Human services committee rejects sustained funding hike for Medicaid fraud investigation unit

Members of the House Human Services Finance and Policy Committee agree they want more investigation and prosecution of fraudsters in the state. But their opinion of the state attorney general and how his office functions differ greatly.

This led to an impasse Thursday that left only a year of funding for increased staffing for the state’s Medicaid fraud investigation unit.

Sponsored by Rep. Joe Schomacker (R-Luverne), a committee co-chair, the omnibus human services bill was amended with a delete-all amendment, that itself was amended with nine amendments, and approved by the committee via voice vote. It now moves to the House Ways and Means Committee.

[MORE: Research summary, spreadsheet]

Included in HF4338 is a provision proposed by Rep. Matt Norris (DFL-Blaine) to allocate $1.23 million in Fiscal Year 2027 to the attorney general’s Medicaid fraud investigation unit. These funds would primarily go toward hiring 18 new positions: 11 investigators, three attorneys and four support staff.

[MORE: Human services finance bill focused on federal compliance, program integrity]

Minnesota’s fraud investigation unit staffing is largely lower than that of comparable size states like Virginia, Washington and Arizona, Norris said. This would set the state at a standard staffing level, but to stay there, funding has to extend beyond a year.

Norris unsuccessfully offered an amendment — failing along party lines — to sustain this additional funding through Fiscal Year 2029 and qualify Minnesota for a federal funding match of about $3 for every $1 spent by the state.

The omnibus bill doesn’t work with only one year of funding, Norris said.

“I don’t know a lot of high-quality investigators and attorneys who are looking for one-year gigs. And by the time these new hires get fully trained, they would maybe have a couple of months left to work on cases that oftentimes take multiple years to fully investigate and prosecute.”

Rep. Steve Gander (R-East Grand Forks) felt “favorable” toward Norris’ amendment but wouldn’t vote for it because he’s heard from constituents who don’t trust the Attorney General’s Office. “Because we’re in a representative democracy, and hearing this feedback from my constituents, I’m going to have to lean no on this.”

The unit is not staffed with bipartisan or political actors, Norris said, but rather by former FBI agents, former state and local prosecutors, former law enforcement, money laundering investigators and veterans. “These are people who care about one thing, and that’s justice.”

Rep. Kim Hicks (DFL-Rochester) pointed out that the attorney general is an elected position with an election coming up this year. “The way people can voice their opposition to the office is to vote for someone else.”

Rep. Jeff Backer (R-Browns Valley) proposed an alternative funding amendment to sustain the funding via a new “Medicaid assistance fraud restitution account” that would pool restitution money paid by fraudsters.

If the account has $1.23 million or more in it at the end of the year, $1.23 million would go toward sustaining the fraud investigation unit’s increased funding. Extra money would go to the General Fund.

But there’s a catch.

Because Backer wants to encourage prosecution, if the account has less than $1.23 million at the end of the fiscal year, none of that money would go to the investigation unit and would instead be put in the General Fund. “It’s incentivizing people to do the work.”

Norris said that as a lawyer Backer’s amendment “alarmed” him.

With the provision, the state would not qualify for matching federal funds and could be illegal, he said. Under law, funds that the account would collect must be returned to the victims, usually Managed Care Organizations or Department of Human Services.

“I believe that there’s a high risk that the federal government would come in and say, Minnesota, you can’t use these funds for staff in the Attorney General’s Office.”

Most importantly, Norris said Backer’s amendment would create “a perverse incentive” for prosecutors to pursue restitution because their jobs depend on hitting a certain amount. “The notion that we would even introduce this conflict of interest is crazy to me.”

Backer’s amendment also failed on a party-line vote.