Report: Dysfunction at agency led to overpayments to tribes

Updated: October 29, 2019 07:34 PM

Minnesota's legislative auditor says "troubling dysfunction" at the Department of Human Services resulted in $29 million in overpayments to two tribes for opioid treatment programs.

The auditor's office said in a report Tuesday the agency lacked authority to make the payments, no one at the department takes responsibility for the decision, and no one can provide a rationale for making them.

The report says the dysfunction has caused serious financial and legal problems for the state, the White Earth and Leech Lake Band tribes. And, it says those problems are "particularly troubling since DHS could have avoided the problems with simple, good management."

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Human Services Commissioner Jodi Harpstead said the report confirms her assumption that her agency is at fault. She said it lacked internal controls to catch the problem and did not provide correct advice to the tribes.

The auditor made three recommendations in the report:

  • The legislature should by law require the DHS Commissioner to design and implement a comprehensive system of documented management reviews and approvals to ensure that payments made by the department with Medicaid funds comply with state and federal legal requirements.
  • The legislature should clarify in law whether DHS has authority to pay a health care provider a service payment when a patient or client self-administers medication outside of the provider's facility.
  • The legislature should consider enacting exceptions to the law that requires DHS to recover payments to providers that resulted from department errors.

Harpstead wrote in response to the recommendations that she supports a legislative review to allow for exceptions to the repayment requirement, but said the department disagrees with the second recommendation because the department believes the law is clear regarding payments to tribal providers. She added that the rate structure is different for payments to nontribal providers, and the department will examine issues related to that topic raised in the audit.

Regarding the first recommendation, Harpstead wrote the department acknowledges it has had decentralized decision making and internal controls were lacking, but it doesn't believe a new law is necessary. Instead, Harpstead said the department has initiated a Continuous Process Improvement and Internal Control Process project to make sure policies and decisions are better and well-documented.

You can see the full report here.

At a hearing of the Legislative Audit Commission, lawmakers were told by Legislative Auditor Jim Nobles the overpayments were the fault of the Department of Human Services. He held up a prescription bottle and cup of water to explain the overpayments.

"Everytime someone would take this from the medicine cabinet, take a pill out and take that pill, the Department of Human Services was paying $455 dollars," Nobles said. "We think it really resulted from dysfunction at the department. The department did not have the authority to make the payments."

Each of the two Native American tribes owes about $14.5 million from overpayments. One tribal leader made it clear they will not pay the money back willingly.

"The Leech Lake Band's position from the outset has been that we will not repay this money because we are not at fault," said Leroy Staples Fairbanks, of the Leech Lake Band of Ojibwe. "That remains our position to this day and the Office of Legislative Auditor's report confirms that we are not at fault."

Harpstead also issued the following statment after the report was released:

"The guidance that was given to tribal governments was wrong and it is impossible for us to serve Minnesotans in a trustworthy way if they believe that their interactions with DHS could leave them on the hook for tens of millions of dollars. I am especially sorry that this error in the Department unfairly affected the tribal nations with whom Governor Walz and Lieutenant Governor Flanagan are working to restore trust and rebuild our government-to-government relationships.
"Based on the OLA report, this is clearly not an error caused by one individual or one commissioner. Instead, since the Walz/Flanagan Administration uncovered this error earlier this year, we have been setting to work to correct problems in the Department systems and processes that allowed such a costly error to take place and to ensure that we have protections in place for our partners in serving Minnesotans. I have put the Department's Office of Continuous Improvement to work ensuring that our systems are adequately protecting our partners. 
"While I do not dispute the Legislative Auditor's assessment that current law requires the Department to work to recover funds in situations like this, it is my hope that the Legislature, the Department of Human Services and tribal governments can come together to agree on a solution to this problem. Any solution to an error made by the Department that punishes the Minnesotans receiving services, or the tribal governments that help us to administer those services would be unfortunate."

Rep. Joe Schomacker (R-Luverne), Republican Lead on the House HHS Finance Division, issued the following statement regarding the special review:

"Minnesota taxpayers should not be forced to foot the bill for the dysfunction at DHS. DHS should take responsibility for their mistake, and find the $29 million within their own $18 billion budget to make amends for their mismanagement of federal funds. The numerous levels of management and middle-management at DHS that failed to identify and stop this improper practice makes clear that reorganization, consolidation, and accountability measures are desperately needed, not just in the division in question in this special review, but agency-wide."

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