Minnesota tries to fend off criticism on Medicaid

  • Article by: KEVIN DIAZ , Star Tribune
  • Updated: May 29, 2012 - 9:25 PM

A top official tells a GOP-led panel that a questioned UCare payment was not due to overcharges.

WASHINGTON - Top Minnesota health officials pushed back Tuesday against a congressional committee probing allegations that the state overbilled federal taxpayers for Medicaid services to cover losses from in other state-run public health programs.

In a letter to the House Oversight and Government Reform Committee, Minnesota Human Services Commissioner Lucinda Jesson defended reforms implemented under DFL Gov. Mark Dayton, saying "our focus has been on changing course rather than investigating the past."

Jesson's letter was addressed to U.S. Rep. Darrell Issa, R-Calif., chairman of the House oversight committee, which has been focusing on a $30 million payment to the state last year from UCare, one of four state Medicaid contractors.

Committee spokesman Jeffrey Solsby said that congressional investigators have begun reviewing Jesson's response. Meanwhile, he said, "Two things are very clear: 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."

Jesson produced an 11-page legal opinion suggesting that the state could keep the entire payment, even though the federal Centers for Medicare and Medicaid Services "might disagree." The state has since agreed to share the money with the federal government, which foots half the bill for the state's Medicaid program.

Nevertheless, the dispute has fueled at least three federal probes into Minnesota's billing practices spanning the past decade.

Jesson's nine-page letter came in response to questions from investigators for the House committee, which held a grueling public hearing last month and then followed with a sharply worded letter to Jesson seeking clarification about remarks she made in her testimony.

Jesson said the Dayton administration has used competitive bidding and profit caps to remedy Medicaid contracts under former GOP Gov. Tim Pawlenty that Jesson said "did not produce the value the public expects." But Jesson said that even as she concluded that past contracts earned profit margins "greater than they should be," the rates agreed to were permissible under federal rules.

The three probes -- in the House, Senate and Justice Department -- 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.

The House committee's letter to Jesson two weeks ago concluded that the UCare payment reflected systematic overcharges that "likely" are still occurring in the state's public health system.

Jesson said that 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. In addition, she claims 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.

Congressional investigators had sought answers to 16 specific questions related to the state's Medicaid billing system. The sharpest difference involved allegations that the state, after being reimbursed by UCare, sought to characterize the payment as a "donation," to avoid sharing it with the federal government. In response to the committee's concerns, Jesson produced a string of e-mails involving top officials in her department.

UCare Marketing Director Dan Ness told the Star Tribune that the company has consistently characterized the payment as a one-time contribution of $30 million due to higher-than-expected 2010 earnings from state public programs. But ultimately, he added, "it was up to the state to determine how to allocate the contribution."

Ness said the higher earnings were due to a number of unforeseen factors that included increased enrollments from high unemployment and the slow economic recovery; healthier new enrollees who were previously enrolled in private insurance, and UCare cost-reduction initiatives.

GAMC under scrutiny

But congressional investigators have zeroed in on another factor cited by UCare: the dismantling of the state's General Assistance Medical Care (GAMC) program in the waning days of the Pawlenty administration. Until then, UCare's losses under GAMC had been offset by Medicaid. When the GAMC program ended, those Medicaid rates were not lowered accordingly.

According to Ness, UCare's payment was "the right thing to do given those factors."

Responding to initial complaints about the state's Medicaid billings, the Legislature approved new, independent audits of the state's $4 billion-a-year Medicaid contracting, but that won't startuntil 2014.

U.S. Rep. Michele Bachmann, R-Minn., who testified before Issa's committee last month, also circulated a recent Star Tribune editorial Tuesday saying the state "should take heed of these continuing congressional concerns ... now -- not in two years."

Bachmann said she will introduce federal legislation next month mandating federal audits.

Kevin Diaz is a correspondent in the Star Tribune Washington Bureau.

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