To say Minnesota has had some fraud going on is an understatement. I don’t know that I’ve seen it mentioned much in local media, but it’s a big national story.

Colorado should beware taking its turn in this barrel.

First, some brief background. Minnesota sought (and received) Medicaid waivers during COVID to use taxpayer dollars to fund things like subsidized housing for recipients, which ended up an impetus for massive fraud. An MPR News article gives some context, but the sheer size of the numbers are what really popped out to me:

“According to the Minnesota U.S. Attorney’s Office, DHS [Minnesota Department of Housing Stabilization] had initially predicted the housing stabilization program would cost about $2.6 million annually but paid out more than $21 million in claims in 2021, $42 million in 2022, $74 million in 2023, $104 million in 2024 and $61 million in the first six months of this year.  [US Attorney Joe] Thompson said most of the spending turned out to be fraudulent.”

Birds of a feather

A natural question follows. Does Colorado have a similar program?  Like birds of a feather flocking together, both Minnesota and Colorado have a bad habit of expanding Medicaid, dating to the first expansion allowed by ObamaCare and continuing on up through COVID.

It turns out we do.  The story begins with House Bill 24-1322. While the bill doesn’t create a carbon copy of Minnesota’s Department of Housing Stabilization, it did start the ball rolling on something even bigger, tasking the Department of Healthcare Policy and Financing (HCPF) with studying the feasibility of creating a similar program subsidizing both housing and nutrition in Colorado.

From the bill:  “If HCPF determines that providing these services is budget neutral to the General Fund due to offsetting reductions in medical services and other expenditures, the department must seek federal authorization to cover the services by July 1, 2025.”

I looked briefly through the study produced by HCPF, and sure enough they concluded that this Medicaid expansion could be done without spending any extra money.  They also found that you could shuffle some existing services around, bundling them up for convenience.

If you’re wondering how more government-subsidized services could happen without spending more money, Senate Bill 25-308, which implements the changes into law, spells it out.  In broad strokes it’s more Medicaid “money laundering” with Colorado convincing the feds to give us money for something and then shifting state dollars to other priorities.

From the bill’s fiscal note: “Under the approved waiver, the state can now draw down federal Medicaid matching funds, and redirect the freed-up state funds to expand and enhance the services.”

Further down in the fiscal note, you see the kind of services we’re talking about include help with finding/keeping a home, housing vouchers, tenant support, and interestingly, services for those leaving prison like medication assisted therapy (methadone), case management, and therapy.

Holding the door open

There are a few issues I see here.  While expanding Medicaid doesn’t automatically cause fraud, opening the door wider so more government money can flow out certainly invites it in.

Interestingly, word searches for “fraud”, “waste”, and/or “abuse” return nothing from the 2024 bill, the 2025 bill, and the HCPF study.  I surely can’t be the only one to think that more spending can drive more fraud, but you don’t get any mention of it in the bills or the study.

To try and get a sense of what HCPF is doing to avoid becoming another Minnesota, I reached out to their spokesperson and got the following back:

“We constantly look out for fraud, waste and abuse (FWA) across all services & programs, but some programs or services are more susceptible to FWA than others. We have various processes/procedures in place for ‘high risk’ services to prevent inappropriate payments from going out the door.  Those preventive measures often include, but are not limited to, ‘prior authorization requests’ (PARs) to ensure the service being requested meets ‘medically necessary’ clinical criteria before the service is authorized. We also conduct pre- and post-payment reviews of claims to ensure/confirm the payments being made are or were appropriate. If something appears questionable or inappropriate, we launch a deeper investigation to determine if we need to recoup inappropriate payments. If we believe billing activity might be fraudulent, we refer those cases to the Attorney General’s office for further investigation and potential criminal prosecution.”

I don’t doubt HCPF takes this seriously, but I am betting Minnesota’s Medicaid people would’ve said the same, right up until the fraud scandal was exposed.

Growing government obligations

The expansion of this program has other problems.  Think about all the anguish we’ve heard over the last two years about the state budget.  Indeed, House Bill 1322 specifically included language that Colorado wouldn’t pursue the expansion if it required spending more state money, a feature on many bills that year.  Now consider all the anguish over changes to federal transfers via HR1 (the One Big Beautiful Bill Act), such as reduced SNAP payments to Colorado.

Putting aside the fact that we’re going to start spending before any money has actually been saved (why let a little thing like that get in the way), the bill puts us even more at the mercy of changes to federal priorities.  Have we not already learned our lesson about nationalizing the costs for state level policy?  I suppose not; the temptation to be the one handing out more government goodies without having to ask taxpayers for money is too great. Or at least it’s great until Congress doesn’t want to pay for Colorado’s choices anymore.  Then we either drop a program we’ve created a dependency for, or (the more likely scenario) the taxman will show up on your door, wanting more from you.

What Colorado is really doing here is growing government obligations, taking from state and national taxpayers to give to Medicaid contractors (one of the sponsors of the 2024 bill was Senator Robert Rodriguez whose wife, coincidentally enough, runs a company that contracts with the state to provide just the kinds of services outlined in the later 2025 bill).

We’re also growing the odds of fraud, waste, and abuse, along with risk from the vicissitudes of federal policy.

Let’s just hope Colorado isn’t the next Minnesota.

Cory Gaines teaches college physics and is a regular contributor to Complete Colorado.  He lives in Sterling on Colorado’s Eastern Plains.  He also writes at the Colorado Accountability Project substack.