Bill aims to codify ‘kickbacks’ in state law definition of fraud

Legislators are responding to a March 17 report by the Office of the Legislative Auditor that found the Department of Human Services has more power than it believes to investigate kickback complaints in autism programs.

Rep. Mary Franson (R-Alexandria) sponsors HF4566 to specify that a credible allegation of fraud includes an allegation of illegal remuneration, aka a “kickback.” The bill would also direct the department to use expedited rulemaking to correct a reference in the definition of fraud and permit the suspension of medical assistance payments during investigation of kickback fraud.

“Since my time here, I have heard about kickbacks. I’ve also heard that kickbacks don’t exist,” Franson said. “I’ve also heard it’s racist to talk about kickbacks because they don’t exist.”

The bill was laid over Tuesday by the House Human Services Finance and Policy Committee for future consideration.

Matt Dean, policy fellow with Center for the American Experiment, testifies March 24 before the House human services committee in support of HF4566. Rep. Mary Franson sponsors the bill. (Photo by Michele Jokinen)

The audit investigated complaints alleging kickbacks in autism programs. It showed the department responded appropriately to most of the 25 complaints investigated; however, three went uninvestigated as department officials asserted that prior to 2025 they did not have the authority to investigate kickbacks unless the allegation also included non-kickback conduct that met the definitions of fraud, theft, abuse or error.

Auditors found the authority to investigate existed, and a decades-old error in the department’s administrative rules “may limit the department’s ability to suspend payments while investigating kickbacks.”

The report appealed to the Legislature to step up in case the department does not initiate corrective action to clarify its authority.  “This could be accomplished through a direction in law for DHS to correct the rule or the enactment of additional statutory language clarifying that kickbacks are a type of fraud for which DHS can suspend payments during an investigation.”

Matt Dean, a policy fellow with Center of the American Experiment, testified that a 1995 rule states that kickbacks aren’t statutorily defined. “When DHS is sitting up here you can say, ‘No, actually you not only have the authority but the obligation to get that money back and stop it.’”

Discussion revolved around how areas of current law already address much of this issue.

The legislative auditor’s report and Committee Co-Chair Rep. Mohamud Noor (DFL-Mpls) noted the Legislature adopted legislation last year that added explicit authority to sanction Medical Assistance providers that solicit, receive, pay or offer to pay kickbacks.

The purpose of the bill is to clearly clarify and codify these definitions to avoid confusion, Franson said.