Minn. to give feds $15M in Medicaid cash

The state of Minnesota has agreed to share with the federal government about half of a controversial $30 million payment from the HMO, UCare. The decision is a reversal from the state's long-held position that the money was a donation and the state could keep all $30 million. That position has prompted inquiries from Congress, and a joint hearing on Minnesota's Medicaid program is scheduled for later this week.

Medicaid provides the safety net for society's most vulnerable citizens -- the elderly in nursing homes, the poor, and children. And because it's a joint state and federal program, the feds are interested in how states account for dollars in the program. So when the Minnesota HMO, UCare announced last year that it was voluntarily contributing $30 million to help the state through its budget crisis, the federal government took notice.

UCare and Minnesota Human Services Commissioner Lucinda Jesson maintained the money was a donation to the state of Minnesota. Jesson has maintained the state could keep the entire $30 million payment.

"We accepted this donation, which they called it a donation. We believed it was a donation back in November and at that time we had no reason to believe that it was anything other than a donation," Jesson said. "But certainly we've learned a lot in the past year since UCare came into my office and said we want to donate $30 million to the state of Minnesota."

Jesson said her office later learned that UCare characterized the payment as an administrative expense. But even if not a donation, she said the state is treating the payment as falling under a 2011 limit on Medicaid profits. A letter from UCare at the time the donation was announced said the $30 million represents what the HMO considered to be excess 2010 operating margin for state public programs.

The plans voluntarily capped their profits at 1 percent of revenue from their programs and returned the excess to the state. Jesson said if there'd been no donation, UCare would've returned the $30 million plus $8 million more to the state, which absolutely would've been shared with the feds.

"So in light of this, we think it's only fair to treat the $30 million as excess profit under the cap and just pay the federal share," Jesson said.

A spokesperson for UCare told MPR News that it was not involved in the negotiations between the state and the federal government over the donation.

Sen. David Hann, R-Eden Prairie, who is also the chairman of the Health and Human Services Committee said there doesn't appear to be any wrongdoing involved.

"I don't believe there's any evidence of fraud or misbehavior. I think it was a legitimate debate about how to treat this money and apparently resolved in an amicable way so we'll just move forward," said Hann.

Under that 1 percent cap on profits, UCare and three other plans, announced they would return to state and federal taxpayers an estimated $73 million as part of the deal -- Minnesota's half will be about $35 million.

The state office of Management and Budget said it's conceivable that the $15 million the state must now pay back to the feds could come out of that $35 million the plans are expected to pay the state this summer.

Sen. Hann agrees. He said there's no budget shortfall or deficit as a result.

Iowa Republican, U.S. Sen. Chuck Grassley had also raised questions about the $30 million UCare gave to the state. When Grassley heard that Minnesota would repay the feds his office emailed a statement saying, "This isn't the end of my investigation. Minnesota needs to answer for its actions on the UCare payment." Grassley will join Commissioner Jesson in testifying before a joint congressional hearing Wednesday morning about accountability in Minnesota's Medicaid program.

Elizabeth Dunbar contributed to this report.