Vague Medicaid Policies Cost Minnesota $1.7 Billion, Early Autism Intervention Heavily Impacted

The Policy Change

A recent state-commissioned report from Optum, a third-party auditor hired by the Minnesota Department of Human Services (DHS), has revealed that poorly written or vague policy language may have led to an estimated $1.7 billion in potential costs across 14 high-risk Medicaid services. The analysis, covering claims from January 2022 through October 2025, also identified $52.3 million in Medicaid claims that unambiguously violated clearly stated policies during the same period. It is crucial to note that the report explicitly states neither amount necessarily implies fraud, waste, or abuse, but rather highlights areas for policy improvement or clearer compliance.

The Optum review scrutinized $9.4 billion in claims for services deemed high-risk for fraud, waste, and abuse by DHS, funded jointly by state and federal dollars. While the report distinguishes between “potential savings” from policy improvements and “direct recoveries” from clear violations, the sheer scale of the potential savings figure underscores significant systemic challenges. The services with the highest dollar amounts of “direct recoveries” were non-emergency medical transportation, totaling $23.9 million, and overnight assistance and supervision, at $11.5 million.

The report, released by DHS, also included lists of vulnerabilities within the Medicaid services and corresponding policy recommendations. However, these specific details were redacted in the publicly available files, citing “security” or “trade secret information” under Minnesota’s government data laws. DHS Deputy Commissioner John Connolly explained that this redaction was partly to prevent individuals from exploiting the information to defraud the state. DHS plans to review these recommendations and present them to the Legislature, which convenes in February, or implement them administratively as appropriate.

Impact on ABA

The Optum report specifically flagged early autism intervention (EAI) centers at a particularly high rate, indicating that over 90% of their claims did not clearly align with existing policies or procedures. Of the $1.7 billion in potential savings attributed to better-written policies, a substantial $1 billion was spent on early autism intervention services. This finding is significant for the Applied Behavior Analysis (ABA) community, as it suggests that the complexity or ambiguity of current Medicaid policies in Minnesota creates considerable challenges for providers in submitting claims that are unequivocally compliant.

DHS Deputy Commissioner John Connolly emphasized that these red flags do not automatically signal fraud, waste, or abuse. Instead, they could represent instances where legitimate claims are unnecessarily flagged due to policy vagueness, or where providers may lack adequate training in correctly filing claims under the current guidelines. This distinction is vital for ABA providers, as it shifts the focus from potential malfeasance to the need for clearer policy language and enhanced provider education on billing practices. The high percentage of flagged EAI claims underscores a systemic issue that impacts reimbursement stability and administrative burden for ABA clinics, potentially affecting access to critical services for individuals with autism spectrum disorder.

Next Steps

This report is an integral part of a year-long, $2.3 million contract between the state and Optum, aimed at developing an “AI-enabled” prepayment review system for high-risk Medicaid claims. Optum’s review of 46 months of historical claims serves as a guide for this new prepayment system. The implementation of prepayment review has been a key anti-fraud initiative championed by Governor Tim Walz and DHS officials, following significant scrutiny over fraud in Minnesota’s human service programs.

The state has already taken aggressive steps, including an abrupt delay in payments to all providers of the 14 Medicaid services in December, which caused disruptions to payrolls and, according to providers, impacted care for Medicaid recipients. While the new AI-enabled system has processed 100,000 claims every two weeks, it has yet to identify claims indicating fraud, though over 70 claims were denied in the first cycle. DHS Temporary Commissioner Shireen Gandhi anticipates that more instances of fraud will be detected as the system matures. Additionally, Minnesota plans to “revalidate” all 5,800 providers of high-risk Medicaid services through unannounced site checks and other measures.

These state-level efforts are unfolding amidst federal scrutiny, with the Trump administration threatening to withhold $2 billion in Medicaid funding from Minnesota related to these high-risk services, a decision the state has appealed. The ongoing investigations into Optum’s parent company, UnitedHealth Group, by the Department of Justice regarding Medicare Advantage billing and prescription management services, add another layer of complexity to the oversight landscape.

Fast Facts

Expert Perspective

The report underscores a critical need for clearer Medicaid policy language and enhanced provider training to ensure compliant billing and uninterrupted access to essential ABA services.

Source: minnesotareformer.com