A new state audit has confirmed what critics long suspected: Minnesota’s Department of Human Services sat on credible Medicaid kickback allegations for years while falsely claiming it had no authority to investigate them.
The Office of the Legislative Auditor released the report Tuesday, titled “Department of Human Services Investigations of Alleged Kickbacks in the Early Intensive Developmental and Behavioral Intervention Program.” It found that DHS’s Office of Inspector General has possessed the legal authority to pursue kickback cases on its own since the late 1990s.
“We disagree with DHS’s assertion that it did not have the authority to investigate allegations of kickbacks alone,” the report states. “Based on our analysis, DHS has had the authority to investigate allegations of kickbacks in MA since the late 1990s.”
DHS had claimed it could only probe kickbacks when they were tied to other fraud, such as billing abuse. The audit says that was wrong.
Between 2021 and 2023, DHS declined to investigate three separate kickback allegations under that flawed interpretation. It did not refer any of those cases to law enforcement. It did not flag them for further review.
The audit focused on the EIDBI autism services program, which ballooned from a $3 million budget in 2018 to nearly $400 million in 2023. Federal prosecutors have described how providers in the program used financial incentives to recruit families and inflate Medicaid billing. One operator allegedly billed millions using kickback-driven tactics while directing funds toward fraudulent claims.
The report also found a decades-old error in DHS administrative rules that may have further limited the agency’s ability to suspend payments during kickback investigations.
DHS responded in a letter included in the report, saying it agrees that fraud “should be defined to more clearly include kickbacks.” The agency did not address why it failed to investigate the cases it declined between 2021 and 2023.
“This is yet another example of a taxpayer-funded state agency failing to work in the best interest of the taxpayers they are meant to serve,” said state Senator Michael Kreun (R). “The Department knew about potential kickbacks, yet failed to act. This has become the new normal – failure to act is exactly how fraud has exploded in this agency. This new OLA report is yet another clear example of how DHS is failing in nearly every metric.”
The report recommends DHS amend its administrative rules to explicitly include kickbacks in the definition of fraud, and says the legislature should intervene if the agency fails to act.
A previous state audit found concerns of fraud in Minnesota’s Department of Human Services’ (DHS) Behavioral Health Administration (BHA) grant program.
