FILE - Minnesota Jodi Harpstead

Jodi Harpstead speaks to reporters at the Minnesota Capitol on Monday. Aug. 12, 2019, after Gov. Tim Walz, right, named her to be his new commissioner of human services. 

A federal audit on Wednesday estimated Minnesota mistakenly issued $3.7 million in payments to managed Medicaid care organizations in the state from 2014 to 2016. Those "unallowed payments" were sent for dead people.

Medicaid, the largest program run by Minnesota's Department of Human Services (DHS), pays privately managed care organizations to administer medical benefits for about 850,000 of the program’s 1.1 million people in the state.

The inspector general audit report found DHS paid the managed care organizations for some deceased enrollees because the state agency didn’t always “identify and process” beneficiary death records.

The report recommended the state return $3.2 million in mistakenly appropriated federal Medicaid funds. About $500,000 of the $3.7 million total amount derived from Minnesota's state coffers. 

Federal auditors wrote that the department identified and began fixing problems with the new eligibility and enrollment system before the audit and will refund any verified additional overpayments.

Minnesota DHS Commissioner Jodi Harpstead told The Center Square DHS is correcting the problem.

“Ensuring our records are up-to-date so we do not pay for individuals who are no longer receiving care is a continual challenge,” Harpstead said in a statement. “We gather death information from many different sources, which do not always report in a timely manner. Because these payments are made to health plans in advance, we will always have to reconcile accounts."

“We are using continuous process improvement, including periodic data match, to get payment accuracy rates as close to 100 percent as possible to be trustworthy to taxpayers.”

Sen. Scott Newman, R-Hutchinson, called for an investigation into DHS.

“It’s no wonder people are losing faith in state government when we have yet another troubling story from the state’s human services department,” Newman said in a statement. “This state agency serves millions of Minnesotans each year, providing critical services on which people rely – and all are affected by this sort of mismanagement.

“This follows reports of fraudulent child care payments, massive overpayments to our tribal governments, and a toxic work environment in the state’s largest agency – problems of which Senate Republicans have been sounding the alarm about for some time. We invite Gov. Walz and the House of Representatives to join us in getting to the bottom of these problems.”

The improper payments represented less than 1 percent of total Medicaid payments to health plans from 2014-2016.

State Rep. Joe Schomacker, R-Luverne, agreed with Newman.

“This is just another example of the problems that have taken place within the Department of Human Services,” Schomaker said in a statement. "While this issue is now behind us, it highlights the need for us to continue to investigate what is happening within the agency.”

Staff Writer

Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi.