DHS February forecast shows continuing Medicaid cost growth; $113 million IMD funding correction shifts costs to state

Alyce Bailey, budget director at the Minnesota Department of Human Services (DHS), told the Senate Health and Human Services Finance and Policy Committee on Wednesday that the February 2025 budget forecast projects continued growth in Medicaid and related forecasted programs and cited several drivers behind the increase.

The DHS presentation showed that for fiscal year 2026 about 55% of DHS funding is federal (roughly $14.0 billion) and 37% is from the state general fund (about $9.5 billion). Bailey said about 89% of forecasted spending is for medical assistance; other forecasted programs total roughly $718 million in state funding in FY26.

DHS highlighted four main drivers of the February forecast: increasing disability waiver spending; an acuity adjustment to managed‑care payments; growing spending for weight‑loss drugs added to medical assistance; and a correction in the behavioral health fund related to federal funding coding for some residential substance use disorder providers.

Dave Greenman, DHS chief financial officer, told the committee that in December 2024 DHS identified claims dating back to 2015 for a small number of residential substance‑use disorder…