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Over a decade ago, Rhett Murdaugh moved to St. Paul to live in sober housing. He had already relocated from Nashville to Pennsylvania for addiction treatment. There, he says his program’s leadership recommended he try Minnesota. 

“I could barely find Minnesota on the map. When they told me to come here I was like, ‘What?’” he said. “But it was because it's known as a hotbed of recovery.” 

Murdaugh, now 49, said he stayed clean for two and a half years before he relapsed on meth. 

A run-in with the law this February motivated him to seek help again. He checked in for an in-patient program at the Pride Institute — which says it is the nation’s first and leading addiction treatment center focused on recovery for LGBTQ+ people — and sought sober housing after.  

Living in a sober house is very beneficial for people in recovery, said Murdaugh. Up to 30 people might live together, all working on the same goals with oversight from a house manager. Murdaugh said social isolation contributes to many people’s addiction struggles, so communal living offers critical support, with housemates checking in on each other. 

“My favorite thing to say is, ‘I can get high on my own, but I can get sober with the community,’” said Murdaugh. 

Murdaugh said he relapsed after two weeks; he said he “kind of freaked out” about having to come up with rent money. Financial stressors contribute to his addiction challenges, he said. So after he returned to Pride for inpatient treatment, he was advised to attend Pride’s outpatient programs after. The center provided a no-cost stay in sober housing for its clients. 

“The therapist said, ‘Just go where it's taken care of, get on your feet, and then, you know, you can ease into the real world,’” said Murdaugh. 

In June, he moved into a spacious, queer-friendly house in the Lowry Hill East neighborhood of Minneapolis. But then he got notice in late July that he would soon have to leave — or pay full rent. The housing support was now deemed illegal by the state. 

Minnesota lawmakers last session passed an anti-kickback law that went into effect Aug. 1. It prohibits service providers from offering financial incentives to clients or entities that send them clients. One provider estimates thousands of Minnesotans have lost access to sober housing as result. 

The change is part of the state’s attempt to address concerns about potential fraud in social service programs. However, people in the recovery community warn it’s already having a disastrous effect on addiction treatment in Minnesota. 

Murdaugh said people didn’t have enough time to find solutions. 

“Everybody was scrambling. People went out. People relapsed. One of my friends is in a different program and he had seven days to get out of his house, and now we can't find him. Just things like that,” he said. 

Recovery community says this law hurts people  

For years, it’s been common for many addiction treatment centers in Minnesota to partially or completely cover the cost of sober housing for people in recovery as they attend outpatient programs. That could be in the form of a housing stipend or placement in a rented bed. 

Service providers fear the changes brought on by the new state law could bring the worst. 

“My mind instantly goes to, you know, death. There was a peace of mind of being able to help support people with housing,” said Meghan Bang, director of utilization review management and compliance at the Pride Institute. 

Bang said many of Pride’s clients who need housing assistance don’t have anywhere to go. She estimates around 75 percent face housing insecurity. 

People in the recovery community said people are ignoring their recovery to instead search for jobs and apartments, which might be a challenge as people might have evictions, poor credit scores, or poor physical and mental health related to their substance use. 

“Normal individuals working an entry-level job can't find an apartment and budget well enough to support themselves, so how are my clients going to figure it out? They're behind the eight-ball on every front,” said Margie Pierce, owner of a sober house and addiction treatment center in the Twin Cities. 

“But if they can live for free for, say, nine months, and they get a part-time job, they might be able to save six grand and then they might have a shot at it,” she added. 

Pierce estimates around 80 to 90 percent of all people in sober housing across the state relied on housing stipends. Without those funds, she expects many sober houses will close. 

Around 30 houses have already closed since Aug. 1, according to Pierce, who said she’s in contact with many other owners. 

Service providers expressed concern that systems already at capacity — homeless shelters, hospitals and inpatient programs — will be stressed taking on their load. Other programs that clients could have relied on have been cut, too, like the housing stabilization program. 

Overdose deaths disproportionately impact older Black men. Few programs in Minnesota exist to support them

'We had concerns': Social services leader previously heard about housing fraud issues

Others say change fights fraud and ensures better outcomes for patients 

State leaders have added more safeguards and oversight in government programs after several high-profile fraud cases in recent years, including at two addiction treatment centers, 

 and NUWAY Alliance. The investigations exposed programs alleged to have cost taxpayers hundreds of millions of dollars with little oversight. There was extra urgency as the state is expected to face a $6 billion deficit in the 2028-29 biennium.  

“Given the year that we have been experiencing with that, this was the best solution we were able to come up with for the session,” said State Rep. Joe Schomacker, R-Luverne. 

In other states, addiction treatment has been fraught with fraudulent billing. The “Florida shuffle” — named after Florida but prevalent in other states, too — is a notorious scheme where rehab centers and sober houses recruit drug users and cycle them through their doors so they can bill insurance for services. In Arizona, officials said 

 out of at least “hundreds of millions of dollars” and kidnapped Indigenous people to fill their books. 

Minnesota officials say housing assistance amounts to “an illegal incentive” for clients and entities that send them clients.

“If a provider offers ‘free’ housing to an individual but conditions it on enrolling in services with them only, it limits individual choice and is ripe for fraud or billing for services not required,” a Minnesota Department of Human Services spokesperson told MPR News in an email. 

There was already a federal anti-kickback law in place. Having a state counterpart simply allows Minnesota officials to enforce it, according to the Department. 

It also clarified the law. Minneapolis-based NUWAY Alliance, a longtime leader in addiction treatment in the Twin Cities, had offered housing assistance for years, so other service providers said they followed suit, believing there was no issue and that they had a loophole to the federal statute. 

Officials have since opened an investigation into NUWAY and alleged the nonprofit paid kickbacks and double billed Medicaid. In June, NUWAY agreed to pay $18.5 million in a settlement with the federal government, in part due to violating the federal anti-kickback law. 

Carmichael Finn, executive director of Recovering Hope Treatment Center in Mora, Minn., has long been vocal against direct housing assistance because he said it’s unethical. Finn said people will choose programs based on rent support, rather than what is clinically recommended, and participate in more hours of treatment than needed. He pointed to issues in other states as a worst-case scenario. 

“You had clients purposely relapse, just so they could get quote-unquote ‘free housing’ for another six months,” he said. 

Recovering Hope has state licensure to be a “board and lodge” facility, a more intensive kind of sober housing able to receive government funding. For people who don’t need that level of care, Finn said case managers help them find stable housing.

Still, Finn doesn’t agree with the new law because it was rolled out without a transition plan for addiction treatment centers and people in recovery. While sober housing operators could previously apply for “board and lodge” licensure to access funding, the state is no longer accepting applications and will sunset the program in 2027. 

Though the Minnesota Department of Human Services plans to transition to a “certified recovery residence” model, which would allow sober houses to access state funding, some worry the process will take too long. 

People in the recovery community said they don’t feel treatment centers are coercive, but they are concerned about how expensive it is to stay in a sober home without subsidy. Several people said $750 per month is typical for a shared bedroom in a house, which is hard to afford on part-time income or public assistance, and it doesn’t match what rent is like on the open market. 

“If it had been a normal living price, then people could probably do it on their own. They wouldn't have to be doing scholarship beds and finding ways to get it paid for with insurance,” said Murdaugh. “I feel like it's another one of those things where, when insurance is paying for it, it's always more expensive.” 

Pierce, who has run Fellowship sober house since 2018, argues sober houses operate on slim margins and the cost is justified. She said there are considerable costs to maintain the houses, which she says tend to be older and centrally located in accessible parts of town. She also said rent includes all utilities, and owners often need to replace mattresses and other household items.

The Pride Institute is covering the cost of beds for people in their outpatient programs until the end of October.

Murdaugh said he’d be finding an apartment with a few others from his sober house. With evictions on his record, he’s relying on his friend’s good credit score and rental history. 

Mack Walsh, 32, moved into a Minneapolis sober house in July and had planned to focus on recovery for several months. Like Murdaugh, Walsh said they struggled with sobriety their first time out of inpatient treatment because it was hard returning to work and being alone. They’re going to aim to pay for sober housing out of pocket, though they’re unsure yet how. 

“I don't actually know what to do right now,” said Walsh. They’re taking things day by day. 

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For decades, addiction treatment centers in Minnesota covered sober housing costs for people in recovery. State officials recently deemed such assistance an illegal kickback, leaving many now in the lurch.

They wanted to get sober. A new state law is making it harder

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