Congressional panel grills DHS Commissioner Lucinda Jesson on state Medicaid spending

WASHINGTON — Gov. Mark Dayton’s human services commissioner on Wednesday faced a combative congressional panel that accused Minnesota officials of requesting an improper amount of Medicaid money from the federal government.

At the heart of the hearing were years of overpayments in Medicaid reimbursements from the federal government to managed care organizations in Minnesota.

The impetus for the hearing was a $30 million gift to the state from UCare, one of those HMOs, that state officials considered to be a donation. State officials had planned to keep it all, but the federal government said it was a reimbursement for Medicaid overpayments and asked for half of it. The state eventually relented this week.

The state considered the UCare money a “bona fide donation,” DHS Commissioner Lucinda Jesson said, and intended to put the full amount in the Minnesota general fund.

Congressional panel members suggested Minnesota officials were scheming to keep the money for the state, pointing to an email in which Jesson instructed a staffer to call the money a refund when making public comments.

“In order to have a good chance of keeping all this money, it must be characterized as a donation,” she wrote. “If a refund, feds clearly get half … I thought we were going to handle this through phone calls.”

Rep. Trey Gowdy, R-S.C., accused the state of trying to “keep as much of other people’s money as you possibly can even if it means recharacterizing something.”

“This was a very unique situation and one which we didn’t have a playbook for,” Jesson said. “There wasn’t a clear answer.”

Jesson didn’t find any relief from the Democrats on the committee.

Rep. Dennis Kucinich, for one, said that he had “questions about how you got to the point of believing and acting to keep all of the UCare funds for Minnesota when many believed at the time and we now can see that the funds needed to be divided with the federal government.”

The larger issue at the heart of the hearing was Minnesota’s oversight of its Medicaid spending.

A congressional investigation, spearheaded by Iowa Republican Chuck Grassley, found the state to be spending less of its money on in-state health care plans while overcharging the federal government, through Medicaid reimbursements, to make up the difference.

“Minnesota was using this accounting trick in order to leverage the federal reimbursement of state Medicaid spending,” a congressional report concluded, saying that the state could end up owing the federal government “hundreds of millions of dollars” for such a system.

Lawmakers by and large acknowledged that there was a problem and were left trying to figure out how it all happened.

Democratic Rep. Betty McCollum accused former Gov. Tim Pawlenty’s administration of “negotiating Medicaid contracts with health plans with little to no transparency” and said his officials should be the ones testifying before the committee.

McCollum and Jesson said the Dayton administration had been working to change the system.

Republican Rep. Michele Bachmann, meanwhile, warned that the problem extended beyond just Minnesota, citing a 2010 Government Accountability Office report that warned, “[the federal government] cannot ensure that states’ managed care rates are appropriate, which places billions of federal and state dollars at risk for misspending.”

“This is not just a Minnesota problem. This appears to be a problem around the country,” Rep. Michele Bachmann told the committee. She said she will introduce a bill requiring third-party audits of managed care financial statements and state contracts with them.