Minnesota lawmakers want to crack down on fraud in state programs: ‘They’re stealing from us’

Minnesota legislators plan to crack down on fraud and waste in state programs when they return to the Capitol in January, after the FBI found “substantial evidence” of fraudulent Medicaid claims in the state’s autism program.

Republicans are expected to lead the charge. They’ve raised concerns about fraud in state programs for years and will wield more influence now that they’re poised to hold a one-seat majority in the Minnesota House. With a possible $5.1 billion budget deficit on the horizon, GOP legislators say the state can’t afford to have money go to waste.

“Minnesota taxpayers are tired of funding fraud,” House GOP leader Lisa Demuth said at a news conference in early December. “Given the fact that we have a budget crisis on the horizon, we need to start working now to evaluate efficiency of our state programs and working to root out the hundreds of millions of dollars in fraud.”

Gov. Tim Walz and some DFL legislators expressed interest in strengthening fraud prevention measures after the FBI raided two autism treatment centers earlier this month. Walz told the Minnesota Star Tribune he wants the state to increase criminal penalties for Medicaid fraud and use predictive artificial intelligence to flag potential fraudsters more quickly.

“This pisses me off unlike anything else,” said Walz, who plans to propose a package of fraud prevention measures before the legislative session starts Jan. 14. “They’re stealing from us. … You’ve got to increase the penalty on these crimes. These are crimes against children, in my opinion.”

The state’s autism program, which serves people under 21, has experienced exponential growth in Medicaid billing. Reimbursement claims soared from $1.7 million in 2017, the first year of the program, to nearly $400 million last year and again this year, according to an affidavit filed before the autism center raids. Federal law enforcement suspects many autism centers are billing for services not actually provided.

Rep. Dawn Gillman, a Republican who will serve on the House human services committee, said the Legislature should require licenses for autism centers. Minnesota doesn’t require autism centers to be licensed, giving the state little oversight. The number of autism treatment providers in Minnesota has ballooned from 41 in 2018 to 328 last year.

“We are sending millions … to places that don’t have to be licensed in the state of Minnesota,” said Gillman, R-Dassel.

Rep. Mohamud Noor, a Minneapolis Democrat on the human services committee, said “We need to have serious conversations about putting guardrails in place for an industry that has no licensing process.”

Federal investigators said the alleged autism program fraud overlapped with the huge Feeding Our Future scheme. The nonprofit Feeding Our Future and other organizations allegedly stole $250 million during the pandemic from a federal program to provide meals to low-income children after school and during the summer.

According to the FBI affidavit, at least a dozen of the 70 defendants in the Feeding Our Future case “owned, received money from, or were associated with autism centers that received state money.”

U.S. Attorney Andrew Luger told WCCO Radio earlier this month that “Minnesota has a fraud problem.”

“It’s something that we can conquer and turn around, and it’s going to take really smart people at all levels of government to do that,” Luger said.

Walz and GOP legislators have expressed concern about people defrauding several government programs at a time. Demuth called on Walz to order state agencies to pause payments to people suspected of defrauding other programs. But the governor said that’s not always possible.

“When we’re pretty certain someone’s involved in this, sometimes we don’t have the legal authority to cut them off until the conviction goes through,” Walz said. “That’s one of the problems.”

Sen. Heather Gustafson, DFL-Vadnais Heights, said she plans to introduce a bill next year to establish an independent Office of Inspector General in Minnesota. Some state agencies have their own inspector general offices, but critics have questioned their ability to act independently.

The new office would investigate fraud, audit entities that receive taxpayer money and hold state agencies accountable for meeting ethical and financial standards, among other things. Ideally, Gustafson said, the office would have subpoena power and authority to pause payments to suspected fraudsters.

“All of the other angles that we’ve taken to fight fraud, waste and abuse are good, right? Anything that we do to prevent that is a good thing. But we’re not doing enough on the preventative side,” Gustafson said. “If we had our own Office of Inspector General, we would be able to do more in an immediate fashion versus wait and bring in others to help us shut it down.”

Republicans have said they also want state agencies to be held accountable for fraud that happens on their watch.

Earlier this year, Minnesota’s nonpartisan legislative auditor released a report stating the Department of Education’s inadequate oversight of a federally funded meals program created opportunities for Feeding Our Future to steal $250 million. When state Education Commissioner Willie Jett responded to the scathing report, he said the blame lies with the fraudsters, not his agency.

Legislative Auditor Judy Randall told the Star Tribune earlier this year that state agencies have become less receptive to audits critical of their work, increasingly rejecting her office’s findings and recommendations. “There’s definitely a shoot-the-messenger feeling,” she said.

Rep. Duane Quam, R-Byron, said he wants agencies to take more responsibility for their shortcomings and, if necessary, discipline employees for incompetence that leads to fraud.

“I have yet to have any one of the commissioners, deputy commissioners, et cetera, indicate there have been any personnel that have been disciplined for incompetence,” said Quam, who’s expected to lead the House elections finance and government operations committee. “If there’s never any discipline for doing the wrong thing or not doing your job … there’d be a tendency to not follow the rules.”