Federal authorities are investigating whether Minnesota state government has wrongly received excess federal funding for its Medical Assistance program, a safety-net source of health insurance coverage for poor and disabled residents.
Lucinda Jesson, commissioner of the Department of Human Services, confirmed the investigation Tuesday during comments at a state House of Representatives committee hearing.
The hearing featured testimony from David Feinwachs, a St. Paul attorney who formerly worked for the Minnesota Hospital Association. Feinwachs prominently displayed for legislators a page from a lawsuit he filed last year that suggested the state manipulated Medical Assistance rate certifications to unjustly obtain federal funds.
Feinwachs’ lawsuit in state court was dismissed earlier this year. Legislators on the committee pointed out Tuesday that the investigation referenced by Jesson might have been prompted by a separate federal whistle-blower lawsuit, where such inquiries are mandatory.
“I don’t know the scope of their investigation, or what they’re looking at or, frankly, how serious it is,” Jesson told legislators, adding that she learned of the investigation last summer and could not say which branch of the government was investigating. “We are fully cooperating.”
This year, the state and federal government are spending $3.3 billion to provide care through the Medical Assistance program, Minnesota’s version of Medicaid. Next year, those governments plan to spend $3.6 billion on the program, which provides coverage for about 733,000 Minnesotans.
WHAT’S AT ISSUE
The majority of Medical Assistance recipients have their care managed by private HMO health plans. For more than a year, Feinwachs has been raising questions at the Capitol about whether state dollars have wrongly inflated the profits and financial reserves of the HMOs, including those operated by Blue Cross and Blue Shield of Minnesota, HealthPartners, Medica and UCare.
Jesson told legislators she could not say whether the investigation creates a financial risk for the state – or what the size of the risk might be. But Rep. Tom Huntley, D-Duluth, said he believed the filing of a federal whistle-blower lawsuit prompted the inquiry.
“My understanding is that someone has filed a court case and that…the federal government must investigate,” Huntley said. “That doesn’t mean we’ve done anything wrong.”
Such suits typically are kept sealed, so Feinwachs said during a break in the hearing Tuesday that he couldn’t say whether he was or was not involved in any such lawsuit.
Rep. Steve Gottwalt, R-St. Cloud, said he didn’t know whether a whistle-blower lawsuit has been filed but that he wouldn’t be surprised. He added that the alleged wrongdoing likely would have spanned several administrations and predated Gov. Mark Dayton, a Democrat.
“This is not a partisan issue,” Gottwalt said after the hearing. “We need to learn more.”
Larry Bussey, a spokesman for Medica, said he could not comment on whether his company has been contacted as part of the federal investigation. But he added: “We’re not aware of any wrongdoing involving the certification process.”
QUESTIONS RAISED
During the committee hearing, Feinwachs raised questions about a decision last year by Minneapolis-based UCare to give back $30 million to the state because the plan’s profits from Medical Assistance were greater than expected. One reason for the extra profit, UCare officials said at the time, is that in 2010 Minnesota suspended a separate health insurance program for low-income residents called General Assistance Medical Care.
State and health plan officials say it’s been known for years that HMOs managed care for GAMC recipients at a financial loss while making a profit on Medical Assistance. But Feinwachs questioned whether federal officials knew about this dynamic.
“Do we all agree that the federal government knew that this was happening?” Feinwachs asked during the hearing.
Legislators should have raised more questions last year about the UCare payment, Feinwachs added. One question, he said, is: Why didn’t other HMOs make a similar contribution since they presumably also benefited financially from the elimination of GAMC? Another question: Why didn’t the federal government get half of the $30 million?
On this point, Feinwachs showed a copy of a March 2011 email from Jesson to another state official about the UCare payment that said: “In order to have a good chance of keeping all of this money, it must be characterized as a donation. If a refund, feds clearly get half.”
She closed the email by writing: “I thought we were going to handle this through phone calls?”
Jesson responded that she thought the payment should be termed a donation because there was nothing in UCare’s contract that would compel them to make the payment. She said she negotiated with other HMOs to achieve savings through future contracts, rather than donations. And as for the email comment about limiting discussions to phone calls, Jesson said it referenced a push she was making across the department for more person-to-person communication rather than through emails.
Feinwachs obtained emails and other documents from a variety of public sources including the recently dismissed lawsuit, which he filed in Ramsey County District Court in February 2011. He alleged that the Minnesota Council of Health Plans – the trade group for health insurers in the state – had interfered with his employment relationship with the Minnesota Hospital Association.
LEGISLATORS REACT
Legislators eagerly picked up on some of Feinwachs’ themes during the hearing.
Rep. Glenn Gruenhagen, R-Glencoe, asked Jesson why more and more money is going to HMOs when payment rates to health care providers have been flat. Jesson responded that enrollment growth has been a factor in rising HMO payments, while health plan officials said rates to doctors and hospitals have been flat because of the Legislature.
But on the question of whether the state has gone too far in trying to obtain federal money for the Medical Assistance program, Huntley said he hoped the Department of Human Services had been aggressively pushing the limits. That’s because Minnesota, overall, gets back less money from the federal government, Huntley said, than it contributes by way of federal tax revenue.
“We’ve got a floor full of people…trying to figure out how to maximize our federal share,” Huntley said. “If we’re not pushing the edge, then we’re not doing our job.”
But Sen. Sean Nienow, R-Cambridge, had a different take on the issue. “To spend taxpayer money that is not supposed to be spent is stealing,” Nienow said in a news release. “We must first address the current investigation and then pass legislation to prevent future fraud.”
