Some question whether Minnesota overpaid insurers as a way to attract more federal matching dollars.
The state Department of Human Services said Monday it will hire an outside auditor to examine how it paid private insurance companies to cover low-income Minnesotans on Medicaid between 2003 and 2011.
The unprecedented move comes as the rate-setting process is under scrutiny by federal investigators and has drawn fire from state and federal officials in the past year.
At issue is whether the state may have set higher rates for Medicaid, the health care program for the poor that draws a federal match, to subsidize a state-paid health plan that extends coverage to single adults who didn't qualify for Medicaid.
Department of Human Services Commissioner Lucinda Jesson said in a letter to legislators that she hopes an independent analysis will "address, once and for all, whether the state's payments to those contractors were higher than the amounts allowable under state and federal law."
The audit, which went out for competitive bids, will cost at least $50,000. Jesson said in an interview that the money likely will come from the Medicaid program. Results are expected by mid-November.
Julie Brunner, executive director of the Minnesota Council of Health Plans, said in a statement that the health plans "support transparency, and will continue to do so."
"The state sets the rates paid to health plans and [the federal government] approves them," she said. "If DHS has any questions about the rates between 2003 to 2011, asking for a review by an independent party is a reasonable action on the part of the commissioner."
The issue came into the spotlight after UCare, one of the state's four largest managed-care plans, voluntarily returned $30 million to the state out of its excess reserves in 2011. Unlike the other health plans, UCare deals exclusively with public programs, Medicare for seniors and Medicaid.
The state initially kept the entire amount, describing it as a donation, but under questioning from federal regulators and lawmakers decided to return half to the federal government.
Last year, UCare, Medica, HealthPartners and Blue Cross and Blue Shield of Minnesota returned a combined $73 million to state and federal taxpayers as part of a deal to cap their profits on state programs at 1 percent.
Jesson, an appointee of Gov. Mark Dayton, a Democrat, said the timeframe of the analysis was not motivated by politics. It spans the tenure of former Republican Gov. Tim Pawlenty, who is said to be under consideration as a possible running mate for Republican presidential candidate Mitt Romney.
The last time the federal government issued guidelines on rate setting for Medicaid was 2003, Jesson said. And Pawlenty discontinued state-funded General Assistance Medical Care in fiscal year 2011.
"That seemed like appropriate bookends," Jesson said. "We think there's bipartisan support for having an outside agency look at a lot of serious questions."
Jackie Crosby 612-673-7335