UCare's $30 million payment to Minnesota questioned

A $30 million payment to Minnesota coffers last year by one of the state's nonprofit health plans is coming under renewed scrutiny after an influential U.S. senator on Thursday questioned whether part of that largesse belongs to the federal government.

U.S. Sen. Chuck Grassley, R- Iowa, sent letters to Gov. Mark Dayton, the Department of Justice and four HMOs saying he wanted to gain "a better understanding of the nature of the $30 million 'donation'" made by UCare.

"I am particularly concerned about evidence I received which appears to suggest that the funds returned by UCare were tailored in a way to avoid returning any of said funds to the federal government," wrote Grassley, the ranking member of the U.S. Senate Judiciary Committee.

UCare, which covers taxpayer-funded insurance for low-income and disabled Minnesotans on Medicaid, returned the money to the state saying it had excess profits in its reserves. The state was facing what it believed was a $5 billion budget at the time.

Lucinda Jesson, commissioner of the state Department of Human Services, said her office "will respond as thoroughly as we can to Senator Grassley's letter," but that she continues to view UCare's action as a donation.

Jesson said she met with the federal government's top Medicaid official for an already-scheduled meeting in Baltimore just days after receiving word that UCare would be making the payment. Jesson, a lawyer, said she told federal officials about the UCare payment and said her reading of the contract made it clear UCare wasn't "obligated to pay us this money."

"I said, 'We think it's legitimately a donation, but we understand you may look at it differently,'" Jesson said. "I understand this is a novel situation. People can have different interpretations, which is why I tried to be extraordinarily transparent with the head of Medicaid for United States government."

Medicaid is paid jointly by the state and federal government. Last year, the state paid $3.8 billion to four health plans UCare, Blue Cross and Blue Shield of Minnesota, HealthPartners and Medica.

Grassley's letter contained an e-mail exchange about crafting a news release on the donation in which Jesson wrote, "In order to have a good chance of keeping all of this money, it must be characterized as a donation. If a refund, feds clearly get half. Can you work with Scott [Leitz, assistant commissioner] on redrafting? Also, I thought we were going to handle this through phone calls."

During a four-hour committee hearing with state House members last month, Jesson dismissed the e-mails as being taken out of context.

A spokesman for UCare said the plan stands by its original intent, and that the donation "was the right thing to do."

In an e-mailed statement, UCare said it "voluntarily contributed $30 million to the state last year given several unforeseen circumstances involving state public health programs and the state's budget deficit. ... We strongly disagree with how some individuals have characterized our contribution."

The UCare donation sparked a round of conversations with the other plans, as the state at the time was facing a $5 billion deficit. All four health plans agreed to cap their profits on state programs at 1 percent for this year only, and to return the excess to the state.

"We expect to get money back from the plans this year as a result from the caps," Jesson said. "Very clearly half goes to the federal government and half goes to the state. Because it was put into the contract. ... That's different from UCare coming in and doing this voluntarily."

Jesson defended the Dayton administration's efforts to hold the health plans more accountable by audits and initiating a competitive bidding process.

"A lot of people have concerns about how the state in the past has handled managed care contracting," she said. "It's an about-face from the past. While we have to answer questions about the past, we're fundamentally changing the way we're dealing with health plans."