Understanding Fraud In Minnesota Government, And How To Fight It

By Chuck Johnson, Jane Prince, Gary Todd and Max Hailperin, Minnesota Reformer

December 11, 2024

Editor’s note: This is the first of three guest commentaries by Charles Johnson, former deputy commissioner of the Department of Human Services, on the subject of fraud in government programs.

Fraud in government programs has been a hot topic in Minnesota over the past few years. Feeding Our Future prosecutions continue apace. Fraud in Medical Assistance — Minnesota’s name for the federal Medicaid program — has been making news. And the Office of the Legislative Auditor weighed in on both Feeding Our Future and the frontline worker pay program earlier this year.

Unfortunately, this attention is probably deserved. Starting a little over 10 years ago, Minnesota has experienced an increase in the number and complexity of fraud schemes targeting government programs.

Perhaps the most helpful piece written on the subject is a commentary by Kayseh Magan published by the Reformer in July.

Fraud in government programs has traditionally been thought of as people trying to get individual benefits — cash, food stamps, health care — that they are not eligible for.

The schemes that Magan writes about that have emerged over the past decade are on the provider side of services. Fraudsters set up businesses — child care centers, autism treatment providers, adult day care services, etc. — and bill for services that are never provided. These schemes are far more lucrative than stealing a couple hundred dollars of food stamps each month.

Magan’s perspective is unique because he is a former fraud investigator in the Minnesota Office of Attorney General, but also because he is part of Minnesota’s Somali community, whose members have been defendants in many of the high-profile fraud cases.

Magan highlights how these schemes take advantage of the tight-knit immigrant community by having community members pose as people receiving services, often unwittingly. Having actual people show up on bills for services helps create a veneer of legitimacy.

The Reformer reported on an elaborate examples of such schemes involving transporting people from Owatonna to the Twin Cities for (non-existent) services.

Magan suggests that elected leaders need to take the issue seriously. I agree, but it takes more than that.

My former agency, the Department of Human Services, first learned about these schemes in the Child Care Assistance Program around 2012. The schemes are difficult to detect and investigate, and it took some trial and error to figure out the most effective way to stop it.

DHS started by asking the 2013 Legislature for authority and staffing for a new CCAP fraud unit. The Legislature approved the request. For several years the fraud unit dug in and investigated cases that were prosecuted both federally and locally.

But by 2017 DHS found it was not keeping up with the volume of fraud and asked the Legislature to fund additional investigators. This time the Legislature said “no.”

In 2018, a hyperbolic media report about CCAP fraud created a political storm, and DHS leadership decided to reexamine how it was attacking CCAP fraud.

DHS concluded it was focusing too heavily on criminal investigations. That may seem counter-intuitive; after all, fraud is a crime.

But DHS learned it could not investigate and prosecute our way out of the problem — the fraud was too pervasive. (To be clear, the $100 million cited in the hyperbolic media report was not accurate, which was confirmed by a later OLA report).

Criminal investigations of these fraud schemes are resource-intensive and time consuming, requiring daily observation and documentation of the operation of the child care center — watching how many kids and which individual kids show up each day to determine if actual attendance aligns with billing records.

The investigations can go on for months and months. And you know what? The program — the fraudulent provider — continues to get paid during all that time. Tens, if not hundreds of thousands of dollars.

Criminal investigators and prosecutors know they need to be careful and take time to build an airtight criminal case. But, from the perspective of program administrators, this is beyond frustrating.

So, what to do?

As one of our staff put it, when water is leaking all over your kitchen floor, you don’t just wait around for the plumber. You turn off the water.

With the support of the 2019 Legislature, DHS got the tools to turn off the water: Enhanced administrative authority to stop CCAP payments and terminate providers from the program. DHS has used these tools in combination with enhanced oversight of new child care providers by licensing staff to penalize and/or shut down programs with suspicious billing practices.

I can’t say that fraud has been stopped in CCAP. The agency continues to refer cases of suspected fraud to appropriate authorities for investigation and prosecution.

But the problem has been blunted. And I’d speculate that it is not coincidental that fraud schemes in other government programs began to emerge after the crackdown on child care fraud.

The fraudsters looked for greener pastures — and they found them.

As recent reports attest, many schemes now target Medical Assistance services like adult day care, autism and transportation. Fortunately, DHS — per federal requirements — has had a Medical Assistance program integrity and fraud prevention system in place for decades, working in partnership with the Office of Attorney General.

These are the resources needed by all agencies and for all vulnerable programs: investigative staff to analyze data, conduct site visits, etc.; and, clear authority to stop funds when any form of misspending — up to and including fraud — is suspected.

In the past, requests to the Legislature for more staff and more agency authority could be met with resistance. The (sort of) good news is that in the post Feeding Our Future world, lawmakers are more likely to step up, and agencies are building capacity to address fraud.

Sometimes it takes a crisis to fix a problem.

Headlines about fraud in government programs should raise concerns. But remember: The headlines are usually about fraud that has been detected and is being prosecuted. That’s a good thing.

Also remember that while prosecutors send out press releases when they charge a case, agencies do not send out press releases when they take administrative actions that stop fraud from happening.

That work is just as important.

The Minnesota Reformer is an independent, nonprofit news organization dedicated to keeping Minnesotans informed and unearthing stories other outlets can’t or won’t tell..