DHS wants audit of Pawlenty-era Medicaid contracts

The Dayton administration is seeking an independent review of how the Pawlenty administration determined payments to HMOs providing services for the state's Medicaid program.

The Department of Human Services announced today that it is seeking bids for an outside audit of Medicaid payment rates for fiscal years 2003 through 2011. The move follows months of controversy over whether the state's contracts have been too generous.

State Human Services Commissioner Lucinda Jesson said the Dayton administration has tried to improve how the state buys health care. But she said it is hard for officials to do that when questions persist about whether the state overpaid its Medicaid contractors in the past.

"You find yourself having to spend a lot of time answering questions about the past instead of changing things for the future," Jesson said. "So that's why we thought it best to really just go out and engage an independent expert to answer questions once and for all about how these rates were set."

Medicaid is a federal and state health insurance program that provides a safety net for low-income people, including the elderly in nursing homes and children. Questions surrounding Minnesota's Medicaid program arose after the state received a $30 million payment of excess profits from the UCare HMO last year.

Amid state and congressional inquiries, the state eventually agreed to split the payment with the federal government. An investigation by the Justice Department into the state Medicaid program is still pending.

Gov. Mark Dayton and Jesson have repeatedly said the state was overly generous in the Medicaid managed care contracts that it inherited from the Pawlenty administration.

In this last year of that contract, Jesson made a deal for Minnesota's HMOs to voluntarily cap their profits at 1 percent of revenue from the programs. As a result, four major HMOs said they would repay $73 million to state and federal taxpayers.

State and federal lawmakers have grilled Jesson in public over the contracts, the repayments, and the state's initial decision to keep all the UCare money.

Her decision to seek an audit is the latest move in the long-running controversy.

State Rep. Jim Abeler, chairman of the Health and Human Services Finance Committee, said he first thought there was no need for a review back to 2003. But since questions still persist, he said an audit makes sense.

"I think it's reasonable to request a whole third party independent person to look into it and see if anything was improper or not," said Abeler, R-Anoka.

"I believe in the end they'll find nothing was improper; we did everything by the book."

Dayton administration officials would not say how much the audit back to 2003 will cost because they are seeking competitive bids to do the work. But it's expected to cost at least $50,000.

State Sen. Sean Nienow, R-Cambridge, is skeptical that any substantive information will come out of Dayton's audit.

Nienow said too often such audits don't dig deep enough.

"My concern is this is just going to be a cursory surface review basically the same kinds of things we've had in the past that's going to say, 'our above ground construction is perfectly fine; it's all up to code,' " he said. "Well that's not the problem. The problem is the foundation and we don't know anything about the foundation that it's built on."

Former Gov. Tim Pawlenty could not be reached for comment. Pawlenty is rumored to be on the likely Republican presidential nominee Mitt Romney's short list for Vice President.

When asked last month about the Medicaid contracts Pawlenty said he had "no indication or reason to believe that anything was done incorrectly or overpaid."

Jesson expects that an audit report will be completed in mid-November.

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