Minnesota failed to recover $40 million in Medicaid overpayments, audit finds

Alex Derosier, Pioneer Press on Dec 10, 2024

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ST. PAUL, Minn. — Minnesota’s Department of Human Services overpaid medical assistance providers like nursing homes more than $40 million through its Medicaid program and did not attempt to recover the debts, according to a report released Tuesday by the nonpartisan Office of the Legislative Auditor.

That finding and others come from an audit that focused on payments in Minnesota’s Medicaid program from October 2006 to June 2023, and the debt figure is a conservative estimate, according to the Office of the Legislative Auditor. The earliest documentation of DHS sending collection notices on those debts was in February 2015.

“The Department of Human Services did not comply with the significant finance-related legal requirements we tested and generally had inadequate internal controls,” OLA concluded in its report.

Minnesota’s Human Services Department pays out billions in claims yearly to medical assistance providers like nursing homes, hospitals and intermediate care facilities for people with developmental disabilities. When the state overpays it’s supposed to recover the extra money from providers.

That’s where OLA found the greatest weaknesses in its audit, according to the report, which also found that DHS failed to accurately report the amounts providers owed to the agency to state budget officials since 2019.

In a written response to the audit, Department of Human Services Commissioner Jodi Harpstead said her agency agreed with most of the audit’s findings but disputed OLA’s conclusion that they didn’t handle outstanding debts in accordance with state law.

She also noted the difficulties in recovering money from nursing homes that have closed down in recent years.

“The complexities in collecting the provider credit balances are substantial,” she wrote in a letter included in the audit report. “The majority of these balances represent organizations no longer doing business and we have had a very low return on any recovery work.”

To illustrate the low recovery rate, Harpstead pointed to her agency’s work with a Medicaid Recovery Audit Contractor, which was only able to recover $125,000 from 2018 to 2022. The contractor, which was paid a percentage of what it recovers, stopped its work because of the low return, she said.

Since then, their contractor has recovered more money, Harpstead said. In 2023, they started a project that recovered DHS about $74,000 back from long-term care facilities.

The majority of the debt owed was from long-term care facilities, or nursing homes, which owed about $32 million. Like much of the country, Minnesota has seen many nursing homes close in recent decades, meaning less care for an aging population.

Between 2005 and 2024 the state lost 90 facilities providing nursing home beds, according to analysis of state data by the Center for Rural Policy and Development — a 22% drop from 415.

Tuesday’s audit report recommended DHS improve its internal controls to make sure that happens more regularly and that the agency work with the Legislature to clarify its authority to do so.

DHS has already taken “significant steps” to resolve issues the audit identified through two measures, Harpstead said.

Those included reviewing outstanding debts, prioritizing ones with the highest likelihood of collection and creating a “process for oversight and collection action” in the future.

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