Bipartisan Lawmakers Call for Closer Scrutiny of Minnesota Medicaid Program

During a recent committee hearing, the Minnesota legislature became aware that the state’s Medicaid program, called the Medical Assistance Program, is being investigated by the federal government on allegations that it inflated health care premiums to receive excess federal funds. Consequently, lawmakers from both sides of the aisle are recommending a review of the program’s accounting practices by an independent third party auditor.

At issue in the investigation is whether Minnesota funds have improperly boosted the financial reserves and profits of four HMOs that manage the program, including Blue Cross and Blue Shield of Minnesota, UCare, Health Partners and Medica. United States Representative Michelle Bachmann framed the inquiry as, “(a)re nonprofit HMOs certifying the level of risk that may or may not even exist in order to draw down massive amounts of matching federal funding?” The collective surplus of the HMOs, combined with those of related private market health insurance companies, totaled $2.5 billion at the close of 2010, according to the Minnesota Council of Health Plans (MCHP), an HMO trade group.

Eileen Smith, the spokesperson for MCHP, maintains that as health care costs are increasing, there is more of a necessity for insurers to place money in reserve. She also contends that the amount currently in reserve is only sufficient to cover less than three months of care under the program. At this time, the state has not imposed a maximum limit on financial reserves.

One of the program’s biggest challengers, Attorney David Feinwachs, inquired during the committee hearing why UCare exceeded anticipated profits from the program in 2011, resulting in its return of $30 million to the state. Officials defend the HMOs’ profits on the Medical Assistance Program because the HMOs used to run a second low-income health insurance program, the General Assistance Medical Care (GAMC), at a financial loss. Feinwachs questioned why the federal government did not receive its half of the returned money, despite its role as joint funder of the Medicaid program and why other HMOs did not refund excess profits as well.

Representative Glenn Gruenhagen inquired why HMOs have been receiving increasing amounts of funding although provider payment rates have not increased. The Commissioner of the Minnesota Department of Human Services, Lucinda Jesson, said that HMO enrollment has been growing, which has been a factor in the increased funding. Jesson also maintained that there was no provision in UCare’s contract that required them to make the $30 million payment to the state; therefore, it qualified as a donation, not a refund.

Bachmann made it clear that she will assist state legislators by introducing comparable federal legislation that requires independent auditing of the Medical Assistance Program.