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Grassley, Issa, Gowdy Continue Review of Minnesota’s Use of Federal Tax Dollars for State-only Health Programs

WASHINGTON — Leaders of the Senate Judiciary Committee and the House Oversight and Government Reform Committee continued their examination of Minnesota’s inappropriate and possibly illegal misuse of federal tax dollars to cross-subsidize its state-only health programs.

The issue has been under the close inspection of Senate Judiciary Ranking Member Chuck Grassley, R-Iowa, House Oversight Committee Chairman Darrell Issa, R-Calif., and House Oversight Subcommittee on Health Care Chairman Trey Gowdy, R-SC.

A state legislative audit report found that Minnesota was underpaying managed care companies in the state for state-only health programs and overpaying insurance companies for Medicaid.  Since federal taxpayers pay half of Minnesota’s Medicaid expenditures, federal taxpayers were inappropriately cross-subsidizing managed care companies in Minnesota for state-only health plans.

In March 2011, UCare, the smallest of Minnesota’s four managed care companies operating in the state, returned $30 million to the state.  UCare’s CEO attributed this contribution to excess 2010 operating margins, which largely resulted from Medicaid overpayments.

It appears that the Minnesota Department of Human Services attempted to disguise this repayment as a “donation” in order to keep all of it in state coffers, as opposed to returning the appropriate amount to the federal taxpayer.  Minnesota finally agreed to return the federal share to the U.S. Treasury the day before an April 2012 House Oversight Committee hearing.

However, because of conflicting statements at the hearing from Minnesota Department of Human Services Commissioner Lucinda Jesson and other contradictory information, questions remain about whether or not the state agency was attempting to defraud the federal taxpayer.

“The State’s agreement with UCare to count UCare’s $30 million repayment toward the 2011 profit cap raises serious questions regarding your insistence that half of UCare’s $30 million “donation” was not subject to federal recoupment,” write Grassley, Issa, and Gowdy.

The letter directs Commissioner Jesson to clarify contradictory testimony, given under oath, before the House Oversight Committee; clarify the timeline and decision-making process on the remission to the U.S. Treasury; and to produce documents inappropriately withheld from earlier requests.

The text of the letter is available here.   The House Oversight Committee held a hearing in April, and issued a staff report.

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