WASHINGTON -- Former Minnesota Gov. Tim Pawlenty defended his administration on Friday against allegations of financial impropriety that have surfaced in two congressional probes, saying that the state did not overpay private contractors providing Medicaid services.
In his first public remarks on the investigations, the two-term Republican governor said that "I have no indication or reason to believe anything was done incorrectly or overpaid."
The federal inquiries into the state's use of Medicaid dollars has become a political football between Republicans in Congress and the administration of DFL Gov. Mark Dayton, which has said that the problems arose on Pawlenty's watch.
The dispute also comes as Congress looks for ways to eliminate fraud and curb costs in the $457 billion Medicaid program, which is slated to expand dramatically under President Obama's health care overhaul.
Pawlenty made his remarks during a phone conference with Minnesota reporters organized by the Republican National Committee (RNC) to criticize Obama's economic record as the president visited the Twin Cities.
Investigations by the U.S. House, Senate and the Justice Department are looking into allegations that the state has been overbilling federal taxpayers for Medicaid services to cover losses in other state-run public health programs.
The probes have put DFL Gov. Mark Dayton on the defensive about his administration's plans to keep a $30 million payment to the state last year from UCare, one of four state Medicaid contractors.
The state has agreed to share the money with the federal government, which foots half the bill for Medicaid services. But the dispute led to questions about whether the UCare payment was a reimbursement for systematic overpayments in the past, stretching into the Pawlenty era.
In a letter this week to committee investigators, state Human Services Commissioner Lucinda Jesson defended changes implemented by Dayton, saying that "our focus has been on changing course rather than investigating the past."
Jesson said the Dayton administration has used competitive bidding and profit caps to remedy Medicaid contracts negotiated under Pawlenty that she said "did not produce the value the public expects." Jesson also told Congress that even though Pawlenty's contracts produced company revenues that were "greater than they should be," the rates were permissible under federal rules.
Pawlenty alluded to Jesson's letter in defending his administration's practices.
"If I read the comments by the current commissioner correctly, she said the contracts were within the range of what was allowed and accepted," Pawlenty said. "There's been no indication currently that any of these allegations are founded or grounded. So we'll just have to let the process play out and see where it all leads."
In a hearing before a House oversight committee in April, Jesson was asked to explain the Dayton administration's interpretation of the $30 million UCare payment as a "donation," the legal basis for the state's initial decision to bank the entire amount.
Although that dispute has been resolved, congressional investigators now are trying to determine whether the payment reflected a deeper pattern of overbilling at the expense of federal taxpayers.
In particular, the federal probes are focusing on the dismantling of the state-funded General Assistance Medical Care (GAMC) program for the poor in the waning days of the Pawlenty administration.
Critics say the higher than necessary Medicaid payments were being used to offset UCare's losses under the now-defunct GAMC program. That means federal dollars essentially would have been used to subsidize a state public health program. When the GAMC program ended, UCare has acknowledged, the higher Medicaid rates were not lowered.
A new competitive bidding system for managed-care contracts in the Twin Cities has resulted in an estimated savings of $600 million for 2012 and 2013, according to Jesson. In addition, the Dayton administration is claiming success in forging agreements with the four Medicaid contractors -- UCare, Medica, HealthPartners and Blue Cross and Blue Shield -- to cap their 2011 profits at 1 percent. Those deals netted the state $73 million in reimbursements, on top of the $30 million UCare payment.
Nevertheless, the House oversight committee issued a statement Tuesday in response to Jesson's letter, reiterating the investigators' belief that "Minnesota overpaid insurance companies through the Medicaid program, wasting taxpayer dollars in the process, and federal oversight of Medicaid's rate-setting process failed miserably to detect the problem."
Kevin Diaz is a correspondent in the Star Tribune Washington Bureau.