A recap and road map on DHS Fraud

The problems at HHS continue to boil over with no end in sight. The Walz administration continues to try to calm the waters with big-name "fixers" who have long experience of crisis management. As you would expect from a Governor who owes his election in part to donations from Government Worker unions, his first priority seems to be DHS worker morale. Overlooked are the taxpayers who get to see their money disappear by the millions and the clients who represent some of the poorest and most vulnerable Minnesotans. His priorities are precisely backward.

There is a long history of fraud and malfeasance at DHS. In our last update, we presented a timeline of DHS problems. It's not a complete history, and we'll be adding to it as events happen. This week we added a document to flesh out one of the episodes highlighted in the chart. When Dayton Administration Commissioner Lucinda Jessen testified before Congress in 2012, she was called on the carpet for Minnesota's failure to return Medicaid funds that were refunded by a Vendor. The state called them a "contribution" and the Federal Government saw it as a reimbursement that should be split with the federal government. We've added a letter from the US House Committee on Oversight and Reform to the documents that explain how her testimony was unsatisfactory.


Lots of state and federal taxpayer money has been stolen or wasted. It's hard to put a total on all the money that has been stolen or misspent by HHS and in particular DHS. Here is a partial list

  • 2009 ~$1 Million stolen from Medical Assistance funds by a State Worker
  • 2011-2018  $5-6 Million 15 cases of CCAP fraud were prosecuted by various counties. Note: This is the amount of money that was proven in a court of law to have been stolen. There are other pending cases and cases that could never be brought to trial for one reason or another. Since these are just the cases that have made it all the way to court, it's anybody's guess how many much was stolen by people who were not caught and prosecuted, especially in Minnesota's largest Counties.
  • 2016 $271 Million paid to ineligible Medicaid and Minnesota Care beneficiaries. 
  • 2017  $30 Million "Software" failure to collect Minnesota care premiums and other sums of money owed to the state. DHS ends up writing it off.
  • 2017 $7.7 Million in PCA fraud
  • 2019 ~ $1 billion Legislature request to have data matches with social security numbers results in approximately 10% of payments who make too much to qualify. Out of $100 Billion in Medicaid dollars, potentially.
  • 2019 $25.3 Million State overpays two tribes, the White Earth Band and the Leech Lake Band of Ojibwa for drug treatment programs. Tribes refuse to refund the money, saying that it was DHS's mistake.


This week. The Minnesota Senate took on the interim commissioner over the latest announcement of misuse of taxpayer money. The $25 Million overpayment. Interim Commissioner Pam Wheelock chose to highlight the "successes" of DHS and HHS over the years and talk up the state workers at that agency. This was a bit surreal, given the context of the hearing. At one point she even announced, "there is no scandal, there is no chaos." As if saying it made it true.


There are big, what might be called "HR" problems.   At the hearing, there was a status update on Carolyn Ham. The suspended Inspector General is no longer on paid vacation but working at a lower-level job at her old, higher pay level. There were no new answers about why the investigation into her performance was taking so long.

The two deputy commissioners who resigned and then rescinded their resignations after Commissioner Lourey resigned apparently are on board and working with the interim commissioner. 

Other testifiers at the hearing included a whistleblower (who said she'd been threatened about testifying) the fired medical director and representatives of the overpaid tribes (who let it be known they weren't paying the overpaid money back).  

In another surreal moment, Interim Commissioner Wheelock tried to pass off all of these resignations as individual career choices by the people involved. As if the context of fraud and scandal had no role. At one point she even suggested that the reason senators were interested in DHS was that the former commissioner had been a senator. HHS Finance Chair Senator Michelle Benson responded curtly to that idea and basically said good luck when you come to the legislature asking for that $25.3 that the Feds want back.


What's the solution? 

1.       Break up HHS? As we mentioned in our earlier post, Senator Michelle Benson and others have openly discussed the possibility of breaking up HHS. The idea is that it is too big and involved in too many things to be fully managed by one commissioner. It might make sense to create different agencies for the Department of Health and DHS. The State Hospitals could be split off, and some of the areas related to law enforcement like Child Protective Services and the Office of Inspector General could be combined with the BCA or devolved to the county level. None of these changes will be easy and will have to be scrutinized to make sure that they won't just spread out the problems and grow government. In government, reform, even reform that saves money costs money.

2.        Better Accounting Systems? Back in 2009, the Legislative auditor called out DHS for poorly designed systems that allowed a single person to create a fake vendor, bill and receive checks for that vendor. A decade later, a lack of consistent enforcement allowed double billing and fraudulent billing in Daycare. The Federal Government requires accounting practices that are supposed to prevent funds for one program being used in another. Yet it seems like this is the way that parts of Minnesota's Department of HHS do business. 

3.        Better Designed programs? In the 2018 OLA report on Child Care programs, the legislative auditor pointed out that there were 7 different subsidized child care programs. They needed to be streamlined. In the 2019 reports on fraud and controls, the OLA criticized the CCAP program and urged that it be redesigned to eliminate the loopholes that made widespread fraud possible.