Physician Patient

Minnesota Needs an Audit to Know Where Taxpayer Dollars are Going in Our Medicaid (Medical Assistance) HMO and Fee-for-service Programs

Past attempts to obtain an independent professional audit of the MN Medicaid program have failed. Clearly, our MN Office of the Legislative Auditor (OLA) headed by James Nobles needs to expediently conduct a professional audit/inquiry of where Minnesota and federal taxpayer Medicaid money is going — to whom and for what MN Medicaid clinical and administrative services. For recipients in the Minnesota Medicaid. programs, HMOs are now charged (and charge) to manage the care of 75% of enrollees, while 25 % are in fee-for-service. The audit should study both populations. HMOs cannot be a black box. Our Minnesota legislators need this data.

Minnesota policymakers need this information to make informed decisions. As a vital part of modifying/replacing the Affordable Care Act (ACA, Obamacare), Federal authorities are now in the process of proposing and enacting block grants for federal Medicaid funds, and Minnesota needs to know where and to whom our Medicaid money is going now, so we can properly decide where and to whom it should go in the future.

This means that Minnesota Medicaid HMOs simply must open their books to a rigorous professional audit by our State Auditor. And Minnesota lawmakers need to demand that they do. Will the Governor and Legislature do this?


History of the Minnesota Office of the Legislative Auditor (OLA) Regarding Doing a Medicaid Audit:

1) In 2008 the OLA examined the financial management of Minnesota health care programs, and reported that essentially, there was no oversight or supervision of these programs, and the OLA didn’t audit!

2) In August 2010 the U.S. Government Accountability Office reported that the actuarial standards of practice our HMOs claim to adhere to did, in fact, not exist, and the OLA didn’t audit.

3) In January 2011 the American Academy of Actuaries issued a statement saying that they did not look for false data or audit information supplied by the health plans, and the OLA didn’t audit.

4) In March of 2011 Ucare returned 30 million dollars to the state of Minnesota revealing that they had been cross-subsidizing a state program with Medicaid money which they characterized as an over payment and the OLA didn’t audit.

5) In April of 2012 The U.S. House of Representatives Committee on Oversight and Government Reform issued a report which stated that Minnesota provides a stunning example of how states are failing to properly ensure the appropriate use of taxpayer dollars spent on Medicaid managed care. And also stated that the federal government is likely owed hundreds of millions of dollars in additional over payments made to all the states HMOs over the past several years. And the OLA didn’t audit!

6) In July of 2012 the Minnesota Department of Commerce issued a letter stating that they had never audited the health plans use of public program money and did not think it was their job to do so. And the OLA didn’t audit!

7) In March 2013 The Segal Company did an actuarial review of Medicaid managed care rate setting in Minnesota. Segal said ” we believe the Milliman trend methodology produced a systemic overstatement of the trend causing the program to exceed targets over time.” Segal also said “… it seems unreasonable that no one ( DHS, Actuary, or CMS) called into question the pattern over the extended period of review.” And the OLA didn’t audit!

8) In September 2013 PCG Health reviewed Minnesota’s health care programs use of managed care and noted that Minnesota ranked only behind the District of Columbia and New York in highest Medicaid expenditures per full-benefit enrollee. And the OLA didn’t audit!

9) In February 2014 in response to a 2012 legislative mandate that the OLA should hire a third party firm to audit the HMOs, The OLA issued a statement that said “after many months of efforts the Office of the Legislative Auditor was unable to secure the services of a qualified accounting firm that was, in our opinion, adequately independent to conduct the audit.” The OLA went on to say that OLA would conduct the audit themselves.

One year later in 2015 the OLA told the legislature that an audit was expensive, unnecessary and complex. The OLA gave back the funds which had been set aside for the audit and recommended the audit statute be repealed. THE OLA DIDN”T AUDIT!!!

10) In January 2015, the executive director of the Minnesota Council of Health Plans published an article in the Star Tribune newspaper in which she said “… HMO reserves are not cash on hand. In fact, more than half of what appears on paper to be HMO reserves is actually money the state has yet to pay the HMOs.” “…there is an HMO shift that totals more than $1.3 billion.” And the OLA didn’t audit!

11) In March of 2015, The Government Accountability Office released a report which said ” …we recommended that CMS require states to conduct audits of payments to and by managed care organizations…” And the OLA didn’t audit!

12) In the past few years a series of court cases have claimed HMO fraud based on hidden internal markups involving both Medicare advantage and ERISA employer plans. And the OLA didn’t audit!

13) On August 14, 2017 news sources reported that over 200 lawsuits had been filed against Blue Cross of Michigan, identical in nature, based on hidden internal markups And the OLA didn’t audit!

14) Recently, a group of concerned citizens met with the OLA and he informed them that he is aware of his fiduciary duty to the Federal government. And the OLA didn’t audit!

Will the OLA promise to investigate Minnesota Medicaid HMOs to learn:

1) Whether or not the reported reserves of the HMOs actually exist or, if as the former executive director of the Minnesota Council of Health Plans claimed, they exist only on paper because the money has been “shifted” to the State of Minnesota.

2) If the reserve money has been shifted, is this permanent and ongoing? What was the money used for? Why is the federal government billed for reserves for what Governor Dayton and other MN officials have described as a cost plus program (meaning by definition that reserves are unnecessary).

3) If the HMOs are engaging in hidden internal cost inflation of the type discovered in the case of Hi-Lex vs Blue Cross of Michigan. (In this case Blue Cross argued that all managed care organizations do this.) Shouldn’t we see if our HMOs are guilty of this fraud in their operation of our Medicaid program?

4) If paid claims data (as examined by audit and not self reported) supports the HMOs assertion that health care costs are out of control or if the HMOs own price inflation and administrative expense and profitability are the real cost drivers in the system.

5) If administrative costs are being hidden in the medical expense category to manipulate medical loss ratios (not to be confused with whether self reported administrative expense is proper and reasonable).

6) If federal funds are being diverted to subsidize non federal qualifying activities (as Ucare admitted doing in March of 2011).

7) Also, the OLA has said that he has unfettered authority to audit and inspect whatever he chooses and requires no legislative authority. Now in the case of HMO audits he claims his hands are tied by the precise wording of the statute apparently designed to prevent an effective audit. How do we deal with this paradox? Do we need to alter the defective Benson wording to get the job properly done?

8) Over the course of the last decade the OLA has done everything possible to avoid any meaningful audit of the HMOs. Why trust him now with no external third party oversight.

9) How will the OLA get paid claims data which the plans have refused to give DHS and which DHS has never forcefully demanded.

10) How exactly will the OLA audit organizations that do not use or adhere to the generally accepted principles of accounting?

11) The OLA has said the methodology of the audit is a secret pursuant to the data practices act. WTF???

12) The significance of the statements made by the former Minnesota Medicaid director on 7/9/15 regarding the feds cracking down on “the Minnesota experience of the past decade”.

(Submitted by MPPA Board Member Dave Feinwachs, JD, PhD)

Leave a Reply