This housing program collapsed as fraud concerns rose. Disability advocates say it's left a gap
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Dionne Swanson has always wanted an art studio. For nearly two decades, the 50-year-old has been trying to move out of her group home and into her own apartment to give her more space to do just that.
“I have ideas, but I need a helping hand to help me do it,” said Swanson, who has autism and other physical disabilities. “I want to stretch out and not be so confined to these four walls.”
Swanson had been looking forward to some reprieve. Last year, she was finally connected with a Housing Stabilization Services provider, a case manager of sorts paid through Medicaid to help people with disabilities and those experiencing homelessness find and maintain housing. But shortly after, the Department of Human Services shut the program down, citing credible allegations of fraud.
“The termination of this program, while regrettable for those who need these services, is the necessary step at this time,” James Clark, the inspector general with DHS, said at the time.
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As many as 20,000 people were enrolled when the program shut down at the end of October in 2025. But DHS hasn’t been able to determine exactly how many people were actually using the service. Investigations uncovered the use of artificial intelligence in claims and enrollees not signed up for or receiving services.
Housing Stabilization Services was meant to be a new way to combat homelessness and provide new housing options for people with disabilities in Minnesota. Unchecked growth and fraud concerns led to that abrupt cancellation last year.
Many disability advocates and lawmakers still wonder how the program could have made a positive impact if proper guardrails and oversight had been put in place — and if it could be revived in some fashion to help the intended population.
“I think this program could have been amazing,” said Adrianne Gould, an HSS provider who raised concerns about the program to state officials and lawmakers years before the program shut down.
New way to combat homelessness
A decade ago, the Center for Medicare and Medicaid Services announced new guidelines for when Medicaid could be reimbursed for housing-related services. The goal was to create more community integration for people with disabilities, older adults and those experiencing chronic homelessness.
Minnesota jumped at the chance. In 2020, it became the first state in the country to roll out a new program under these guidelines, called Housing Stabilization Services. Receiving support to find stable housing was now considered to be part of healthcare.
Prior to the program’s launch, Minnesotans could only access home and community-based services through disability waivers. Through the program, anyone in Minnesota on Medical Assistance could access those services. Providers helped people with disabilities and those experiencing homelessness find and apply for new places to live, negotiate with landlords and administer tenant training to prevent evictions.
“It was going to help people live their best life,” said Tony Lourey, a former state senator and Human Services commissioner who sponsored the bill that created the program. “Finding a solution that was bipartisan and widely embraced as a really valuable tool in the toolkit for combatting homelessness and providing better services to people with disabilities was transformational. It was met with a great deal of excitement.”
Four years later, the cost for housing stabilization skyrocketed from the original annual estimate of $2.6 million. In its first year, the cost of the program jumped to more than $20 million. By 2024, it hit $104 million, according to federal prosecutors.
A ‘loss of trust’
In 2025, KARE 11 published a series of reports that found some HSS providers were billing for services never provided, used AI to generate fake claims and, in one instance, billed Medicaid to provide services to someone who had already died.
By August, the Human Services department announced the program’s termination. The following month, federal prosecutors charged the first eight people for their roles in a massive fraud scheme tied to HSS. To date, 22 people have been charged with fraud in relation to Housing Stabilization Services and 15 have pleaded guilty.
“We are at this crisis now where we are the laughing stock of the nation,” said Rep. Mary Franson, R-Alexandria, at a committee hearing last year. “Now there are some consequences that are going to be paid. Do I like it? Absolutely not.”
Medicaid is Minnesota’s largest source of federal funds.
“A revenue source like this at this scale had the potential to really revolutionize the impact of our overall strategy to address homelessness,” said Will Lehman, the homelessness prevention area manager for Hennepin County.
But some county workers and even some housing service providers had been warning the state about problems years before the program shut down. When Gould, a longtime advocate for homelessness prevention efforts, decided she wanted to start her own Housing Stabilization program to help people in her community, she assumed she needed to obtain a license. She was told all she needed to do was fill out an application.
“They didn’t ask for a resume, didn’t ask for anything. They just said that you needed to have knowledge in the housing industry,” Gould said. “My program ran from 2021 to 2025 and there was not one time the Department of Human Services asked for a timesheet.”
She added, “There was never a time someone came and even knocked on our door to see that we were an office that existed.”
Gould wrote to lawmakers, the Attorney General’s Office and Department of Human Services staff about problems she was seeing in the program. But she rarely heard back.
“There was no response to it, there was no acknowledgement of it,” Gould said. “There’s a loss of trust in the government’s ability to take care of taxpayer’s dollars and also to take care of constituents who are deserving of the services that are available to them.”
In October, the state agency said it would withhold payments from Gould’s company, LOGO Community Support Services.
A class-action settlement
Life in Swanson’s New Hope group home is restrictive. Swanson has a 6 p.m. curfew and has to be in bed by 10 p.m. each night. Due to mobility issues, she’s stuck there until the morning staff come to get her. The narrow hallways in the house make it difficult for her to maneuver her motorized wheelchair out of her room on her own.
For years, Swanson told her case managers that she wanted to live somewhere where she could have more independence, to no avail.
She eventually signed on as one of the named plaintiffs in a decade-long class action lawsuit against the Department of Human Services. It claimed the agency over-relied on group home settings and made it more difficult for people with disabilities to live on their own.
“I want more privacy. That’s really important for me and being able to go out a lot more frequently without time restriction,” Swanson said.
The plaintiffs, represented by Mid-Minnesota Legal Aid’s Disability Law Center, and the agency reached a settlement agreement in 2023. As part of that, state officials agreed to offer information about Housing Stabilization Services to people living in group homes and other home and community-based settings.
Now that process has “ground to a halt,” said Eren Sutherland, the director of the Minnesota Disability Law Center and an attorney on the case.
“I am concerned that with the cancellation of Housing Stabilization Services and the other threats to our service system for people with disabilities that we will see more institutionalization and less community integration,” Sutherland said. “That is my fear.”
In a statement, a spokesperson for the Department of Human Services said the settlement agreement expired in June and noted, “DHS provided guidance to case managers to consider what other services were available to meet the unique needs of individuals who had been accessing HSS.”
Sutherland said attorneys with the Disability Law Center believe the termination of Housing Stabilization Services was a violation of the settlement agreement.
The program had relieved county case managers who often have caseloads that far surpass the recommended amount and don’t have resources to help their clients find and maintain housing.
“The role for a case manager when somebody indicates that they would like to seek different housing is really more of a referral role,” said Debbie Ackerman, the human services area manager for Hennepin County. “Part of it is that they don’t have time because of all of the other pieces of disability waiver services.”
‘What are the chances?’
Fraud in Minnesota’s social services was used by the Trump administration as justification for a federal immigration enforcement surge this winter, which resulted in two citizen deaths and the detainment of hundreds of U.S. citizens.
Since February, citing fraud concerns, the federal government has deferred a total of $550 million in Medicaid funding to Minnesota. On Tuesday, federal officials announced they would not be reimbursing Minnesota for at least $112 million.
As part of the state’s latest Olmsted plan, Minnesota’s blueprint for helping people with disabilities live in the most integrated settings possible, the Human Services department plans to replace and strengthen HSS services. Little detail has been offered as to how.
“DHS is exploring options to design a new housing benefit and intends to work with a consultant in 2027 to collect community feedback,” an agency spokesperson said in a statement.
The federal government and the state Legislature would still need to approve any new program.
“Housing stabilization was needed for years,” Sutherland said. “We finally had it and now getting something to replace it and then getting it funded and approved, what are the chances, right?”
A year after the state terminated Housing Stabilization Services, Swanson is still living in the group home she’s tried to leave for nearly 20 years.
“Am I ever going to get a chance?” Swanson said. “I stay positive ‘cause I have to, but sometimes I’m running low. I’m still stuck here.”
