Committee report: Adult Day Services

Adult Day Services Hearing Date: December 17, 202593

Background:

Adult Day Services (often referred to as adult daycare) are designed to provide “community integration,” particularly for older individuals who are living with disabilities and who qualify for Medicaid (Medical Assistance or MA) disability waivers. People receive 6-12 hours of care a day. The focus of the care is on health and social needs in a center that participants visit during the day.

Stories alleging fraud in adult day services and connections to the Feeding Our Future scheme have circulated for years. The Committee wanted to know more about DHS’ oversight of this service, as it was one of the 14 high-risk programs designated by DHS. The day before our hearing, DHS announced a two-year moratorium on new adult day service providers effective February 1, 2026. The Committee questioned the agency on the red flags and the lack of oversight of provider enrollment prior to this action.

Finding: DHS could not justify the significant mismatch between growth in the number of individuals receiving services and the growth in adult day services providers.

As DHS testified in the hearing, current provider capacity exceeds current and projected service needs. This was the key reason DHS belatedly implemented a moratorium on new service providers.

Over the last 10 years, there has been approximately 7% growth in the number of individuals receiving services, while there has been an astonishing 43% growth in providers. This mismatch is a significant red flag for fraud. Legislators focused much of their discussion around this key point and found that the agency has long been aware of this dichotomy between the number of recipients and the number of providers.

Rep. Hudson: “I’m trying to understand how the adult day services capacity of providers could exceed the need. I would think that the providers would be generated by the perceived need in the community as opposed to people setting up themselves as providers and then looking for somebody to fill up those spaces. How do you get established as an adult day provider in the first place if there is nobody you need to take care of?”

Deputy Commissioner Connolly: “Depending on the service there may not be a requirement to have a general service need demonstrated for a provider to be approved or to seek a licensure.”

Inspector General Clark: “This is a very important point. As a state we need to look at potential needs assessments across the board for new Medicaid businesses that enter our programs. I think, unfortunately, the Adult Day program did have a needs assessment that was required but that was removed from statute last session, I’m trying to figure out why that was the case… One thing I’ve thought about and kicked around is just a general needs assessment for all new

93 YouTube video, House Fraud Prevention and State Agency Oversight Policy Committee 12/17/2025.

Medicaid businesses in this state. You need to demonstrate that there is a need for your services before we allow you to open up and get licensed. I think that would help with this excess capacity issue we are seeing.”

With the agency admitting they saw this red flag, along with identifying basic oversight gaps, the Committee asked how long this was known before action was taken in 2025.

Rep. Anderson: “At what point did DHS notice this, was it before the last 3 or 4 months? It had to be on going over the last 5 or 6 years. This is a huge red flag.”

Deputy Commissioner Connolly: “The license capacity has outpaced the need in the last several years, so we’ve seen that the number of participants has grown by about 7% in the last 10 years, licensed capacity has grown by about 43%... We wish we had identified any concerning trend sooner, but I think we’ve kind of communicated that our tools were really not up to the enormity of what we were facing.”

Finding: DHS admitted that it was because of the immense pressure from adult day providers and legislators that approvals for new providers were given, despite the lack of demand.

The questioning shifted to why approval for new businesses continued and why action wasn’t taken sooner.

Chair Robbins: “My concern is that when the Dept. has the ability to regulate and approve these applications, why on earth are you approving all these applications that basically fill out a form. Why have you allowed it to get so out of whack…If you know there isn’t demand, why are you greenlighting providers to start billing Medicaid?

Commissioner Gandhi responded that DHS has put temporary moratoriums in place to try and stop the increased risk of fraud in adult day services. DHS is given authority to approve providers based on what is in statute. In regard to the growth of providers, Gandi stated:

Commissioner Gandhi: “In fact, DHS faced a lot of pressure from legislators and the public on not going fast enough and not getting enough providers licensed or approved or enrolled as providers.”

Chair Robbins: “So who is pressuring you to approve providers?”

Commissioner Gandhi: “It would be a whole host of legislators and providers.”

Gandhi said that provider applications were experiencing a backlog and the provider applicants had been pressuring DHS to approve their license for weeks because “people need care.”

Finding: This revealed a pattern similar to what occurred in the Feeding our Future Fraud scheme and should have immediately activated higher scrutiny and investigation by DHS.

As was well-documented in the hearing with the Minnesota Department of Education (MDE) on Feeding our Future, the fraudster in the case sued MDE for failing to approve new site applications fast enough.

This pressure from providers and lawmakers to approve new providers should always be considered a red flag that demands higher scrutiny of a program.

Finding: DHS officials view Medicaid as a trust-based system, and take it as given that trust may be violated.

Despite assurances over several hearings, and statement from Governor Walz that fraudsters will be caught and held accountable, DHS confirmed what the Committee already suspected: Medicaid in Minnesota has been treated as a trust-based system.

Rep. Anderson: “What are you doing about attendance records? Counties receive lots of pressure in regard to senior care. We don’t know if they are getting 8 hours or 12 hours of care.”

Inspector General Clark: “Medicaid is a trust-based system. We do not have the staff or the technology to look over everyone’s shoulder. We need to trust providers that they are doing the right thing.”

Commissioner Gandhi: “Looking forward in the future, perhaps the legislature wants to consider electronic visit verification or something like that. I would be interested in discussing that in the coming session.”

Summary:

It is clear that that DHS ignored the obvious mismatch between demand and supply for Adult Day Services, permitting exponential growth in the number of providers due to pressure from providers and some unnamed legislators to approve and enroll new providers in the program.

This was the same tactic that Feeding Our Future fraudsters used to pressure MDE to approve new meal sites, except they took the additional step of suing MDE to force approvals.

Any time the growth of providers outpaces growth of demand for services, or agency officials are pressured to approve new providers, it is incumbent on the agency to pause enrollment and review the entire program. This is one of the many ways the Walz agencies turned a blind eye to obvious signs of fraud and permitted millions of taxpayer dollars to be spent without adequate oversight.