Fraud in Minnesota Government Programs: A Former DHS Deputy Commissioner’s Perspective
Fraud in Minnesota government programs has become a significant issue in recent years. High-profile cases like the Feeding Our Future prosecutions and ongoing concerns about Medical Assistance (Minnesota’s Medicaid program) have dominated headlines. The Office of the Legislative Auditor has also released reports on both Feeding Our Future and the frontline worker pay program, highlighting the extent of the problem. This increased scrutiny is likely justified, as Minnesota has seen a rise in both the number and sophistication of fraud schemes targeting government programs over the past decade.
A particularly insightful commentary by Kayseh Magan, published in the *Minnesota Reformer* this past July, sheds light on the evolving nature of this fraud. Traditionally, government program fraud was associated with individuals attempting to obtain benefits they weren’t entitled to. However, Magan’s analysis reveals a shift towards provider-side fraud, where businesses—child care centers, autism treatment providers, adult day care services, and others—bill for services never rendered. These schemes yield significantly higher returns than individual benefit theft.
Magan’s unique perspective, as both a former fraud investigator for the Minnesota Office of Attorney General and a member of Minnesota’s Somali community (which has been affected by many of these high-profile cases), is invaluable. He emphasizes how these schemes exploit close-knit immigrant communities by using community members, often unknowingly, as recipients of fictitious services. The presence of these individuals on billing records lends an air of legitimacy to the fraudulent claims. The *Minnesota Reformer* has reported on elaborate examples of this, such as transporting individuals from Owatonna to the Twin Cities for non-existent services. Magan rightly calls for elected officials to take this issue seriously.
My experience as a former deputy commissioner at the Department of Human Services (DHS) offers further insight. DHS first encountered these schemes in the Child Care Assistance Program (CCAP) around 2012. These schemes proved difficult to detect and investigate, requiring trial and error to develop effective countermeasures. In 2013, DHS successfully lobbied the Legislature for a dedicated CCAP fraud unit, which made progress in investigating and prosecuting cases. However, by 2017, the unit was overwhelmed, and a subsequent request for additional funding was denied.
A highly publicized (and ultimately inaccurate) media report on CCAP fraud in 2018 prompted DHS to re-evaluate its approach. It became clear that relying solely on criminal investigations wasn’t sufficient; the fraud was too widespread. Criminal investigations are resource-intensive and time-consuming, often requiring months of daily observation to build a solid case. Frustratingly, the fraudulent providers continued receiving payments throughout these lengthy investigations.
The solution, implemented with the support of the 2019 Legislature, involved enhancing DHS’s administrative authority. This allowed the agency to stop payments and terminate providers suspected of fraud more quickly. Combined with stricter oversight of new providers, this approach significantly reduced the problem. While fraud persists, the situation has improved dramatically. It’s worth noting that the crackdown on child care fraud seemed to trigger a shift in fraudulent activity to other programs, such as Medical Assistance.
Fortunately, DHS already had robust systems in place for Medical Assistance fraud prevention, working in partnership with the Attorney General’s Office. This highlights the resources needed across all vulnerable programs: dedicated investigative staff and the authority to swiftly halt funding when suspicious activity is detected. While legislative resistance to increased staffing and authority was previously an obstacle, the Feeding Our Future crisis has spurred greater political will and agency capacity to address fraud.
While headlines about fraud are concerning, it’s important to remember that these often represent detected and prosecuted cases—a positive sign. Administrative actions preventing fraud, while equally important, rarely garner the same publicity. Ultimately, a multi-pronged approach—combining investigative capacity with decisive administrative actions—is crucial in combating this pervasive issue.