Minnesota's Medicaid program under fire on Capitol Hill

Lucinda Jesson
Human Services Commissioner Lucinda Jesson has had to defend the Dayton administration's treatment of HMO UCare's payment to the state. The question is whether the $30 million payment was a donation — or a refund of overpayments. UCare officials say they sent the payment to help with the state's budget deficit.
Photo from Hamline University

Minnesota Human Services Commissioner Lucinda Jesson was in the hot seat Wednesday on Capitol Hill, trying to defend the state's Medicaid program for the poor and disabled, which she oversees.

At issue during a congressional hearing was $30 million that the HMO UCare — one of four large insurance companies that provide services for Minnesota's Medicaid program — returned to the state last year.

Jesson has had to defend the Dayton administration's treatment of the company's payment to the state. UCare officials say they sent the payment to help with the state's budget deficit.

The question is whether the $30 million payment was a donation — or a refund of overpayments.

U.S. Sen. Charles Grassley of Iowa, who testified before the committee, accused Minnesota of trying to rip off the federal government by trying to keep all of UCare's $30 million repayment.

Medicaid is funded jointly by the federal and state governments.

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Many Republicans, including Grassley of Iowa, believe that the program is rife with fraud.

"Documents show that the state schemed to keep the federal government from receiving its share of overpaying to one specific company, UCare," Grassley said.

The House Oversight Committee also reviewed problems with Medicaid in New York and Texas. But Minnesota's program generated the most heat in the crowded Rayburn House Office Building hearing room.

The role of HMOs in covering Medicaid patients is important because states are increasingly turning to HMOs to run their Medicaid programs, as Minnesota already has.

If the new federal health care law survives a challenge in the Supreme Court, Medicaid will expand dramatically as it becomes the primary way that states insure many of the people who currently lack health insurance.

If the UCare payment to Minnesota was a donation, as Jesson maintains, Minnesota wouldn't have to share the money with the federal government.

But U.S. Rep. Trey Gowdy of South Carolina was among those who didn't buy that story.

"C'mon, this $30 million," Gowdy said. "No corporation is ever going to give a state $30 million out of the benevolence of their shareholders' hearts."

Lost in dispute, however, is an important detail: Like other HMOs in Minnesota, UCare is a non-profit and doesn't have shareholders.

But Gowdy was persistent. He pointed to emails in which Jesson asked colleagues to limit discussion of the donation to phone calls — not email.

He also referred to a letter from UCare, in which CEO Nancy Feldman wrote Jesson that the donation was a way of repaying past overpayments by the state government.

Both have already been made public in Minnesota.

Even though Jesson announced earlier this week that the state will share the UCare money with the federal government, lawmakers from both parties didn't let her off lightly.

U.S. Rep. Dennis Kucinich of Ohio, a liberal Democrat, asked Jesson whether Minnesota regularly received $30 million donations.

"A $30 million donation, congressman, certainly is unusual," Jesson replied.

"This is why we're here to discuss it," Kucinich said. "I think it's unusual."

One of the witnesses at the hearing was David Feinwachs, a vocal critic of Minnesota's Medicaid finances and former counsel for the Minnesota Hospital Association. He testified that he lost his job for raising questions about whether Minnesota was using federal Medicaid funding in unauthorized ways.

Feinwach's allegations haven't been adjudicated, but Jesson has said a federal investigation of the state's Medicaid program is underway.

U.S. Rep. Michele Bachmann also testified, and said she would introduce legislation to improve oversight of Medicaid-managed care contracts.

To the extent that Jesson agreed there were problems with the state's Medicaid program, she said they were the fault of the Pawlenty administration.

"We were struck that the contracts we inherited from the previous administration offered few incentives for improving quality and reducing costs," Jesson said.

In Minnesota, the tenor of today's hearing prompted an angry response from Dayton.

"The whole thing, both in Washington and here, has been blown so out of any factual relationship that it's just really appalling," the governor said.

Dayton said instead of being criticized, Jesson deserved praise for the changes she has made to the state's Medicaid program, changes he said have saved state and federal taxpayers hundreds of millions of dollars.