State allegedly overpaid contractors after GAMC ended.
WASHINGTON - Congressional investigators are raising new questions about how Minnesota bills federal taxpayers for Medicaid costs, seeking evidence that the state has been overpaying state Medicaid contractors to cover losses from state-run public health programs.
The letter to Minnesota Human Services Commissioner Lucinda Jesson, obtained Friday by the Star Tribune, revives allegations of inflated payments and represents an escalation in one of three continuing federal probes into the state's use of Medicaid funds over the past decade under Republican and Democratic governors. It comes three weeks after a U.S. House panel made the state the focus of a grueling public hearing.
The probes come as Congress looks for ways to curb costs in the nation's $457 billion Medicaid program, which is slated to expand dramatically under the new federal health care law.
Investigators for U.S. Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, wrote Jesson on Tuesday, seeking additional information about a $30 million payment to the state from UCare, one of four state Medicaid contractors. The money purportedly was to cover "excess" operating margins.
The letter seeks clarification of Jesson's April 25 testimony before the committee, questioning state health practices that stretch back to the administration of former Republican Gov. Tim Pawlenty. But it also reflects the committee investigators' conclusion that Minnesota "likely" is still systematically overpaying insurance companies for its Medicaid program.
Total state overcharges to the federal government could exceed $500 million over the past decade, according to Minnesota whistleblower David Feinwachs, a former Minnesota Hospital Association lawyer who has testified before Congress.
State health officials who served under Pawlenty and DFL Gov. Mark Dayton say they did nothing wrong, although Dayton has stated that past contracts between the state and its four Medicaid providers were "too generous with the taxpayers' money."
The Dayton administration claims success in forging agreements with the four Medicaid contractors -- UCare, Medica, HealthPartners and Blue Cross and Blue Shield -- that cap their 2011 profits at 1 percent. The deals netted the state $73 million in reimbursements, on top of the $30 million UCare payment.
Republicans on the committee, as well as some Democrats, are skeptical of Jesson's characterization of UCare's $30 million transfer to the state last year as a "bona fide donation."
This week's committee letter seeks a chain of e-mails between Jesson and Dan Pollock, a high-level staffer in Jesson's department that suggest the UCare payment be characterized as a "donation" in order to avoid reimbursing the federal government, which puts up half the money for state Medicaid services.
Congressional investigators also want Jesson to reconcile Dayton's remarks about past Medicaid payments that were "too generous" with her own statement to Senate investigators in March that the state does "not believe there were any 'miscalculations in the rates.'"
Jesson said Friday that she welcomes the opportunity to respond to congressional investigators.
"We share their interest in assuring that taxpayer dollars are used wisely and that Minnesota works in tandem with the federal government in effective administration of this critical program," she said in a statement. "This includes reforms that have already saved hundreds of millions of dollars, as well as upcoming changes that will create incentives for better health outcomes."
A spokesman for Jesson said the department is working on responses to the committee, which has set a May 29 deadline for the answers to 16 separate questions.
Some of those questions about the state's rate-setting process zero in on the dismantling of the state's General Assistance Medical Care (GAMC) program in the waning days of the Pawlenty administration. This week's letter to Jesson cites a March 16 letter to state officials from UCare CEO Nancy Feldman suggesting that the company's $30 million payment to the state was attributable to overpayments the state made to UCare. Those payments, she wrote, were made through the Medicaid program to "offset" losses under GAMC, the now-defunct state-funded plan for low-income patients.
"When GAMC moved out of managed care in mid-year 2010," Feldman wrote, "Medical Assistance [Medicaid] rates were not lowered to reflect this overpayment."
State officials have agreed to reimburse half the UCare payment to the federal government. But in Jesson's testimony last month to Congress, she continued to call it a gift, a contention that was met with bipartisan skepticism.
"Commissioner Jesson's testimony revealed an ugly truth that state and federal taxpayers have been overpaying the state's insurance companies under the state's Medicaid contracts," said U.S. Rep. Jim Jordan, R-Ohio, who co-chaired the House hearing. "What we have learned is deeply troubling and underscores the need to fundamentally reform this program."
The House probe is one of three current federal inquiries into the use of federal Medicaid funds in Minnesota. One is being led by Sen. Chuck Grassley, R-Iowa., a senior member of the Finance Committee. The Justice Department and U.S. health officials also are pursuing the matter, according to recent House testimony.
Kevin Diaz is a correspondent in the Star Tribune Washington Bureau.