Auditor to probe Human Services’ $25 million in overpayments to Minnesota tribes

Updated 5:19 p.m.

Minnesota Gov. Tim Walz has asked the legislative auditor to look into how the state overpaid more than $25 million to two tribes over the last five years for treatments covered under Medicaid.

The payments, first reported Thursday by the St. Paul Pioneer Press, were made by the Department of Human Services to the Leech Lake Band of Ojibwe and the White Earth Nation for substance abuse therapy.

The department administers the federal funds to the tribes, but it’s unclear how the overpayments occurred.

“We have some preliminary information, but given the magnitude of the alleged overpayment and some other factors, we really need to be cautious about making any initial judgments before we know more,” said Legislative Auditor Jim Nobles, whose office will conduct the investigation.

Walz, a DFLer who took over the office from former Gov. Mark Dayton in January, said he directed his commissioners to uncover issues within their agencies. DHS discovered the overpayments in May, according to a statement.

“My administration finds problems, and we deal with them. That is why we are confronting this issue head on,” Walz said. “As of May, the payment structure was corrected, and the problem was stopped. We are now taking a deeper dive to figure out the root of this issue and help ensure nothing like it happens again.”

Eugene “Umsy” Tibbetts, vice chair of White Earth’s business committee, said they were first contacted by the administration about the overpayments in May, but they hadn’t heard from the administration again until this week, when they were informed the issue would soon become public.

Tribal leaders are “deeply troubled by the lack of meaningful consultation on this issue,” he added. “At a bare minimum, we expected actual dialogue between a State agency and a Tribal government as ordered by the Governor. That is manaaji’idiwin – respect."

While the tribe has agreed to work to resolve the matter, the state and DHS were the “architects of the billing structure” and must share the blame on the overpayments, Tibbetts said.

Later in the day Thursday, Leech Lake leaders said the band “steadfastly refutes these allegations that it was overpaid and asserts that any and all billing it submitted to DHS was done so in accordance with its billing agreement with DHS and pursuant to technical guidance provided by DHS.”

Republicans in the Legislature called the Medicaid payments issue another example of ongoing turmoil, fraud and abuse in health and human services programs.

"Republicans have been sounding the alarm about waste, fraud, and abuse across DHS for years — this is an agency that seems to have a blatant disregard for taxpayer dollars, and is simply not doing enough to stop activity that is costing taxpayers tens of millions each year," Rep. Nick Zerwas, R-Elk River, said in a statement.

Republicans in control of the Senate have called a hearing on DHS in August after weeks of turmoil in the agency.

Former DHS Commissioner Tony Lourey resigned unexpectedly last month, along with his chief of staff. Two deputy commissioners who had planned to resign have since rescinded their resignations, and the agency is being led by an acting commissioner, Pam Wheelock.

The administration has not provided an explanation for turnover in the agency.

DHS, which has a nearly $18 billion budget every two years, delivers services to 1.2 million of Minnesota’s most vulnerable residents, including low-income people who can’t afford health insurance.

Wheelock said there’s no evidence that the overpayments were done out of “self interest,” but the outside audit will help determine what exactly happened that led to overpayments in the first place.

“There are 6,700 employees who are doing good meaningful work here every single day. We are always going to have some of these high-visibility issues because of the complexity of the work we do,” Wheelock told MPR News in an interview.

“We are involved in direct care and treatment, we have oversight and compliance responsibilities. The challenge is not are we going to have problems, but do we identify and address those problems promptly and effectively.”

Wheelock said the department is also going claim-by-claim as far back as 2014 to determine exactly how much was overpaid. The total number could be less than $25 million, she said. The department has a 365-day repayment plan to the federal government.