A Medicaid provider was banned for fraud. She kept billing.
Medicaid fraud in Minnesota
A former fraud prosecutor said Managed Care Organizations and the Department of Human Services were "asleep at the wheel."
MINNEAPOLIS (FOX 9) - A former fraud prosecutor said Managed Care Organizations (MCOs) and the Department of Human Services (DHS) were "asleep at the wheel."
Medicaid schemes lead to ‘easy’ money
Why you should care:
In one case, state investigators said a UCare provider’s fraud continued "unabated" because it was "easy."
Another provider said UCare knew she was double billing for Medicaid services and did nothing to stop it.
In a pending case, the ringleader of a massive Medicaid scheme kept billing for years after being banned by UCare because of credible allegations of fraud.
The fraud cases highlight the critical role UCare and other Managed Care Organizations (MCOs) play in detecting fraud in Minnesota.
UCare, which is shutting down due to massive losses, did not respond to repeated requests for comment.
Gov. Tim Walz is now calling for all MCOs to be eliminated from Minnesota’s Medicaid system.
To better understand how those private insurers manage Minnesota’s safety net, the FOX 9 Investigators spent months conducting interviews with legal experts, reviewing state contracts and analyzing hundreds of court records involving Medicaid fraud.
Steve Forrest, a former prosecutor with the state’s Medicaid Fraud Control Unit at the Minnesota Attorney General's Office, said MCOs and the Department of Human Services (DHS) were "asleep at the wheel."
The PITSTOP-66 Investigation
What we know:
A massive scheme exposed UCare’s failure to freeze Medicaid funding despite repeated red flags, impossible billing claims, and credible allegations of fraud.
Nasro Takhal recently pleaded guilty to charges of Medicaid fraud for orchestrating the scheme that involved interpreters, drivers, medical clinics and transportation companies.
Takhal, who worked as an interpreter, recruited and exploited Somali American residents in Faribault to seek services from specialty clinics in the Twin Cities that were not actually needed.
She targeted UCare members in the Faribault area because it was located just under 60 miles from most specialty clinics in the Twin Cities metro. This allowed transportation companies associated with Takhal to bill the maximum amount under UCare’s policy.
Related: UCare’s Medicaid payouts more than doubled before insurer’s downfall
It also allowed them to bill for interpreter services for Somali American members of UCare.
But in what is now known as the PITTSTOP-66 Investigation, fraud investigators found most of those Medicaid claims involved "phantom" services that had been made up or were ineligible for reimbursement.
UCare believed Takhal was booking thousands of those "phantom" services through numerous transportation and interpreter agencies.
"I think that definitely should have raised some red flags that folks should have looked into sooner," said DHS Inspector General James Clark.
Banned in 2019. Kept billing.
Timeline:
Takhal was banned by UCare in 2019 following a credible allegation of fraud.
Still, the money kept flowing for nearly two more years.
Takhal used "invalid or fabricated names" to continue booking hundreds of rides and interpreter services through those same agencies even after she was banned.
A medical clinic alerted UCare to the continued fraud in November 2019 — three months after Takhal was cut off from the Medicaid system.
Yet prosecutors say the scheme continued until 2021, resulting in a "remarkable increase" in Medicaid funds paid by UCare.
"When you think about a sophisticated ring like that being able to work together to game the system, you have to wonder whether or not fraud detection efforts and oversight efforts were…were up to the task," Clark said.
$600,000 in overpayments after ban
By the numbers:
UCare was required to suspend payments to providers when they received a credible allegation of fraud, according to managed care contracts reviewed by the FOX 9 Investigators.
But court records show UCare issued roughly $600,000 in overpayments after Takhal was banned.
Forrest said funding should only keep flowing to providers suspected of fraud under certain circumstances: when a provider successfully appeals in court, or when requested by law enforcement to protect an ongoing investigation.
"But those are the only two circumstances…where payment would continue to go following a determination by either an MCO or DHS," Forrest said, adding that requests from law enforcement to renew payments are rare.
Forrest would not comment on specific investigations.
"What's supposed to happen is when you have a credible allegation of fraud, they have a mechanism to withhold payment immediately."
In one court filing reviewed by the FOX 9 Investigators, Nicholas Wanka, the head of the Medicaid Fraud Control Unit, acknowledged the Medicaid system lacks "quality control on the front end to ensure that only eligible claims are paid."
Most Medicaid care administered by private insurers
Big picture view:
The "front end" of the state’s Medicaid system is predominantly controlled by private insurers like UCare.
In Minnesota, 80% of Medicaid care and nearly half of all Medicaid funding is administered by those MCOs.
Related: How Medicaid Funding Flows through Minnesota
"They decide whether the money goes out the door," Wanka recently told the FOX 9 Investigators. "By the time we're involved, the money is already out the door."
Despite their role as the first line of defense in fraud prevention, MCOs referred only a small percentage of the total fraud cases received by the Medicaid Fraud Control Unit.
From 2020-2023, 81 out of 598 fraud referrals (less than 14%) came from MCOs. The private insurers referred fewer cases than DHS, private citizens and "other" sources.
The number of fraud referrals from MCOs has increased in recent years.
"The MCOs recognize the moment we're in and are stepping up their efforts," said Clark.
Eliminating MCOs
Local perspective:
Yet Gov. Walz is now calling for MCOs to be eliminated from the state’s Medicaid program.
"We need to have it centralized where we can take that accountability," Walz said at a press conference last month.
Like DHS, each MCO operating in the state is required to have a special investigative unit that monitors for fraud.
"You have eight different managed care organizations that are all responsible for detecting and preventing fraud. No one really has a good insight into what the other business is doing," Clark said in a recent interview with the FOX 9 Investigators.
Clark has been meeting with compliance officers at the MCOs to discuss the need for more collaboration with DHS.
"So the silos are breaking down," he said. "We are in closer communication."
While the Walz Administration is now pointing at MCOs as potential cracks in the Medicaid system, state contracts show DHS already has direct oversight of those private insurers.
"The terms and conditions of those contracts allow DHS to hold MCOs accountable through audits, compliance reviews, and monitoring," a DHS spokesperson said in an email.
UCare and other MCOs are required to report to DHS if they even have a "reason to believe" that fraud has been committed, according to managed care contracts.
What we don't know:
DHS would not provide specifics on when UCare reported suspected fraud in the PITTSTOP66 case, citing ongoing investigations.
"UCare is now no longer in business, so I can’t necessarily speak on their exact policies," Clark told the FOX 9 Investigators. "What I will say is that it is troubling, right?"
DHS later acknowledged that fraud reports from MCOS were "historically submitted quarterly and not in easily accessible formats."
This past January, DHS began to require MCOs to report open investigations every month.
"We’re working with MCOs to standardize how they report the data so we can use analytics to look across the whole system," a DHS spokesperson said in an email.
Who freezes Medicaid funding?
What they're saying:
DHS and MCOs like UCare are the only entities that can freeze Medicaid funding because of credible allegations of fraud.
"I’m honestly surprised that someone concerned about the bottom line didn’t say ‘what the hell is going on here?’" Forrest said.
Forrest would not comment on specific investigations but said obvious signs of fraud were repeatedly missed.
"I never saw evidence that DHS or any MCO was appropriately tracking claims within their own systems to ensure claims paid made any sense," Forrest said.
Fraudster says UCare had all the information it needed
Dig deeper:
In one case, an interpreter later convicted of fraud argued UCare and Medica were aware that she had been billing for "overlapping services."
Related: Medicaid in Minnesota: What are Managed Care Organizations?
Ifrah Ahmed Gadid frequently billed for interpreter services provided to multiple clients at the same time from 2018-2020.
"The insurers knew Ms. Gadid provided interpreter services to multiple clients at the same date and time, because she told them," her attorney wrote.
"UCare and Medica possessed all the same information regarding Ms. Gadid’s services when it paid the ‘overlapping appointment’ claims at issue as they do now."
UCare is currently being taken over by Medica. Neither company responded to repeated requests for comment.
The fraud was ‘easy’
Why it matters:
An analysis of court records by the FOX 9 Investigators reveals another Medicaid provider continued to collect funding years after first being investigated by UCare for fraud.
Jonathan Newcomb was convicted of Medicaid fraud in 2023.
UCare appeared to start investigating his business as early as 2017 after receiving a complaint from a clinic supervisor that interpreters were billing for "phantom services."
However, Newcomb continued to operate and even increased his fraudulent billings to UCare after opening a second, illegitimate clinic that allowed him to expand the scheme.
UCare paid out roughly $570,000 in Medicaid funding after receiving the first credible allegation of fraud.
Newcomb kept fraudulently billing even while he was under criminal investigation.
DHS confirmed UCare never reported the initial fraud allegation.
"We just no longer can have these silos of information where we're not sharing suspected fraud," Clark said.
The agency finally froze payments to Newcomb’s clinic after they were alerted by the Medicaid Fraud Control Unit.
Until then, Newcomb continued his scheme unabated.
"He did this because of his greed," Wanka said in a court record.
"And because it was easy."