Lure of federal money leads state to embrace bloat, with little prospect for accountability
Very few people know it, but Wisconsin’s Medicaid program is in the housing business.
Not construction or real estate, but assistance in finding a home for any Medicaid recipient with a qualifying health or mental health issue and a qualifying risk of homelessness.
You won’t find a line item for Medicaid Housing Support Services in the state budget or related budget documents. It’s just one of 76 services, arrayed over three broader categories and tucked into what are 19 different programs under the Medicaid umbrella.
Until August 2025, Minnesota ran a similar but more ambitious Housing Stabilization Services program with Medicaid funding. Projected to cost $2.6 million a year when it began in 2020, the program was wildly popular, with a staggering $21 million in claims in its first year, $42 million the next, $74 million the year after that and $104 million in 2024.
In the first half of 2025, before the Minnesota Department of Human Services shut it down, HSS had already racked up $61 million in claims. Joe Thompson, first assistant U.S. Attorney for the District of Minnesota, said the “vast majority” of claims from the very start were fraudulent.
The revelations in Minnesota indicate what those of us who have reported on Medicaid for many years have suspected but have had a tough time proving: The amount of waste, fraud and abuse in Medicaid is far greater than anyone imagined.
Unlike Minnesota, where the reckoning that began more than a year ago continues, with billions of dollars in thefts uncovered and dozens of people imprisoned, there is resistance in the administration of Gov. Tony Evers to any sort of auditing or accounting of so-called “waiver services” — long-term care services that states can opt to offer using Medicaid money.
There is at least anecdotal evidence to support such an audit. An investigation by the inspector general’s office for the U.S. Department of Health and Human Services determined last July that Wisconsin’s Department of Health Services potentially made $94.3 million in improper or illegal Medicaid payments in 2021 and 2022 to providers of applied behavior analysis of children with autism.
Investigators extrapolated the estimate from the $18.5 million in improper payments they identified. They also identified a familiar pattern. When Medicaid agreed to fund autism analysis, DHS paid out $39.9 million for it in 2018. By 2022, billing increased to $53.7 million.
In September and December, the U.S. Attorney’s office in Minneapolis announced the arrests of more than half a dozen people in two autism treatment schemes involving more than $14 million in fraudulent Medicaid payments.
These sums are a pitifully small share of the outflow. Last year, the U.S. Centers for Medicare & Medicaid Services, known as CMS, estimated that states made $37.4 billion in improper Medicaid payments, a hefty 21 percent increase over the $31.1 billion in estimated improper payments the year before.
Ever careful not to suggest anyone is doing anything wrong, CMS does not use the word “illegal,” and it insists that nearly 80 percent of that $37.4 billion is made up of payments “generally not indicative of fraud or abuse.”
Most experts will tell you that annual CMS report is bunk. Throw a dart at any state’s acute, primary, long-term or waiver services lists, and you are likely to hit something illegal, fraudulent or, to use federal jargon, improper.
But even the most ardent reformers aren’t sure how much. With spending at an estimated $8.2 trillion, or more than $800 billion a year, for Medicaid over the next decade, it’s easy for little programs like Housing Support Services in Madison to get buried.
Federal money to subsidize housing customarily is administered by the Department of Housing and Urban Development, another bureaucracy historically taken advantage of, as Milwaukee’s city housing authority confessed to doing to the tune of $2.8 million last year.
It’s almost quaint to recall President Lyndon Johnson printing up the first two health insurance cards for former President Harry Truman and his wife, Bess, when Congress created Medicaid and Medicare as part of the Social Security Amendments in 1965.
The aim of Medicaid sounded modest: provide health insurance for low-income people, part of Johnson’s promise “never to ignore or to spurn those who suffer untended in a land that is bursting with abundance.”
We’ll never know if Johnson thought 70 million Americans would still be untended 61 years later. The reason is simple. Congress left the door open, expanding the program at least 20 times since then.
The program’s Section 1115 allows states such as Wisconsin to pitch new programs, such as Housing Support Services, and secure 60 percent federal funding if it can be somehow, even ephemerally, attached to Medicaid.
The result is federal and state taxpayers covering 40 percent of all births in America, half of all Americans under 65 with a disability and more than 60 percent of all residents in nursing homes.
In a delicious overlap, 13.6 million Americans eligible for health care through Medicare — the health insurance program for the elderly — also have Medicaid coverage.
The cost of Medicaid in 1970 was the equivalent of 0.5 percent of the U.S. gross domestic product. By 1980, it had nearly doubled its share of the nation’s economic output. By 2010 it had nearly quintupled, and by 2020, it was 3.2 percent of the GDP, more than six times the 1970 figure.
According to Medicaid.gov, Medicaid is the largest single item in state budgets, constituting an average of about 30 percent of total state spending. In Wisconsin it’s 32.7 percent, or $36,364,526,400 of the $111.1 billion total biennial budget for 2025-27.
The Badger Institute has tracked the Leviathan for nearly five years.
In Wisconsin’s 2026-27 fiscal year, Medicaid will cost a record $18.7 billion, split roughly 60-40 between federal and state funding. That is more than double the $9.2 billion cost for Medicaid in 2015-16.
Wisconsin’s Republican legislative majorities have turned back Evers’ proposals to expand eligibility for the program farther up the income scale — with the federal government promising to pay for 90 percent of the expansion. A resistance to the program’s seemingly unstoppable growth and the conviction that the federal government will not keep its 90 percent promise are just two of lawmakers’ reasons.
The spending increases don’t track with enrollments. Overall Medicaid enrollment at the end of January in Wisconsin was 1,249,864, down 25.5 percent from a peak of 1,676,787 in May 2023, when President Biden finally called an end to a health “emergency” that prohibited states from culling ineligible people from their Medicaid rolls.
At the end of that culling in 2024, however, there were still more than 163,000 more people on Medicaid in Wisconsin than there were in March 2020 at the onset of COVID-19, the Badger Institute reported. Even now, there are still 62,000 more on the rolls.
Despite the trimming, Wisconsin Department of Health Services Secretary Kirsten Johnson told the legislative Joint Committee on Finance in January that Medicaid would be $213 million over its state budget for the next two years.
Some of the overruns were due to the rising cost of prescription drugs, but much of it was due to increased costs of programs the Legislature could not have imagined in 1965.
Housing Support Services, as far as anyone can tell, is not at risk, nor are the grants to the eight non-profit homeless assistance providers serving the eligible across the state.
The Housing Support web page does not say how much the program costs or how much is each of the grants. The Badger Institute made a formal request of DHS for that information on Jan. 22.
We are still waiting for the information.
Mark Lisheron is the managing editor of the Badger Institute.
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