by federal regulations. The 2026 human services supplemental budget bill establishes due process guidelines that maintain federal Medicaid compliance. The new law does the following:  

• Establishes an administrative review process for business operators who receive payment from Medicaid and were notified of a temporary payment withhold due to credible allegations of fraud.   

• DHS must present evidence to the administrative law judge under seal and the administrative law judge must review the evidence in private (in camera).   

• The administrative law judge must provide a recommendation on whether DHS established that there was a credible allegation of fraud.   

• After a payment withhold is imposed for 90 days, DHS must submit evidence to the administrative law judge to determine whether DHS or law enforcement is actively pursuing an investigation. This must continue every 90 days thereafter.   

• The recommendation of the administrative law judge is advisory and DHS’s decision to continue a withhold is final and not subject to appeal or reduction.