Responsible stewardship of public dollars is Job One for state lawmakers. Knowing with precision where tax dollars are spent is critical for providing the accountability that voters demand. That’s especially important for one of the biggest items in the Minnesota state budget — the roughly $5 billion in state and federal funds paid to private health insurers each year to manage publicly funded medical assistance programs.
That’s why a report released this week by the respected Office of the Legislative Auditor (OLA) fell short of expectations. In 2012, lawmakers tasked Jim Nobles’ staff with doing a deep dive into the books of the state’s powerful, private nonprofit insurers — Blue Cross Blue Shield, Medica and HealthPartners. The goal: to help lawmakers better understand how public dollars for these programs are spent and to address growing concerns that managed-care companies had long been overpaid by the state. A 2012 congressional hearing put a national spotlight on Minnesota managed-care costs, and a 2013 state report concluded that profits had often exceeded state-set targets.
OLA staff members delivered on part of their assignment. Their report provided greater insights into administrative expenses. But the auditors did not complete a critical part of their assignment: hiring an outside firm to scrutinize where most managed-care program funds are spent — on health care.
Nobles told lawmakers that plans to hire an outside auditing firm fell through when a conflict of interest for the firm surfaced. The OLA then used internal staff members to break off part of the task: evaluating the insurers’ administrative costs paid for by the state.
The audit did not reveal the headline-grabbing “gotcha’’ that some insurance critics had predicted. Administrative costs for the four insurers averaged a respectable 5.6 percent of total medical and administrative public-program costs in 2012, the year evaluated. But some administrative expenses had been improperly categorized, so auditors recommended sensible legislative changes. They also credited the state Department of Human Services for money-saving changes, including competitive bidding.
But the bulk of the spending on medical care did not get OLA scrutiny. On Tuesday, Nobles asked lawmakers if they wanted to spend the money set aside for this task. The answer should be yes, and lawmakers must also ensure that there are ongoing resources to fund deep audits of the sprawling, expensive program.
A March 4 report from the federal Government Accountability Office (GAO) said states have done inadequate auditing of HMOs that oversee medical assistance programs. The national spotlight made Minnesota the “poster state” for this. For program integrity, the GAO directed states to ramp up audits. Minnesota should be moving forward, not stopping.