DHS outlines supplemental budget to centralize Medicaid admin, boost program-integrity and curb spending growth

The Department of Human Services presented the governor's supplemental budget to the Senate Human Services Committee, proposing a set of administrative changes and program-integrity measures the agency says will streamline Medicaid and reduce fraud risk while producing biennial savings.

Alice Bailey, identified in committee as the budget director for the Department of Human Services, said the package includes roughly 35 proposals across transformation, integrity and targeted investments and seeks about $240 million in savings this biennium and larger amounts in future forecasts. "We have centered our budget around thinking about how we can transform the human services system to work better for people," Bailey said, adding that the administration wants to put more policy decisionmaking at the state level to reduce regional rule fragmentation.

Why it matters: The proposal would shift some eligibility and administrative functions currently handled by counties and some tribal nations to the state, with DHS proposing a phased transition for manual eligibility work beginning July 1, 2028. Bailey described the change as part of a longer-term roadmap to define the proper roles of the state, counties and tribes in program delivery and oversight.

Key provisions and examples: Bailey described a program-integrity package that would establish prepayment and post-payment claims reviews, predictive analytics and a data-driven provider risk assessment. "The idea that DHS needs a greater capacity to oversight — we absolutely do," Bailey said, noting the agency spends an estimated 2–3% of budget on administrative capacity and that underinvestment hampers oversight.

The presentation also proposed electronic visit verification (EVV) expansions, changes in billing units (including a proposed 15-minute unit for some services), rate alignment so payments better reflect services actually delivered, and a one-time $500,000 appropriation for an internal DHS structural review.

Concerns and questions: Committee members pressed DHS on several points. Multiple senators asked about widely circulated fraud estimates; Bailey said those figures are unsupported. "I would say the 9 to 18 billion again has never been based on any data that I've seen," she told the committee. Members also raised staffing and information-technology concerns at the county level and asked whether additional appropriation for systems modernization was included; Bailey noted set-asides for updates in the administration's plan and emphasized staffing and systems as constraints.

County and tribal partners asked for careful sequencing and assurances that any savings would not shift unplanned costs to local governments. Paul, a counties association representative, supported a comprehensive study of roles and responsibilities but warned that eliminating managed care organizations would have ripple effects on county purchasing and local programs.

What comes next: Committee leadership said the budget spreadsheet and bill language will be circulated before a planned Friday markup. Several provisions were laid over for possible inclusion in the budget package; no final votes or enactments occurred at the hearing.