Tim Walz (FOX 9)
ST. PAUL, Minn. (FOX 9) - A former state prosecutor said the private insurance companies that manage most of the Medicaid care in Minnesota were also "asleep at the wheel" when it came to detecting fraud.
What are Managed Care Organizations?
What we know:
Gov. Tim Walz’s plan to combat fraud now includes eliminating Managed Care Organizations (MCOs) from Minnesota’s Medicaid system.
"We need to have it centralized where we can take that accountability," Walz said at a press conference Tuesday.
MCOs are private insurers contracted by the Minnesota Department of Human Services (DHS).
Private insurers responsible for billions in Medicaid funding
By the numbers:
Eight MCOs currently administer roughly 80% of Medicaid care provided in Minnesota.
Private insurers have issued more than $6-billion in Medicaid payments combined since 2018, according to state data obtained by the FOX 9 Investigators.
DHS Inspector General James Clark said each company has a different approach to detecting fraud.
"And they're not necessarily sharing information with each other," Clark said.
"So, Medica doesn't know what Blue Cross is looking at. Blue Cross doesn't know what UnitedHealth is looking at. UnitedHealth doesn't necessarily know what other managed care organizations are looking at. So I think this proposal streamlines and unifies Medicaid oversight."
RELATED: How Medicaid Funding flows through Minnesota
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The state’s largest MCO was UCare before it was taken over by the Minnesota Department of Health last year due to massive losses.
RELATED: UCare’s Medicaid payments more than doubled before insurer’s demise
Why you should care:
Since UCare and other MCOs control such large sums of Medicaid funding, they have long been considered to be the first line of defense when it comes to preventing fraud.
"They decide whether the money goes out the door," said Nicholas Wanka, director of the Medicaid Fraud Control Unit at the Attorney General’s Office. "By the time we're involved, the money is already out the door."
MCOs and DHS are the only entities that can freeze Medicaid funding because of suspected fraud.
MCOs and DHS 'asleep at the wheel'
Dig deeper:
To better understand how 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.
Most of the cases involved UCare, which is now being absorbed by Medica.
Both companies did not respond to repeated requests for comment about their role in detecting Medicaid fraud.
A former prosecutor told the FOX 9 Investigators that MCOs and the state agency that regulated them were "asleep at the wheel" when it came to detecting fraud.
"I never saw evidence that DHS or any MCO was appropriately tracking claims within their own systems to ensure claims paid made any sense," said Steve Forrest, who worked for the Medicaid Fraud Control Unit from 2021-2025.
Forrest would not comment on specific investigations.
MCOs incentivized to detect fraud
He explained that MCOs have their own investigators and are obligated to report credible fraud allegations to DHS.
The FOX 9 Investigators reviewed state contracts that detail how the state regulates MCOs.
Forrest also said MCOs are incentivized to prevent fraud because they are paid capitation rates, which are upfront, set amounts of money to cover the future cost of care for its members.
If they don’t stop fraud, they lose money.
"It surprises me, particularly given the added incentive that MCOs have, that in some of these larger type cases they weren't able to identify that (fraud) earlier," Forrest said in a recent interview.
"Somebody at one point didn't either see codes being entered or claims being paid for that didn't make sense, upticks in claims that didn’t make sense and flag that before money went out the door."
Forrest said many of those red flags were missed because of a well-intentioned effort to increase access to healthcare.
"And so the mechanisms that would be otherwise put in place to prevent fraud weren't there. And there are all sorts of what I would characterize as relatively easy fixes," Forrest said.
Forrest did not comment on the Governor’s plan to eliminate MCOs from the Medicaid system.
Who is better at detecting fraud?
What's next:
Until recently, MCOs have received little attention in the state’s effort to crack down on fraud.
"I haven't seen any evidence that managed care organizations are better at spotting or detecting fraud than the Department of Human Services," said Clark, the agency’s Inspector General.
But shifting more oversight responsibility to DHS may be a tough sell at the legislature. The agency has been a frequent target for Republicans who blame the Walz Administration for not doing enough to prevent fraud.
DHS previously declined interview requests from the FOX 9 Investigators.
In an email, an agency spokesperson said MCOs are primarily responsible for "identifying, investigating, and taking corrective action against fraudulent and abusive practices."
The FOX 9 Investigators requested all written reports of suspected fraud that MCOs are contractually required to submit to the state agency.
DHS declined to produce any of those reports, citing ongoing investigations.
The agency said it routinely reviews MCO claims as part of state-initiated investigations, and through routine oversight activities.
"Certainly MCOs have not been under the microscope to the same extent as DHS has" Forrest said. "And to some extent, rightfully so. I mean, DHS is ultimately the state agency that's responsible for administering these programs… and so everybody bears responsibility, but certainly DHS would bear the greatest responsibility historically for the problem that we're at today."
Note: This story is part of a series from the FOX 9 Investigators focusing on the state's response to Medicaid fraud.
The Source: This story uses information FOX 9 Investigators obtained from the Minnesota Department of Human Services and court records.