Walz Proposes Major Overhaul of Minnesota Human Services System

(KNSI) – Governor Tim Walz unveiled a proposal Tuesday to restructure how Minnesota administers human services in the wake of a fraud scandal that has rocked the state’s safety net programs.

Walz is calling for the elimination of managed care organizations from Medicaid, a consolidation of eligibility processes under state control, and an independent review of how social programs are organized across all levels of government.

“Systems built decades ago must evolve to meet today’s challenges,” Walz said. “This proposal begins the work of modernizing how we deliver human services so we can strengthen oversight, increase efficiency, and improve the quality of services Minnesotans rely on.”

At the heart of the plan is a move away from Minnesota’s current Medicaid structure. Roughly 45% of all Medicaid spending, and nearly 80% of basic care services, currently flows through eight Managed Care Organizations. Walz wants to replace that model with a single statewide Administrative Service Organization, which would handle administrative duties such as claims processing and provider services while all policy decisions remain with DHS.

Beyond restructuring Medicaid delivery, the proposal would shift eligibility determinations away from counties and into the state’s hands. Minnesota is among a small number of states that still operate a largely county-administered human services system. Under Walz’s timeline, the state would assume control of eligibility processes by July 1st, 2028, with a full transfer targeted for 2032. A pilot program would also test state administration of MnCHOICES assessments, which determine eligibility for long-term care, disability, and older adult services.

The plan also phases out contracted waiver case management, which helps people with disabilities and older adults access tailored services, by 2031 and funds a study on how that work should be structured going forward.

Separately, DHS issued a Request for Proposals seeking an independent consulting firm to evaluate the agency’s organization and operations, covering roughly 2,300 employees. That review was ordered by Walz last fall through an executive order focused on fraud prevention. It will also examine how counties and Tribal Nations deliver programs, including Medicaid, MinnesotaCare, behavioral health, housing support, economic assistance, child support, and childcare.

Federal prosecutors previously estimated as much as $9 billion in taxpayer money may have been stolen through social service programs since 2018. That figure came from Joe Thompson, a federal prosecutor who has since left the department.

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