The Minnesota Department of Human Services (DHS) is intensifying pressure on two Indian bands to repay $25.3 million in Medicaid overpayments, despite mounting evidence that state officials were largely to blame for the billing error.

In letters sent to the Indian bands, acting Human Services Commissioner Pamela Wheelock said the state is legally obligated to collect the excess payments from the Leech Lake Band of Ojibwe and White Earth Nation for addiction treatment services, even if the overpayments were caused by DHS error and were not the fault of the bands.

The official notice has intensified a growing dispute between the administration of Gov. Tim Walz and leaders of the tribal governments, who say they were given misleading guidance by the state over a period of years. Tribal officials have produced more than a dozen e-mails showing that DHS administrators were aware of the billing practices that led to the millions of dollars in overpayments, and even advised the bands on how to create the billing infrastructure.

The leaders of both bands presented a united front at a Senate committee hearing Tuesday, criticizing the DHS for overstepping its authority and failing to consult with the bands.

They also warned of deep cuts to tribal programs on the reservations if the agency prevails in its efforts to recover the money.

"We assert that we collected those amounts with DHS' advice and approval," said Eugene Tibbetts, chairman of White Earth Nation, which has launched its own investigation into the overpayments. "We are especially interested in determining how this continued for several years if it was as improper as DHS claims."

The situation is politically and personally complex for Walz. Lt. Gov. Peggy Flanagan, a member of the White Earth band, is one of his closest advisers and he touts her status as the highest-ranking Native woman elected to executive office.

The White Earth flag stands behind Walz at all of his public pronouncements. On the campaign trail, he touted his early high school teaching and coaching career about an hour away from the Pine Ridge Indian Reservation and made frequent trips to visit allies in the American Indian community, including after his election in November.

Only four months ago, Walz issued an executive order affirming the sovereign status of Minnesota's tribes and ordering state agencies to engage in meaningful consultation with the tribal governments.

Flanagan: 'Unacceptable'

In a written statement, Flanagan called the situation "unacceptable" and said she is "deeply disappointed" that the DHS did not engage in meaningful consultation with the bands. She encouraged state lawmakers to change the state law that holds the tribal nations responsible for overpayments even when they are not at fault.

"Our Administration will remain in close communication with the tribes as we work together to figure out the best path forward," she said.

At the committee hearing, Wheelock apologized to the Indian bands for the overpayments, calling them "deeply regrettable," while repeating her agency's position that state law requires the DHS to recover improperly paid federal funds from providers. There is no exception for overpayments resulting from the agency's own error, she noted in her letter to the bands. "Unfortunately, regardless of whether the overpayment was caused by DHS error or not, DHS is required to recover overpaid federal funds," Wheelock wrote in an Aug. 8 letter to the Leech Lake Band.

In a statement, the DHS said it is required to repay the federal Centers for Medicare and Medicaid Services within one year. State law allows the DHS to enter into a repayment plan with a provider if department error was a factor. No schedule for repayment has been set, the agency said.

"The tribes do not have this kind of money lying around," said Sen. Jim Abeler, R-Anoka, chairman of the Human Services Reform Finance and Policy Committee. "This administration should be saying to the tribes, 'Look, we gave you bad advice and we're going to work collaboratively with you to help us all out of this mess,' instead of treating them like total strangers."

Documents uncovered by the two bands suggest that DHS administrators were aware of the billing practices that led to the overpayments as far back as 2015, and repeatedly assured the bands that the practices complied with state law.

Assurances made

In e-mail exchanges, DHS staff assured White Earth that it was permissible to bill Medicaid at a much higher in-clinic rate for Suboxone, medication that can ease withdrawal symptoms and suppress cravings, even when the patients took the anti-addiction drug at home.

Under the billing model, the bands were allowed to bill the Medicaid program $455 for every dose of Suboxone, which is much higher than the typical $22 billing rate for the drug.

The higher rate was designed to cover a range of integrated treatment services that the bands provided along with Suboxone, including counseling, mental health treatment, peer support services, and culturally specific programs such as sweat lodges and talking circles. The program also involved regular monitoring and drug testing.

Adam Fairbanks and Jeri Jasken are two White Earth band members who said they worked closely with the DHS to create the billing infrastructure.

In an interview, the two said they consulted with administrators in at least four separate divisions at the agency before moving forward with the now-prohibited billing procedure.

They reached out to the DHS in part because the band had never established a medication-assisted treatment program for substance abuse, and they needed technical advice from the state, they said.

At any point, about 300 to 400 members of the Leech Lake and White Earth bands were enrolled to receive these services through their medication-assisted treatment programs.

At no point, they said, did DHS officials object to the higher rate for at-home use of Suboxone, sometimes referred to as "takeouts" or "take homes."

As recently as this February, Fairbanks sent an e-mail to the DHS seeking to know if the higher rate was authorized and was assured that it was permitted by a staff member in the agency's behavioral health division, according to an e-mail exchange.

"We walked hand in hand with DHS through the whole process, and were assured again and again that [the higher rate] was permissible," said Fairbanks, a former White Earth employee who now works as a consultant to other tribes.

Added Jasken, who is the behavioral health director at White Earth, "We had absolutely no reason to believe we were doing anything improper."

The unorthodox billing practice ended in May, and the loss of opioid treatment revenue is expected to have a far-reaching impact on reservation programs.

On the Leech Lake reservation, Medicaid payments for opioid treatment were used to fund recreation programs for reservation youth, a homeless shelter and a program for tribal elders, among others.

Repayment fallout

Officials with White Earth said they may have to sell certain assets, including buildings and property, to offset the impact of the lost revenue.

The changes also reduce access to Suboxone and imperil the integrated model of substance abuse treatment that took years to build, tribal officials warned.

"Numerous individuals have turned their lives around" and maintained sobriety through the opioid treatment program at White Earth, said Danielle Stevens, compliance director for the band. "All the gains that these individuals have made, everything they have fought so hard for … will be jeopardized."

Staff writers J. Patrick Coolican and Glenn Howatt contributed to this report.