A third-party audit assessing Minnesota Medicaid programs at high risk for fraud found the state could safeguard $1 billion in the next four years by changing its policies on payment reviews. But the changes that could result in those savings for now remain hidden from public view.
Minnesota’s Department of Human Services on Friday released an initial report on fraud vulnerabilities in 14 programs it considers high risk. It reviewed more than $9.4 billion in payments between January 2022 and October 2025. Portions of the report regarding vulnerabilities are redacted.
Gov. Tim Walz in October ordered an audit and a 90-day payment pause for the programs as scrutiny continued to build on fraud in federally-funded programs run by his administration. The pause would help the state detect “suspicious billing activity and scrutinize the use of public funds,” the governor’s office said at the time.
However, the audit released Friday focused more on procedure for fraud prevention than finding actual fraud. The independent report from health care company Optum leaves questions unanswered for the public.
Redactions in report
Sections of the report released to the media on weaknesses in Medicaid programs and recommendations for fixing them are covered with large black bars and boxes, citing Minnesota law protecting “trade secret information.”
Minnesota Medicaid Director John Connolly said the redactions were made in accordance with state law to protect information on vulnerabilities from people who might use it to exploit the state.
“We don’t want to share information with bad actors, with fraudsters that will tip them off to how we’re looking at fraud and looking at risk or vulnerability to fraud,” he told reporters during a Friday media briefing. “We’re trying to balance transparency and provide as much up-to-date information as transparently as we can with you all and with the public, but also protect information that could present more risk.”
Connolly said some of the changes Optum recommended could require action by the Legislature, and that the state Department of Human Services would share more information with lawmakers during the upcoming session, which starts Feb. 17.
‘First phase’
State officials described the report as the “first phase” of developing a payment review process for the high-risk programs.
Those include Housing Stabilization Services, which it shut down last fall as federal prosecutors filed charges in a multimillion-dollar fraud scheme, and autism support services, which have also seen schemes now facing federal prosecution.
In autism programs alone, the audit flagged 90% of claims in the past four years “that didn’t match clear policies and procedures,” according to Human Services officials. The suspicious claims don’t necessarily indicate waste, fraud or abuse, according to the report, which Connolly said was not a “forensic investigation of program integrity.”
“We may need to clarify policies so claims that deserve to be approved are not unnecessarily flagged, and providers may not have the training they need to file claims properly,” Connolly said.
“Optum was looking at, perhaps filling trends that might have raised some questions, things that may not have seemed clinically appropriate,” he later explained. “And did that, of course, by looking not only at their own frameworks and analytics, but looking at our own policies in our provider manual.”
Payment policy
Optum estimated the state could have avoided $1 billion in fraud risk over a four-year period by making “refinements ” to the payment policy. More than $700 million of that was in autism service programs, where federal investigators have uncovered fraud schemes, though again, the report noted those savings don’t necessarily imply there was fraud.
Optum also found that in the same period, the state could have directly recovered more than $52 million from instances where providers of Medicaid-funded services clearly violated state policies.
Human Services will continue to work with Optum over the next nine months to develop a “pre-payment strategy” for Medicaid programs, according to agency officials.
The three-month mark report accomplished a few things, DHS officials said. It established an analytics process before payments, did 192 target analytics across the 14 high-risk programs and started a pre-claim analysis process in each payment cycle.
Programs deemed high risk by Minnesota include: Early Intensive Developmental and Behavioral Intervention Services for Autism; Integrated Community Supports; Nonemergency Medical Transportation; Peer Recovery Services; Adult Rehabilitative Mental Health Services; Adult Day Services; Personal Care Assistance/Community First Services and Supports; Recuperative Care; Individualized Home Supports; Adult Companion Services; Night Supervision; Assertive Community Treatment; Intensive Residential Treatment Services; and Housing Stabilization Services.
One of the 14 programs, Housing Stabilization Services, is no longer operating. Human Services ended the program in October after learning of a federal investigation into allegations of significant fraud.
What else is happening with fraud issue?
On Monday, Human Services announced a new push to scrutinize providers in state-run Medicaid programs at high risk for fraud, including a significant expansion of unannounced site visits.
The plan to significantly expand on-site validations comes as federal officials threaten to cut off Medicaid funding amid accusations of significant, widespread fraud in programs administered by the agency.
The state is currently appealing a January decision by the administration of President Donald Trump to withhold more than $2 billion in Medicaid funding from the 14 high-risk programs. Funding remains in place as the appeals process continues.
Human Services is making a call out to Minnesota’s tens of thousands of state employees seeking individuals to fill 168 temporary positions to visit providers in all 87 counties. There are currently only six dedicated site visit staff.
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