'Giant step forward': Proposals to root out fraud nearing finish line at Minnesota Capitol

Minnesota legislators are pushing forward several fraud prevention measures in the final weeks of their session, including proposals to establish a new Office of Inspector General and beef up the state's existing Medicaid fraud investigation unit.

They're also considering giving state agencies authority to withhold payments from suspected fraudsters, and having the nonpartisan Office of the Legislative Auditor track whether agencies are implementing its audit recommendations.

The slate of proposals still in play before the Legislature's May 19 adjournment deadline comes in response to growing concerns about fraud in public programs. The largest pandemic-era fraud in the country happened in Minnesota, with the nonprofit Feeding Our Future and other organizations stealing $250 million from a federally funded meals program for children. The FBI also has investigated fraudulent Medicaid claims in Minnesota's autism program.

"I think that Minnesotans are looking for a serious treatment of waste, fraud and abuse," said state Rep. Jim Nash, R-Waconia. "The policies that have been voted off the floor of the House are going to be a giant step forward."

The House passed a bipartisan finance bill last week that included funding for the Attorney General's Office to add nine people to its Medicaid Fraud Control Unit.

Nick Wanka, director of the unit, told lawmakers Monday that staffing hasn't kept up with the state's growing Medicaid budget. The unit needs 41 staffers but has 32, he said.

"When our state Medicaid budget has expanded, our Medicaid fraud unit has not," Wanka said. "… But even with that, we get results. We regularly outpace other states in the number of fraud convictions and charges we get and bring."

The finance bill also included funding for a new special review unit in the Office of the Legislative Auditor (OLA). It would track whether state agencies are implementing audit recommendations and report findings to the Legislature annually.

Legislative Auditor Judy Randall said last year that agencies have become less receptive to audits critical of their work, sometimes dismissing the OLA's findings and recommendations. A report by the OLA last year found the state Department of Education's inadequate oversight of the federally funded meals program created opportunities for the Feeding Our Future scandal.

A separate policy bill passed by the House last week gives agencies legal authority to withhold payments to public program participants if there is a "credible allegation of fraud under investigation." The bill also strengthens whistleblower protections for state employees and allows agencies to share data about suspected or confirmed fraud in public programs.

"We have very complicated data-sharing laws," said Rep. Dave Pinto, DFL-St. Paul, who noted that a loophole before did not allow such sharing.

The proposals to improve data sharing between agencies, expand the Medicaid fraud unit and give agencies more authority to withhold payments are supported by Gov. Tim Walz.

It's unclear if all the House measures will survive conference committee negotiations with the DFL-controlled Senate.

In the upper chamber, all eyes are on a bill that would establish a new Office of Inspector General to investigate fraud. That bill was heard in the Senate Finance Committee on Wednesday and could go to a floor vote as early as Thursday.

Sen. Heather Gustafson, DFL-Vadnais Heights, has been working on the bill for months with a group of bipartisan lawmakers. The Office of Inspector General would operate as an independent entity in the executive branch, investigating state agencies, programs and funding recipients to root out fraud.

Some state agencies have their own inspector general offices, but Republicans have questioned their ability to act independently.

The independent inspector general's office would be able to refer civil and criminal cases to the appropriate authorities, seek court orders to freeze public funds and recommend legislative changes to improve state programs.

A bipartisan commission would recommend candidates for inspector general to the governor, who would appoint the office's chief investigator to a five-year term. The governor could appoint one of the recommended candidates or pick someone else for the job. The appointment would have to be confirmed by a three-fifths vote of the Minnesota Senate.

Gustafson said she thinks the bipartisan inspector general bill could be a "success story" in what has been a contentious year at the Capitol.

"This is a bill that I think meets the moment and has the support," she said. "I have gotten so many messages of support from both my progressive colleagues, my moderate colleagues, Republicans, my local cities."

House Republicans also introduced a bill to create an Office of Inspector General. That bill's sponsor, Rep. Patti Anderson, said she's been working with Gustafson and hopes to get the proposal across the finish line before May 19.

"That's what I'll be spending the last two weeks of session trying to get done and get accomplished for the citizens of Minnesota," said Anderson, R-Dellwood, at a news conference Tuesday.

Walz told reporters last week that both parties are aligned in wanting to combat fraud in government programs. He welcomed the legislative changes moving through the House and Senate, including the inspector general bill.

"I think the Legislature is committed to giving us the tools that we need," Walz said. "... We should have everything in place to try and stop [fraud]."