Department of Human Services:
Payments for Self-Administered
Opioid Treatment Medication
SPECIAL REVIEW
October 29, 2019

Office of the Legislative Auditor
State of Minnesota

 State of Minnesota

Office of the Legislative Auditor
Special Reviews
We conduct special reviews in response to requests from legislators and other public officials,
or to address a government issue that has come to our attention in some other way.

While the focus of a special review is more narrow than an audit or evaluation, our objective is
the same: to find the facts and report them accurately and objectively.
For more information about the Office of the Legislative Auditor, go to our website at:
www.auditor.leg.state.mn.us

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Creative Commons License: https://creativecommons.org/licenses/by/2.0/legalcode

 OLA

OFFICE OF THE LEGISLATIVE AUDITOR
STATE OF MINNESOTA • James Nobles, Legislative Auditor

October 29, 2019
Members of the Legislative Audit Commission:
The Office of the Legislative Auditor (OLA) conducted a special review of payments the Department
of Human Services (DHS) made to the White Earth Nation and the Leech Lake Band of Ojibwe for
clients in their opioid addiction treatment programs to self-administer medications at home.
Because the payments were not authorized, occurred over several years, and total over $29 million,
OLA had a responsibility to determine why DHS made the payments and why the department did not
stop them sooner.
Our review was conducted by Jim Nobles, Legislative Auditor; Elizabeth Stawicki, Legal Counsel;
Joel Alter, Director of Special Reviews; and Valerie Bombach, Audit Director. The department
cooperated fully with our review.
Sincerely,

James Nobles
Legislative Auditor

Room 140 Centennial Building, 658 Cedar Street, St. Paul, Minnesota 55155-1603 • Phone: 651-296-4708 • Fax: 651-296-4712
E-mail: legislative.auditor@state.mn.us • Website: www.auditor.leg.state.mn.us • Minnesota Relay: 1-800-627-3529 or 7-1-1

  Table of Contents
Page
Introduction ............................................................................................................................................ 1
Summary ................................................................................................................................................ 2
Conclusion ............................................................................................................................................. 4
Background ............................................................................................................................................ 4
Findings.................................................................................................................................................. 8
Final Comment..................................................................................................................................... 22
Recommendations ................................................................................................................................ 22
Response by Department of Human Services ...................................................................................... 25

  Department of Human Services:
Payments for Self-Administered
Opioid Treatment Medication
Introduction
The Department of Human Services (DHS) notified the Office of the Legislative
Auditor (OLA) on July 9, 2019, that DHS had overpaid the opioid addiction treatment
programs operated by the White Earth Nation (White Earth) and the Leech Lake Band
of Ojibwe (Leech Lake).1 In July, DHS estimated the overpayments amounted to
$25 million; recently, the department increased the estimate to nearly $29 million.2
The overpayments were in connection with the tribes’ Medication-Assisted Treatment
programs to treat opioid addiction. These programs combine counseling with a narcotic
known as buprenorphine (brand name, Suboxone®), which reduces cravings and
symptoms of withdrawal.3
DHS classified these expenditures as “overpayments” because the department paid
White Earth and Leech Lake the U.S. Indian Health Service (IHS) “encounter rate”
when clients took the treatment drug at home. The department should not have used
that rate—currently $455 per day—because it can only be used when there was a faceto-face interaction between a client and a health care professional within a clinic.4

1
Minnesota Statutes 2019, 3.971, subd. 9, requires state agencies to “promptly” notify the Legislative
Auditor when they obtain information indicating that public money or other public resources may have
been used for an unlawful purpose. In this case, DHS did not promptly notify OLA; the notice came
approximately four months after the department determined that public money had been used for an
unlawful purpose.
2

The initial amounts were based on payments the department made through December 2018. Human
Services Commissioner Jodi Harpstead notified Legislative Auditor James Nobles of the revised estimate
in a telephone call on September 24, 2019. According to the commissioner, the new amount included a
$2.4 million increase for the White Earth Nation and a $1.4 million increase for the Leech Lake Band of
Ojibwe. The increase was mostly due to payments the department made in 2019 after the department had
determined that paying tribes the encounter rate for take-home medications did not comply with state and
federal legal requirements.
3

Buprenorphine is a Schedule III narcotic. According to the U.S. Drug Enforcement Administration,
drugs are classified into five different categories (or schedules) based on a drug’s potential for abuse. The
schedules range from Schedule I drugs, which have the highest potential for abuse and dependence, to
Schedule V drugs, which have the least potential for abuse. For details, see https://www.dea.gov/drugscheduling.
42 CFR, sec. 440.90 (2019); and Department of Human Services, “Minnesota State Plan Amendment,
Methods and Standards for Establishing Payment Rates, Supplement 2 to Attachment 4.19-B,” approved
January 3, 2012, 1.
4

 2

Special Review

When a client takes a dose of medication at home, there is no face-to-face encounter
with a treatment provider.
According to DHS officials, because the department made the overpayments with
federal Medicaid funds, the department has to repay the federal government the full
amount of the overpayments. DHS contends that state law requires White Earth and
Leech Lake to repay the state.
Given OLA’s responsibility to audit DHS and the state’s use of Medicaid funds, we
decided that OLA had a responsibility to conduct a special review of the issues
involved. Minnesota Statutes 2019, 3.972, subd. 2a, says:
To ensure continuous legislative oversight and accountability, the
legislative auditor shall give high priority to auditing the programs,
services, and benefits administered by the Department of Human
Services.
In addition, Minnesota Statutes 2019, 3.971, subd. 6, says:
The legislative auditor shall see that all provisions of law respecting the
appropriate and economic use of public funds and other public resources
are complied with and may, as part of a financial audit or separately,
investigate allegations of noncompliance.
In this special review, our primary objective was to determine what factors contributed
to DHS making the overpayments and why the department did not disclose and stop
them sooner. To conduct our review, we examined DHS and federal documents, and
we interviewed former and current DHS officials under oath.
While we focused our review on DHS, we also wanted input from the tribes. Therefore,
we reached out to the chairman of the White Earth Nation and the chairman of the
Leech Lake Band of Ojibwe. We asked to meet with them and other tribal officials.
We also asked them to provide us with documents that would help OLA understand the
overpayment issue from the tribes’ perspectives. They did not respond to our request,
and given the fact that American Indian tribes are sovereign nations, OLA’s authority to
compel their participation in an OLA review was uncertain.
Therefore, we had to rely largely on information we obtained from DHS and other
nontribal documents. It is possible that as the overpayment issue continues to unfold,
White Earth or Leech Lake will bring forth additional documents and testimony that
will be relevant to a full understanding of what occurred.

Summary
Over a decade ago, and without authority, DHS officials decided that it would pay
opioid treatment providers when their clients took medication at home. A few years
later, and again without authority, DHS officials decided it would pay tribal opioid
treatment providers the Indian Health Service (IHS) encounter rate when their clients
took medication at home.

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

3

Who made the decisions, why, and when is not clear because DHS officials never
documented their decisions. Even during the interviews we conducted, DHS officials
could not recall who was responsible. In addition, none of the DHS officials we
interviewed could offer a credible rationale for paying health care providers for their
clients taking medications at home.
While some DHS officials took actions that led to the overpayments, there were other
DHS officials who could have stopped the payments but did not. In interviews with
OLA, some officials said they were unaware of the payments, while others said they
were aware but it was not their responsibility to question an established payment
practice.
On February 12, 2019, a representative of the Red Lake Nation e-mailed a DHS opioid
treatment expert to find out if Red Lake’s opioid addiction treatment program could
receive the IHS encounter rate for days when clients took treatment medications at
home. Red Lake already operated an opioid addiction treatment program, but it had not
given its clients treatment medication to take at home.
The DHS expert told Red Lake “yes”; Red Lake would be able to receive the encounter
rate when clients took treatment medication at home. But another DHS official copied
on the e-mail told Red Lake to wait for an official response.
The department did not, however, issue an official response to Red Lake until May 1,
2019. In a letter to Red Lake, Leech Lake, and White Earth, the DHS commissioner
reversed the department’s long-standing practice of paying tribes for their clients to
self-administer treatment drugs at home. The commissioner told the tribal chairmen
that DHS can only pay the IHS encounter rate when there is a face-to-face interaction
between a client and a health care professional.
Also on May 1, 2019, the department finally implemented a policy and a payment
control that stopped the department from making payments to tribes when clients take
medication at home.
The department took another three months to inform the White Earth and Leech Lake
tribes that they must return all of the payments their tribes received from DHS for
clients self-administering medications at home.5
Leaders of the White Earth Nation and the Leech Lake Band of Ojibwe have expressed
frustration with how DHS has communicated with them about the overpayment issue.
They have placed responsibility for the overpayments on DHS and questioned their
obligation to repay the state. The state could face legal challenges in its efforts to
require White Earth and Leech Lake to return the overpayments.

5

The department also informed the White Earth and Leech Lake tribes that they had a right to dispute the
department’s determination that any individual payment was unauthorized by evidence that there was a
face-to-face encounter between the client and a tribal health care provider. In addition, the department
gave the tribes notice that they could appeal the department’s determinations and judgments to an
independent hearing officer. We will discuss the legal issues involved in Finding 6.

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Special Review

Conclusion
Our review found troubling dysfunction at the Department of Human Services, which
resulted in the department making $29 million in overpayments to the White Earth and
Leech Lake tribal opioid treatment programs.
The department did not have legal authority to make the payments; it did not document
why, when, and who decided it was appropriate to make the payments; no one at DHS
takes responsibility for the decision; and no one at DHS can provide a rationale for the
payments. The overpayments continued over several years and did not stop until an
outside inquiry brought them to light.
The dysfunction we found at DHS has created serious financial and legal problems for
the state, the White Earth Nation, and the Leech Lake Band of Ojibwe; those problems
will be difficult to resolve.

Background
Opioid Addiction and Treatment
In recent years, opioid addiction has become a major public health crisis. According to
the National Institute on Drug Abuse, more than 130 people die each day in the U.S.
after overdosing on opioids.6
While opioid addiction has become a serious problem nationwide and in every part and
population of Minnesota, a recent article in The Circle: Native American News and
Arts noted its particular impact on American Indians:
Minnesota’s crisis with opioid addiction is devastating families and
communities across the state and country. Opioids account for more
overdoses than any other drug. American Indians are experiencing the
effects of the opioid epidemic far more than other Minnesotans. 7
Opioids include a wide variety of drugs both illegal (such as heroin) and prescribed pain
medications (such as oxycodone, morphine, and codeine). Some opioids are made from
opium extracted from poppy plants, while others are synthetically created by
formulating chemicals into drugs that replicate the effects of natural opium.8
According to medical professionals, the process of reducing an addiction to opioids can
take significant time and poses significant risks. For example, Mayo Clinic offers this
advice: “Opioid withdrawal can be dangerous, and symptoms can be severe.

See “Opioid Overdose Crisis,” National Institute on Drug Abuse, revised January 2019,
https://www.drugabuse.gov/drugs-abuse/opioids/opioid-overdose-crisis, accessed October 18, 2019.
6

Lee Egerstrom, “Tribes and Public Agencies Spur Efforts to Fight the Opioid Crisis,” The Circle: Native
American News and Arts, April 1, 2019. The quote is a statement made by Richard Latterner, a manager
and chemical health counselor at the White Earth Urban Substance Abuse Program in Minneapolis.

7

8

For more information about opioids, see Centers for Disease Control and Prevention, Opioid Basics,
https://www.cdc.gov/drugoverdose/opioids/index.html, accessed October 23, 2019.

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

5

Depending on the type and dose of drug you’ve been taking, it may take weeks or even
months to gradually and safely reduce your [addiction].”9
There are various approaches to the treatment of opioid addiction. One approach,
Medication-Assisted Treatment (MAT), uses medications specifically formulated to
help people reduce or completely taper off of opioid use. The U.S. Substance Abuse
and Mental Health Services Administration describes MAT programs as follows:
Medication-Assisted Treatment (MAT) is the use of medications, in
combination with counseling and behavioral therapies, to provide a
“whole-patient” approach to the treatment of substance use disorders.
Research shows that a combination of medication and therapy can
successfully treat these disorders, and for some people struggling with
addiction, MAT can help sustain recovery.10
Medication-Assisted Treatment programs commonly use three types of medication:
methadone, buprenorphine, and naltrexone. Because of their potential for abuse and
diversion into illicit drug markets, the U.S. government regulates methadone and
buprenorphine as “controlled substances.”11 Our review focused on payments for
treatment involving buprenorphine (commonly referred to under the brand name
Suboxone®) since this was the take-home medication used in the MAT programs
operated by the Leech Lake and White Earth tribes.12
Federal requirements for buprenorphine treatment have evolved over time. Prior to
2013, federal regulations required that patients be stable and in treatment for nine
months before they were eligible to receive a one-week take-home supply of
buprenorphine. Effective in January 2013, however, a physician for an opioid treatment
program could determine at any point in treatment (even upon admission) that a patient
was suitable to receive take-home medications, and the amount of medication given to
patients was not necessarily limited to one week.13
In addition, Minnesota law establishes criteria that prescribing physicians must consider
when determining whether they will allow their clients to self-administer treatment

“Tapering Off Opioids: When and How,” Mayo Clinic, https://www.mayoclinic.org/diseasesconditions/prescription-drug-abuse/in-depth/tapering-off-opioids-when-and-how/art-20386036, accessed
October 23, 2019.
9

“Medication and Counseling Treatment,” Substance Abuse and Mental Health Services Administration,
U.S. Department of Health and Human Services, https://www.samhsa.gov/medication-assisted-treatment
/treatment, accessed October 18, 2019.
10

11

Buprenorphine is a Schedule III narcotic. According to the U.S. Drug Enforcement Administration,
drugs are classified into five different categories (or schedules) based on a drug’s potential for abuse. The
schedules range from Schedule I drugs, which have the highest potential for abuse and dependence, to
Schedule V drugs, which have the least potential for abuse. For details, see https://www.dea.gov/drugscheduling.
12
13

The U.S. Food and Drug Administration (FDA) approved buprenorphine in 2002.

H. Westley Clark, Director, Center for Substance Abuse Treatment, Substance Abuse and Mental Health
Services Administration, “Dear Colleague” letter regarding federal regulatory changes effective on
January 7, 2013, November 21, 2012.

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Special Review

medications.14 The stated purpose of these criteria is to “limit the potential for
diversion” of these medications “to the illicit market.”15

Leech Lake and White Earth Opioid MedicationAssisted Treatment Programs
The White Earth Nation and the Leech Lake Band of Ojibwe are bands within the
Minnesota Ojibwe (Chippewa) Tribe.
The Leech Lake Band of Ojibwe reservation in northern Minnesota includes land in
Beltrami, Cass, Hubbard, and Itasca counties. The White Earth reservation in northern
Minnesota includes land in Becker, Clearwater, and Mahnomen counties.
The box below shows recent data on tribal membership and the populations on the
reservations. It is important to keep in mind that not all people who live on the White
Earth and Leech Lake reservations are tribal members, and not all tribe members live on
their respective reservation.
Tribal Membership and Reservation Population
Tribe
Leech Lake
White Earth

Tribal Members
9,509
18,109

Reservation Population
11,456
9,799

NOTES: Tribal membership was reported in tribal publications (Leech Lake in Fiscal Year 2015, White Earth in
September 2018). The reservation population reflects U.S. Census Bureau estimates averaged over five years (20132017).

As sovereign, self-governing nations, American Indian tribes have the authority to
establish a wide range of services and programs for their members. They may also
choose to coordinate some services and programs with state and federal government
agencies. They may choose to do that in part to obtain state and federal funding.
OLA limited the scope of our review to the opioid Medication-Assisted Treatment
(MAT) programs that White Earth and Leech Lake operate.16 Leech Lake started its
program in 2004; it served approximately 162 clients in fiscal years 2018-2019. White
Earth established its program in 2017; it served approximately 595 clients in fiscal years
2018-2019.

14

Minnesota Statutes 2019, 245G.22, subd. 6.

15

Ibid.

16

The Red Lake tribe established its program in 2017; however, this program is not the subject of our
review because it has not received payments for clients to take medications at home. In fact, a
representative of the Red Lake MAT program told us its program does not allow clients to take treatment
medications at home.

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

7

By their choice, Leech Lake and White Earth enrolled their opioid MAT programs with
the state and became service vendors.17 While tribal programs are not required to be
licensed by the Minnesota Department of Human Services, if enrolled as vendors with the
state, they must demonstrate to the department that their standards for credentialing health
care professionals meet, exceed, or are exempt from corresponding state standards.18
To receive Medicaid payments for the services they provide, tribal programs must meet
certain requirements established in federal law.19 Also, state Medicaid plans—
including the portions related to tribal services—must be reviewed and approved by the
federal Centers for Medicare and Medicaid Services (CMS).20 U.S. Indian Health
Service (IHS) periodically publishes rates that are used to pay for services provided at
IHS tribal facilities to Medicaid recipients. Federal law specifies that the federal
government will pay 100 percent of these payments.21

Leech Lake and White Earth have been paid what is called an IHS “encounter rate”
for the health services they provide. It is an all-inclusive payment for the services
within a category of service (dental, behavioral health, etc.) an individual receives at
a health clinic within a day. When tribal providers submit claims to DHS for
services provided, it is DHS’s responsibility to review and—if appropriate—pay the
claims based on IHS-authorized payment rates and the state’s federally approved
Medicaid Plan.
Exhibit 1 shows the total opioid treatment payments to MAT providers and individuals
served by the Leech Lake and White Earth programs in state fiscal years 2018 and
2019.

Minnesota Statutes 2019, 254B.03, subd. 1(b), says, “The [Minnesota] commissioner of human services
shall select eligible vendors of chemical dependency services who can provide economical and appropriate
treatment.” Minnesota Statutes 2019, 254B.05, subd. 1(a), says, “American Indian programs that provide
substance use disorder treatment, extended care, transitional residence, or outpatient treatment services,
and are licensed by tribal government are eligible vendors.”
17

18

Minnesota Statutes 2019, 256B.02, subd. 7(c).

19

42 U.S. Code, sec. 1396j (2019).

20

42 CFR, secs. 430.14-430.16 (2019).

21

42 U.S. Code, sec. 1396d(b) (2019).

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Special Review

Exhibit 1: Total Medication-Assisted Treatment (MAT)
Payments and Enrollment for Leech Lake and White Earth,
Fiscal Years 2018 - 2019
Tribe

Number of Individuals who
Received MAT Treatment,
Fiscal Years 2018-2019a

Total Payments
Fiscal Years
2018-2019b

Leech Lake (Cass Lake)
White Earth, by Program
 Maternal Outreach and Mitigation
Services (MOMS) (Naytahwaush)
 Urban MOMS (Minneapolis)
 Oshki Manidoo MAT (Bemidji)
 Naytahwaush MAT (Naytahwaush)
 White Earth Urban MAT (Minneapolis)
 White Earth MAT (White Earth)
White Earth Total

162

$14,404,096

73
38
102
196
123
132
595

9,503,616
3,446,860
9,957,298
18,905,486
6,819,128
14,189,680
$62,822,068

Total

752

$77,226,164

a Represents an unduplicated count

of individuals who received services for that program during fiscal years 2018 and 2019.
Some individuals received services from more than one White Earth MAT program, therefore, the total of individual
programs is greater than total reported here.
b Totals

represent fee-for-service payments from the Consolidated Chemical Dependency Treatment Fund to White Earth
and Leech Lake Indian Health Service providers for medical treatment services, and excludes payments from grants for
program-related services, such as staff training, data collection and analysis, and program evaluation.
SOURCE: Department of Human Services.

Findings
Finding 1. The Department of Human Services did not have authority to
claim federal Medicaid funds to pay White Earth and Leech Lake opioid
treatment providers who submitted claims when their patients selfadministered medication at home.
A complex set of laws, rules, policies, and guidance establish the conditions under
which states, Indian tribal health providers, and nontribal health providers may claim

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

9

Medicaid funds for health care services.22 At the federal level, the Centers for Medicare
and Medicaid Services (CMS) within the U.S. Department of Health and Human
Services administers the federal Medicaid program. In Minnesota, the Department of
Human Services (DHS) is responsible for administering the state’s Medicaid program
(which Minnesota calls Medical Assistance).
To access Medicaid funds for a service, DHS must specify the service in its State
Medicaid Plan and obtain approval from CMS for Medicaid funds to be used to pay for
that service.23 DHS must also ensure on an ongoing basis the State Medicaid Plan and
the department’s programs and payment policies stay aligned with federal and state
Medicaid requirements.24 For example, DHS should track changes in state law related
to chemical dependency treatment to ensure they do not conflict with federal Medicaid
law and the State Plan. If there are discrepancies, DHS must either promptly submit a
State Plan amendment, obtain a program waiver from CMS, or modify its practices.25
Medicaid generally pays for services on a fee-for-service basis or through a fixed
amount for each individual enrolled in a managed care organization. Tribal health
providers may choose another option; they may select to be paid an “encounter rate” the
U.S. Indian Health Service (IHS) establishes annually.26 Under Minnesota’s agreement
with IHS, tribal health programs enrolled with DHS may receive an encounter rate
payment for several categories of health services. For example, a Minnesota tribal
health provider can be paid an encounter rate when a client has a counseling session
with a therapist, when a client takes a dose of medicine in the presence of a nurse or
other health care professional, or when a client has a teeth cleaning by a dental
hygienist.
However, DHS payments at the IHS encounter rate—$427 per day in 2018 and
$455 per day in 2019—to tribal providers who submitted claims for payment when their
clients self-administered a treatment drug at home, and not at a clinic, conflicted with

For example, 42 CFR, sec. 440.90 (2019), requires generally that clinic services “must be furnished at the
clinic by or under the direction of a physician….” Services may be furnished outside of a clinic—by clinic
personnel under the direction of a physician—to an eligible individual who does not reside in a permanent
dwelling or does not have a fixed home or mailing address. Federal guidance expands on this regulation. See
U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services, State Health
Official Letter #16-002, “Federal Funding for Services ‘Received Through’ an IHS/Tribal Facility and
Furnished to Medicaid-Eligible American Indians and Alaska Natives,” February 26, 2016, 2; and the related
document, U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services,
“Frequently-Asked Questions (FAQs) Federal Funding for Services ‘Received Through’ an IHS/Tribal Facility
and Furnished to Medicaid-Eligible American Indians and Alaska Natives (SHO #16-002),” January 18, 2017,
2 and 5. Also, see Minnesota Statutes 2019, 256B.0625, subd. 34; and Minnesota Rules, 9505.0210, published
electronically August 13, 2013.

22

23

42 CFR, sec. 430.10; 430.14-16; and 440.230 (2019).

24

42 CFR, sec. 430.12 (2019).

25

Ibid.

IHS regulations establish “per visit” rates for reimbursement. Minnesota’s State Medicaid Plan refers to
“encounters” or “encounters/visits” at IHS facilities. Minnesota Statutes 2019, 256B.0625, subd. 34(b),
refers to the federal “encounter rate.”
26

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Special Review

various DHS rules and requirements.27 Most notably, since at least January 2011,
Minnesota’s federally approved state Medicaid plan has had the following language:
An encounter for a [tribal] or [Indian Health Service] facility means a
face-to-face encounter visit between a recipient eligible for Medical
Assistance and any health professional at or through an [Indian Health
Service] or [tribal] service location….28
DHS publishes comprehensive guidance and provides training to health care providers
related to covered services and billing processes in order to receive reimbursement for
their services. This guidance also lays out the requirement for interaction between the
provider and client in order to receive the encounter rate. For example:


In 2001 and 2007, DHS issued bulletins to providers regarding payment of
Indian Health Service rates from the Minnesota Consolidated Chemical
Dependency Treatment Fund. The bulletins defined an “encounter” as a “faceto-face treatment episode” and stated that this criterion must be met “for the
encounter payment to be authorized and paid.”29



DHS’s provider manual for Minnesota Health Care Programs has had language
since at least 2012 that says: “An encounter for a tribal or [Indian Health
Service] facility means a face-to-face visit between a recipient eligible for
[Medical Assistance] and any health professional at or through an [Indian
Health Service] or tribal service location for the provision of [Medical
Assistance] covered services….”30

The encounter payments DHS made to White Earth and Leech Lake for clients to selfadminister opioid medications at home did not involve a face-to-face encounter between
the client and a health professional within the clinic. In other words, the DHS payments
did not comply with state policies that specified when an encounter rate can be paid.
We could not find, and DHS did not provide, any evidence that anyone at DHS ever
sought or obtained authority from a federal agency to use federal funds to reimburse
tribes an IHS encounter rate—or any rate—for opioid medication that patients take at
home. Further, given federal restrictions on Medicaid claiming for IHS facilities, it
seems unlikely that such a request would have been approved.
We discuss in the next sections, however, that DHS also gave different guidance to
different opioid treatment providers. This conflicting guidance, and other factors,

27

Minnesota Rules, 9505.0210, published electronically August 13, 2013, require that services paid for from
Medicaid funds must be “personally furnished by a provider” unless otherwise authorized in the rules.
28

Department of Human Services, Medicaid State Plan, 4.19-B (Methods and Standards for Establishing
Payment Rates), Attachment Supplement 2, effective January 1, 2011.
29

Department of Human Services, Bulletin 01-51-10: CCDTF Implementation of Encounter Rates,
September 28, 2001; and Bulletin 07-51-04: CCDTF Implementation of Encounter Rates, July 19, 2007.
30

Department of Human Services, Minnesota Health Care Provider Manual, September 26, 2012. In a
May 9, 2019, revision to the manual, DHS added the following language: “The [Indian Health Service]
encounter rate is not available for self-administered medication therapy.”

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

11

resulted in DHS reimbursing White Earth and Leech Lake an estimated $29 million in
unauthorized payments.
Finding 2. No DHS official—past or present—takes responsibility for
deciding that the department could use the U.S. Indian Health Service
encounter rate to pay tribal opioid addiction treatment programs for
clients to self-administer medications at home.

In an April 2019 internal memo, a DHS official said: “The explanation of how/who
approved the encounter rate reimbursement for the self-administered prescriptions is
unclear.”31
Like the department, we could not determine who decided to pay tribes the IHS
encounter rate for a client to self-administer medication at home. No one at DHS
documented the decision or formulated a written policy to implement the decision. In
addition to being a poor management practice, the department’s failure to document its
decision violated the Minnesota Official Records Act, which says that agencies “shall
make and preserve all records necessary to a full and accurate knowledge of their
official activities.”32
In addition, no DHS official we interviewed acknowledged making the decision to pay
the IHS encounter rate to tribal opioid addiction treatment programs for clients to take
medications at home.
The department’s current opioid treatment program expert, Rick Moldenhauer, told us
that the decision to pay the tribes the encounter rate grew out of a previously established
practice of paying nontribal opioid treatment programs for clients to self-administer
medications at home. Moldenhauer said that when he came to work at DHS in 2001 the
practice was as follows:
[I]f you’re an OTP [opioid treatment program], a methadone program,
we regularly…[paid] for the self-administration of dispensed doses.
That has never been an issue and that was the format and the billing
process that I inherited when I came here May of 2001.
Other DHS staff confirmed that the practice of paying MAT providers for doses of
medicine clients took at home has been in place for nontribal providers for many
years—perhaps since the 1990s.
Moldenhauer told us that the decision to apply this practice to the tribes occurred in
2004. At that time, DHS awarded grants to three organizations (the Leech Lake Band
of Ojibwe and two nontribal organizations) to foster an expansion of the state’s opioid
addiction treatment programs. Moldenhauer said that former chemical health division

31

DHS Health Care Administration, memorandum to Deputy Commissioner Claire Wilson and Assistant
Commissioner Marie Zimmerman, “MAT Payment Structure for Tribal Providers,” April 3, 2019.
32

Minnesota Statutes 2019, 15.17, subd. 1.

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Special Review

director Don Eubanks wanted to make sure that billing for take-home medication by
tribes would mirror those of nontribal programs.
In an interview with OLA, Eubanks denied any responsibility for payment decisions
affecting the tribes. According to Eubanks, he worked on higher-level issues and
pushed for policies that would increase the number of tribal opioid addiction treatment
providers, but he left detailed decisions about payment levels to other staff.
Given Eubanks’ response and the denials of involvement we received from other DHS
officials, we interviewed Moldenhauer a second time about the origins of the decision
to pay tribes for clients to take medications at home. Moldenhauer continued to insist
that Eubanks and others in positions above Moldenhauer were either directly involved
in the decision or were aware of the decision to pay tribes the IHS encounter rate for
self-administered treatment medications at home.
When we asked Moldenhauer about others’ denials, he said no one wants to take
responsibility for a decision that has become controversial. In fact, Moldenhauer
claimed that DHS officials and others are trying to pin the blame on him. He said:
[T]he impression that I received within DHS and, and outside of DHS,
is either myself running with a rogue interpretation of rules and statutes
or to the other extreme, individual malfeasance, where I’ve intentionally
somehow engineered this. How? I’m not a business analyst, I’m not a
programmer…. The other extreme being malfeasance on my part or that
I somehow personally have benefited from this. I have no contractual
agreements with any of these organizations, I don’t do the assessments,
I don’t provide the service, I don’t receive the, the, the monies that [are
paid]. What happened? I think it became a political issue.
Because Moldenhauer has played a central role for many years in the department’s
substance abuse treatment programs, we focused significant attention on him. We
reviewed a large number of his e-mails, we interviewed him twice under oath, and we
asked about Moldenhauer’s role and activities in our interviews with other DHS staff
and officials. Here is what we concluded about Moldenhauer:


Moldenhauer is highly regarded inside DHS for his deep knowledge of opioid
addiction and treatment programs.



Moldenhauer was the person tribal representatives came to for advice about
establishing opioid addiction treatment programs and about DHS billing
policies for those programs.



Moldenhauer advised tribal representatives that DHS would pay them the IHS
encounter rate when clients take opioid treatment medications at home. We
discuss the advice he gave in Finding 4.



Moldenhauer continues to assert that there is a legal basis for DHS to pay tribes
the IHS encounter rate for clients to take opioid treatment medications at home.

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication



13

We have no evidence, however, that Moldenhauer was directly involved in the
decision to pay tribes the IHS encounter rate for opioid treatment medications
clients took at home.

In addition, we find it highly unlikely that someone at Moldenhauer’s level within DHS
could make a decision and implement a process that resulted in $29 million in
unauthorized payments being made to White Earth and Leech Lake.
As shown in Exhibit 2, there are multiple supervisors above Moldenhauer.33

Exhibit 2: Levels of Supervision over Richard Moldenhauer
at the Minnesota Department of Human Services
Commissioner
│
Deputy Commissioner for Policy
│
Assistant Commissioner for Community Supports
│
Director of Behavioral Health Division
│
Deputy Director of Behavioral Health Division
│
Treatment Manager
│
Supervisor of the Clinical Services Policy Team
│
Richard Moldenhauer
Human Services Program Consultant/State Opioid Treatment Authority Representative
SOURCE: Department of Human Services Organization Chart, August 2019.

If we are wrong and Moldenhauer did make and implement the decision to pay White
Earth and Leech Lake the IHS encounter rate for clients to take opioid treatment
medications at home, all of the supervisors above him—as well as officials in other
DHS divisions—clearly failed. They allowed a person far down in DHS’s organization
to unilaterally initiate—without legal authority—a payment policy that sent millions of
federal funds to those tribes.
Finally, no matter who initiated the payment policy, the fact that DHS officials did not
stop the payments and allowed them to continue for several years indicates a level of
mismanagement and dysfunction within DHS that is extremely troubling. We discuss
this failure in the next finding.

In addition, Moldenhauer’s position description explicitly requires him to “report on various activities,
projects, and outcomes to other managers within the division or department” and to establish goals and
reforms using a work plan developed with division management.
33

 14

Special Review

Finding 3. DHS failed to implement procedures to stop the department
from making the unauthorized payments to the White Earth Nation and the
Leech Lake Band of Ojibwe.
Every well-managed organization designs and implements procedures to ensure that the
organization complies with its legal obligations and internal policies. Organizations
(and auditors) call these procedures “internal controls.” Controls often require actions
by individuals, but controls can also be built into computer systems as decision rules. 34
For example, controls in payment systems establish the criteria for allowing or not
allowing a payment to be processed.
Prior to 2012, DHS relied on agreements negotiated between counties/tribes and service
providers to establish the amounts the state would pay for chemical dependency
treatment services. That complex arrangement may have limited DHS’s ability to
establish controls to ensure that the payments it made to the tribes were correct. When
DHS established uniform, statewide payment rates, however, it had an opportunity to
establish controls that would have stopped unauthorized payments from being made.
But, because it failed to establish payment controls, DHS processed unauthorized
payments to White Earth and Leech Lake for several years.
According to people we interviewed, this disconnect between payment policy and
payment controls resulted from a lack of coordination between the Behavioral Health
Division and the Health Care Division, which oversees payments to providers in DHS.
For example, Julie Marquardt, Deputy Assistant Commissioner and Assistant Medicaid
Director, told us that the Behavioral Health Division has its own rate-setting staff and
that her division’s staff “don’t interact with them very much.”
When we asked Marquardt whether officials responsible for the state’s Medicaid
program and payment system still have ultimate authority to approve all payment rates,
Marquardt said, “I would like to say yes to that question, and, unfortunately, I have to
say no to that question.” She said that while the current controversy over DHS
payments for take-home opioid treatment drugs is an example of that reality, it is “only
one example of this.”
Marquardt said that she has been division director for 5 years and at Health Care
Administration for 15 years, and “our presence was not always welcomed” in other
areas of the department. She said that officials in other DHS divisions think the Health
Care Administration is being “intrusive” if it intervenes. According to Marquardt, there
is a culture at DHS of keeping the Health Care Administration out of other divisions’
business.
Multiple DHS officials told us that there is no formal policy that delineates how DHS’s
program divisions must interact with the DHS Health Care Administration for purposes
of setting and overseeing rates and payments.

34

Computer processing rules are also often called “edits.”

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

15

There are other units within DHS that had—or should have had—opportunities to flag
the unauthorized payments to the two tribes. For example:


The department’s Surveillance and Integrity Review (SIRS) unit failed to
identify the payments. SIRS is federally required to review Medicaid utilization
to safeguard against unnecessary or inappropriate use of Medicaid services and
against excess payments.35



The department’s Office of Inspector General (OIG) failed to identify the
unauthorized payments. This is particularly troubling since we learned that in
2014, the OIG worked with the Behavioral Health Division to include in DHS’s
online Provider Manual explicit instructions for providers to identify and code
within their claims submissions when a client self-administers opioid treatment
at “home.”36 Apparently, OIG did not at that time determine whether payments
for these types of services for U.S. Indian Health Service (IHS) tribal facilities
were actually authorized for federal Medicaid reimbursement and did not
conclude that the state’s payment system should be programmed to stop such
payments.



The American Indian Team in the Behavioral Health Division failed to identify
the unauthorized payments even though this team was established to work
closely with tribes on mental health and addiction issues.37 However, the
director of that team, Don Moore, told us that White Earth and Leech Lake have
not asked for the advice of his team on billing issues in recent years. Rather,
according to Moore, they have sought advice from Rick Moldenhauer, and he
was not always informed of the questions posed by tribes to Moldenhauer.
Moore said that had he known that DHS was paying the IHS encounter rate to
tribal providers for clients who self-administered medications, it would have
been a red flag.

Taken together, the facts we have presented in the findings above indicate a level of
dysfunction within DHS that is deeply concerning. As we discuss in the next findings,
that dysfunction has seriously harmed the state’s relationship with the White Earth
Nation and the Leech Lake Band of Ojibwe.
Finding 4. After telling tribes for several years that DHS would pay them
the U.S. Indian Health Service encounter rate for medications dispensed
to clients to take home, the department reversed its position in 2019.
As was the case with other aspects of our review, we had difficulty obtaining
documents that showed who at DHS told the tribes the department would pay the
35

42 CFR, sec. 456.3 (2019).

These actions were part of the OIG’s initiative to investigate transportation costs for opioid treatment.
See Department of Human Services, Minnesota Health Care Programs Provider Manual, Alcohol and
Drug Abuse Services, revised September 11, 2014, 9. These instructions appeared in the “Billing” section
of the manual. DHS’s provider training staff have instructed treatment providers to submit claims for all
services, including those provided at home.
36

37

Minnesota Statutes 2019, 254A.03, subd. 2.

 16

Special Review

encounter rate for opioid treatment medications clients took at home. We did, however,
find several e-mail exchanges between Moldenhauer and tribal representatives.
For example, in a June 28, 2017, e-mail, the billing specialist for the Leech Lake Opioid
Treatment Program asked Moldenhauer how many medications the tribe’s program
could dispense to a client at a time to take at home. In that exchange, the Leech Lake
representative specifically asked Moldenhauer how much the department would pay the
tribe for each time a client took medication at home. Here is that exchange:
Leech Lake Representative: “Just to verify that I am understanding this
correctly. We can dispense 30 days at a time to the client and bill DHS
the $391.00 a day for the 30 days that were dispensed to the client for
take homes[?]”
Moldenhauer: “The short answer is yes….”38
A more extensive interaction between Moldenhauer and a tribal representative occurred
on February 12, 2019. In that exchange, Adam Fairbanks, representing the Red Lake
Nation, sent an e-mail to Moldenhauer with the subject line: “Billing for Takeouts.”
Fairbanks wanted written confirmation from DHS that the tribe could receive an
encounter payment for each dose of an opioid treatment medication its program
dispensed to a client to self-administer at home.
Moldenhauer responded “yes,” Red Lake could receive an encounter rate for
medications clients self-administered at home. The department’s liaison to Indian
tribes, Vernon LaPlante, who was copied on the e-mail, told Red Lake leaders in a
February 21, 2019, e-mail to wait for an “official response.”
It took the department almost three months to provide Red Lake with an official
response. In separate letters sent on May 1, 2019, to the tribal chairmen of Red Lake,
Leech Lake, and White Earth, DHS Commissioner Tony Lourey said:
The Minnesota Medicaid State Plan approved by the Centers for
Medicare & Medicaid Services defines an encounter for a [tribal] or IHS
facility as a face-to-face visit between a recipient and qualifying health
care professional. Therefore, reimbursement for self-administered
medication does not meet the criteria of a face-to-face visit and is not
reimbursable at the federally negotiated IHS encounter rate.39
The commissioner’s letter not only contradicted the response Moldenhauer had given
Red Lake in February, it contradicted the department’s long-standing practice of paying
White Earth and Leech Lake the IHS encounter rate for clients in the opioid addiction
treatment programs to self-administer medications at home.

38
39

In 2017, the IHS encounter rate was $391.

Tony Lourey, Commissioner, Minnesota Department of Human Services, letter to Eugene Tibbetts,
Chairman, White Earth Nation, May 1, 2019; Tony Lourey, Commissioner, Minnesota Department of
Human Services, letter to Darrell Seki, Red Lake Tribal Council, May 1, 2019; and Tony Lourey,
Commissioner, Minnesota Department of Human Services, letter to Faron Jackson, Chairman, Leech Lake
Band of Ojibwe, May 1, 2019.

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

17

Finding 5. DHS’s communications with the White Earth and Leech Lake
tribes about its decision to reverse the department’s payment policy for
opioid treatment medications clients take at home were not timely or
respectful.
After informing White Earth and Leech Lake that the department was reversing its
payment policy on take-home medications, DHS took an additional three months to
inform White Earth and Leech Lake that the tribes would have to pay back the millions
of dollars in unauthorized payments the department had made to the tribes. In a
meeting at DHS headquarters in St. Paul on July 31, 2019, department officials told
leaders from both tribes that the tribes would have to pay the money back.
In follow-up letters on August 1, 2019, Acting DHS Commissioner Pam Wheelock sent
overpayment notices. The Commissioner told Chairman of the White Earth Tribal
Nation Eugene Tibbetts that his tribe would have to reimburse the state $11,979,279 for
the payments the state had made to the tribe for medications clients took at home from
2017 to 2019.40 Wheelock sent a similar letter to Faron Jackson, Chairman of the Leech
Lake Band of Ojibwe, to inform him that his tribe would have to return $13,338,094 for
overpayments from 2014 to 2019.41

On August 8, 2019, Acting Commissioner Wheelock sent the tribes letters
recognizing that DHS had not provided them with documentation underlying the
overpayment amounts and said the 30-day deadline to appeal will begin when the
department mails the claims level data and accompanying correspondence.
On August 20, 2019, Acting Commissioner Wheelock acknowledged that DHS “failed
to engage in communication, coordination, and formal consultation…as we became
aware of a potential overpayment of the [tribe’s] Medication Assisted Therapy
program.” She said DHS “took a regulatory stance, approaching your nation as a
‘medical assistance vendor’ rather than as a sovereign nation.” In addition, Wheelock
said: “We are confirming that the 30-day deadline to appeal has not started.” 42
On September 24, 2019, DHS told the tribes that the amounts the two tribes would have
to pay back had increased. According to the department’s latest estimates, White Earth
would have to pay back about $14.2 million and Leech Lake would have to pay back
about $14.7 million.43

40

Pamela Wheelock, Acting Commissioner, Minnesota Department of Human Services, letter to Eugene
Tibbetts, Chairman, White Earth Nation, August 1, 2019.
41

Pamela Wheelock, Acting Commissioner, Minnesota Department of Human Services, letter to Faron
Jackson, Chairman, Leech Lake Band of Ojibwe, August 1, 2019.
42

Pamela Wheelock, Acting Commissioner, Minnesota Department of Human Services, letter to Faron
Jackson, Chairman, Leech Lake Band of Ojibwe, August 20, 2019; and Pamela Wheelock, Acting
Commissioner, Minnesota Department of Human Services, letter to Michael Fairbanks, Chairman, White
Earth Nation, August 20, 2019.
43

We asked DHS for documentation and officials told us they did not send letters to the tribes but the
commissioner met with tribal leaders and informed them of the increase.

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Special Review

Representatives of the White Earth and Leech Lake tribes have criticized DHS not only
for providing the tribes with misinformation about their ability to obtain encounter
payments, but they have also criticized the way the department has communicated with
them about the overpayment problem. The department has accepted that criticism.
Frankly, we think the department’s mismanagement of its relationship with White Earth
and Leech Lake is worse than Wheelock acknowledged. In a meeting on October 18,
2019, which was prompted by questions we submitted to the department, DHS officials
told us they still have not obtained an official determination from federal officials that
the payments to White Earth and Leech Lake were overpayments. While we believe the
department’s determination that the payments were not authorized is correct, and we
assume federal officials will also support that determination, we were surprised to learn
that the department had not, as of the date of our meeting, obtained a determination
from federal officials on such a serious question.
In fact, we learned that the department only recently agreed to seek such a federal
determination because White Earth and Leech Lake demanded it. We were told that in
response to the tribes’ position, DHS has agreed to have a conference call in which
DHS, White Earth, Leech Lake, and federal officials will discuss the overpayment
issue. However, the department was not sure that the result would be an official,
written response from the federal government. In fact, the department was not sure
when the conference call would occur or which federal officials would participate.
All of this uncertainty is occurring more than five months after DHS told White Earth
and Leech Lake that the payments the department had made to the tribes for clients to
self-administer medications at home did not comply with legal requirements. And, it
comes over two months after DHS officials told White Earth and Leech Lake that they
would have to return millions of dollars to the state because the payments DHS made
over several years were not authorized.
Finding 6. The State of Minnesota could face challenges in trying to
obtain the unauthorized payments DHS made to the White Earth Nation
and the Leech Lake Band of Ojibwe.
The U.S. Department of Health and Human Services (HHS) can require the State of
Minnesota to repay the federal government for overpayment of Medicaid funds.
Federal regulations define overpayments as “the amount paid by a Medicaid agency to a
provider, which is in excess of the amount that is allowable for services furnished under
section 1902 of the Act and which is required to be refunded.”44 When the state
discovers overpayments, it has one year to recover (or attempt to recover) the
overpayments and repay the federal government before HHS can adjust the Medicaid

44

42 CFR, sec. 433.304 (2019).

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

19

payments HHS makes to the state.45 The Secretary of HHS determines the amount
CMS may withhold from a state to recover the overpayments.46
In addition to federal regulations, Minnesota Statutes 2019, 256B.0641, subd. 1(1),
requires the commissioner to recover an overpayment when the commissioner or the
federal government determines the state has overpaid a medical assistance vendor.47
Minnesota Statutes say this is true even when DHS made the error.48
In several important respects, American Indian tribes are different from other medical
assistance vendors, but the recovery requirement applies to tribes. As tribal nations,
White Earth and Leech Lake have legal authority to establish and license their
medication-assisted opioid treatment programs.49 In addition, the state has an
obligation to interact with tribes on a government-to-government basis, unlike how the
state interacts with counties, other political subdivisions, or other vendors. 50
Nevertheless, because White Earth and Leech Lake have enrolled their medicationassisted opioid treatment programs with the state to receive Medicaid funding, they are
subject to certain federal and state legal requirements and processes, including the
recovery provision noted above.51

Appeal Process
Both Leech Lake and White Earth have said they will appeal DHS’s determination. In
an August 1, 2019, press release, Leech Lake said the band’s legal counsel was working
to develop a response to the allegations and “will vigorously appeal any determination

45

42 U.S. Code, sec. 1396b(d)(2)(C) (2019).

42 U.S. Code, sec. 1396b(d)(3)(A) (2019). “The pro rata share to which the United States is equitably
entitled, as determined by the Secretary, of the net amount recovered during any quarter by the State or
any political subdivision thereof with respect to medical assistance furnished under the State plan shall be
considered an overpayment….”
46

47

We note that Minnesota Statutes 2019, 256B.064, subd. 1c(a), gives the commissioner discretion on
whether to recover an overpayment. Nonetheless, Minnesota Statutes 2019, 256B.0641, which requires
the commissioner to recover the overpayment, also includes the phrase “notwithstanding…any law or rule
to the contrary,” which then supersedes the permissive clause (commissioner may obtain repayment) in
256B.064.
48

Minnesota Statutes 2019, 256B.064, subd. 1c(a); and 256B.0641, subd. 1(2).

49

For a discussion of the legal basis of the tribes’ status as sovereign nations, see Research Department,
Minnesota House of Representatives, American Indians, Indian Tribes, and State Government, January 2017,
“Tribal Sovereignty: Limits of State Power,” 18-21. For additional information and from a tribal
perspective, see National Congress of American Indians, Tribal Nations and the United States: An
Introduction, (no date), 20-22.
Governor Tim Walz, Executive Order 19-24, “Affirming the Government to Government Relationship
between the State of Minnesota and Minnesota Tribal Nations: Providing for Consultation, Coordination,
and Cooperation,” April 4, 2019.
50

Minnesota Statutes 2019, 254B.05, subd. 1, for example, says, “American Indian programs that provide
substance use disorder treatment, extended care, transitional residence, or outpatient treatment services,
and are licensed by tribal government are eligible vendors.”

51

 20

Special Review

that it was improperly overpaid.”52 White Earth wrote Acting Commissioner Wheelock
on August 30, 2019, that it intended to appeal the overpayments.53

The tribes may appeal DHS’s decision to recover the funds by filing a written
request for a “contested case” hearing no later than 30 days after the commissioner’s
notice seeking recovery of the funds.54 DHS’s communication with the tribes has
been so confusing that it is unclear when the 30-day time frame has started or will
start. As we noted in the previous section, DHS sent overpayment notices to the
tribes on August 1, 2019, but on August 8, 2019 said the 30-day deadline to appeal
had not begun.55
Once the 30-day clock starts and the tribes file an appeal within that time frame,
DHS sets the matter for a contested case hearing before an administrative law judge
(ALJ), according to Minnesota Statutes 2019, Chapter 14.56 Following the hearing,
the ALJ issues a report containing factual findings, conclusions of law, and
recommended decisions to the commissioner.57
The commissioner may adopt, reject, or modify findings, conclusions, and
recommendations contained in the ALJ’s report.58 If the tribes disagree with the
final decision, they would have 30 days to file an appeal with the Minnesota Court
of Appeals.59
Equitable Estoppel
The tribes could try to prevent DHS from recovering the funds based on the premise
that they relied on DHS’s advice. Known as “equitable estoppel,” the legal doctrine is

“Leech Lake Band of Ojibwe Responds to Overpayment Allegations Made by Minnesota Department of
Human Services,” Leech Lake News, August 1, 2019, https://www.leechlakenews.com/2019/08/01/media
-release-llbo-dhs-overpayment/, accessed October 24, 2019.
52

53

Veronica Newcomer, Tribal Attorney, White Earth Band of Ojibwe, letter to Pamela Wheelock, Acting
Commissioner, Department of Human Services, August 30, 2019.
54

Minnesota Statutes 2019, 256B.064, subd. 2(e). See also Minnesota Statutes 2019, 256B.064, subd. 2(a),
providing certain limited exceptions to the notice and hearing requirements under subd. 2(b) and (d).
55

One reason DHS contends the 30-day deadline to appeal did not start with the August 1, 2019,
overpayment notices is because DHS did not send the letters by certified mail, which is required under
Minnesota Rules, 9505.2230, subp. 1, published electronically August 12, 2008.
56

Minnesota Statutes 2019, 14.50-14.69.

57

See Minnesota Statutes 2019, 14.58-14.62. After the ALJ issues the report, the record remains open for
at least ten days to allow the parties to file exceptions and present arguments to the commissioner. Once
the record closes, the commissioner then has 90 days to issue a final decision based on the record.
58

Minnesota Statutes 2019, 14.62. If the commissioner fails to issue a final decision within 90 days of the
record closing, the ALJ’s recommended decision becomes the final decision. Minnesota Statutes 2019,
14.62, subd. 2a.
59

Minnesota Statutes 2019, 14.63. Although we did not research this legal option, we think it is possible that
the tribes could go to federal court to try to block the State of Minnesota from making a repayment claim.

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

21

designed to protect a party from taking unconscionable advantage of his own wrong by
asserting his strict legal rights.60
Courts have discretion on whether to apply estoppel,61 and whether to do so depends on
the facts of each case.62 Minnesota’s Supreme Court has held that a party asserting
estoppel against the government bears a “heavy burden of proof.”63 Nonetheless, it can
be used against the government if “justice requires” and there is some element of fault
or wrongful conduct on behalf of the government.64
In order to win on equitable estoppel against the government in Minnesota, the tribes
would need to prove:65
(1)
(2)
(3)
(4)

Wrongful conduct on the part of the government;
They reasonably relied on the wrongful conduct;
They incurred a unique expenditure in relying on the wrongful conduct; and
A balance of the equities that weigh in favor of estoppel.66

The state Supreme Court has held that the first element, “wrongful conduct” on the part
of the government, is the most important element of the four.67 Minnesota’s courts have
not provided a comprehensive definition as to what is “wrongful conduct” in an
equitable estoppel claim against the government. They have decided in several cases,
however, that a government official’s “simple mistake” is not wrongful in this
context;68 there must be some degree of malfeasance or affirmative misconduct.69
We caution against speculating as to whether the tribes would succeed or not succeed
with an estoppel claim based solely on the information contained in OLA’s report. As

60

Brown v. Minnesota Dep’t of Pub. Welfare, 368 N.W.2d 906, 910 (Minn. 1985) (quoting N.
Petrochemical Co. v. United States Fire Ins. Co., 277 N.W.2d 408, 410 (Minn. 1979)).
61

Shetka v. Aitkin Cnty., 541 N.W.2d 349, 353 (Minn. App. 1995), review denied (Minn. Feb. 27, 1996).

62

Northern Petrochemical Co. v. United States Fire Insurance Co., 277 N.W. 2d 408, 410 (Minn. 1979).

63

Nelson v. Commissioner of Revenue, 822 N.W.2d 654, 660 (Minn. 2012) quoting Ridgewood Dev. Co. v.
State, 294 N.W.2d 288, 292 (Minn. 1980).

64

Brown v. Minn. Dep’t of Pub. Welfare, 368 N.W.2d 906, 910 (Minn. 1985).

65

City of North Oaks v. Sarpal, 797 N.W.2d 18, 25 (Minn. 2011).

UCLA Law Professor Sam Bray explains the “balance of equities” (also known as the balance of
hardships) as taking into consideration the burdens or costs on plaintiff and defendant, degree of fault, and
tailoring a solution to the particular case. Professor Bray provides an explanation of the balance of
equities at https://www.washingtonpost.com/news/volokh-conspiracy/wp/2017/07/02/what-is-the-balance
-of-equities/, accessed October 20, 2019.
66

67

Ridgewood Dev. Co. v. State, 294 N.W.2d 288, 293 (Minn. 1980). For context, also see Department of
Human Services v. Muriel Humphrey Residences, 436 N.W.2d 110, 117 (Minn. Ct. App. 1989), pet. for
rev. denied (Minn. April 26, 1989).
68

North Oaks, 797 N.W.2d at 25-26 citing Mesaba Aviation Div. of Halvorson of Duluth, Inc. v. Cnty. of
Itasca, 258 N.W.2d 877, 880 (Minn. 1977); Kmart Corp. v. County of Stearns, 710 N.W.2d 761, 771
(Minn. 2006); and Bond v. Comm’r of Revenue, 691 N.W.2d 831, 838 (Minn. 2005).
69

Kmart, 710 N.W.2d at 771 (degree of malfeasance); City of Minneapolis v. Minneapolis Police Relief
Ass’n, 800 N.W.2d 165, 176 (Minn. App. 2011), review denied (Minn. Aug. 24, 2011) (affirmative
misconduct).

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Special Review

we mentioned at the beginning of our report, the tribes did not respond to our requests
to understand their perspectives on this issue. The tribal documents OLA obtained were
those in the state’s possession. Given that an estoppel analysis is fact-specific, the
tribes could have documents or other evidence that could play a role in whether they
would succeed or not succeed in a legal challenge.

Final Comment
As the discussion in the findings above clearly show, the financial and legal problems
created by the DHS overpayments to White Earth and Leech Lake are going to be
difficult to resolve. This is particularly troubling since DHS could have avoided the
problems with simple, good management.
The fact that so many DHS management officials allowed the department to make
millions of dollars in unauthorized payments over multiple years is inexcusable, as is
the department’s failure to document important policy decisions. We think fundamental
and deep reforms within DHS are needed.

Recommendations
Recommendation 1. The Legislature should by law require the
Commissioner of the Department of Human Services to design and
implement a comprehensive system of documented management reviews
and approvals to ensure that payments made by the department with
Medicaid funds comply with state and federal legal requirements.
We were surprised—and troubled—to learn that individuals within DHS can make
decisions to spend Medicaid funds without review and approval from the DHS officials
who are responsible for the state’s Medicaid program. Department officials told us that
DHS does not have a policy that requires the department’s various divisions, offices,
and units to obtain approval from Medicaid officials when they make decisions that
affect Medicaid spending.
In addition, the department acknowledges that it does not know who made the decisions
that led to the department making $29 million in unauthorized payments using
Medicaid funds. Apparently, DHS does not require staff and officials to document their
policy decisions—or cite the legal authority for decisions—that spend Medicaid funds.
We normally do not recommend legislation to correct an internal executive branch
decision-making process. In this case, the DHS decision-making process was so
deficient and created such serious problems that we think legislative intervention and
action is necessary.

 Department of Human Services: Payments for Self-Administered Opioid Treatment Medication

23

Recommendation 2. The Legislature should clarify in law whether the
Department of Human Services has authority to pay a health care provider
a service payment when a patient or client self-administers medication
outside of the provider’s facility.
DHS has stopped paying the White Earth and Leech Lake tribes’ opioid treatment
programs when a client self-administers a treatment medication at home. The
department continues, however, to pay nontribal opioid addiction treatment programs
when clients self-administer a medication at home. The amounts paid per day are
relatively small ($23) compared to the encounter rate DHS paid the White Earth and
Leech Lake tribes. However, because those nontribal payments were not within the
scope of our review, we do not know how much has been paid to these programs over
the many years the payments have apparently been made.
As with the payments the department made to the White Earth and Leech Lake tribes,
we could not find any explicit legal authority for the department to pay nontribal opioid
addiction treatment programs when clients take medications at home. In addition, we
question the policy basis for the state to pay a health care provider when the provider’s
client or patient self-administers medication since there is no direct medical service
being provided. In fact, we are not aware of any other situation in which the state pays
health providers when clients or patients self-administer medications at home; opioid
addiction treatment drugs dispensed by treatment providers seem to be a unique
example.
Given these facts, we think the Legislature should clarify in law whether the state will
(or will not) pay health care providers when their clients self-administer their
medications outside of the clinic.
Recommendation 3. The Legislature should consider enacting exceptions
to the law that requires the Department of Human Services to recover
payments to providers that resulted from department errors.
The state law that allows the Department of Human Services to recover all payments it
erroneously made to providers allows the department to avoid any accountability for
egregious mismanagement.
While the law may be justified in many situations, we think the facts presented in this
report should be the basis for a legislative reconsideration. Specifically, the Legislature
may want to consider whether actions by DHS are so unfounded and erroneous that the
pay-back policy should have some exceptions.

  Minnesota Department of Human Services
Elmer L. Andersen Building
Commissioner Jodi Harpstead
Post Office Box 64998
St. Paul, Minnesota 55164-0998

October 28, 2019
James Nobles, Legislative Auditor
Office of the Legislative Auditor
Centennial Office Building
658 Cedar Street
St. Paul, Minnesota 55155
Dear Legislative Auditor Nobles:
Thank you for the opportunity to review and comment on your office’s report titled “Department of Human
Services: Payments for Self-Administered Opioid Treatment Medication.” We appreciate the effort and
professionalism of you and your staff as your office completed their work on this Special Review.
Your report confirms my own assumption based on review of the available facts – that the Department is at
fault for providing incorrect guidance resulting in this billing error. In particular, your report shows that our
Tribal Nation partners provided detailed and transparent billing information of the at-home selfadministration to the Department over the years. The Department did not have the internal controls
necessary to catch the issue and did not provide correct advice.
In my first week as Commissioner I made a commitment to trustworthiness. I understand that we have
significant work ahead of us to rebuild the necessary processes and internal controls that will help us to
identify and prevent similar issues in the future. Fortunately, the Department has passionate and talented
staff with the expertise to build integrity and compliance in all our processes, with a focus on restoring the
public’s trust in carrying out the critical mission of providing services to Minnesotans.
The Department also has work ahead to rebuild trustworthiness in our government-to-government
relationship with the White Earth Nation and Leech Lake Band of Ojibwe. We are establishing better
processes for timely consultation, coordination, and cooperation with our tribal partners.
Below are our responses to the specific recommendations in your report.
Recommendation 1:
The Legislature should by law require the Commissioner of the Department of Human Services to design and
implement a comprehensive system of documented management reviews and approvals to ensure that
payments made by the department with Medicaid funds comply with state and federal legal requirements.

 Legislative Auditor James Nobles
October 28, 2019
Page 2 of 2

Response to Recommendation 1:
While we do not believe enactment of a new law is necessary, we acknowledge that in this area the
Department has had decentralized decision making and internal controls were lacking. To address this, the
Department has initiated a Continuous Process Improvement and Internal Control Process project to
sharpen payment and rate-setting policy and decision-making and to make sure the decisions are properly
documented in accordance with current state laws. As part of this project, the Department plans to
strengthen its internal controls to include a system of several checks and balances, including requiring highlevel approvals for each payment policy decision.
We value continuous improvement and have seen the results of using a continuous improvement model to
address deficiencies and inconsistencies in program policies and operations. For example, we have initiated
improvements in our Child Care Assistance Program processes using this tool. Continuous improvement is
just one tool in the comprehensive compliance framework that we have recently instituted across the
agency. We look forward to publicly sharing this model at the upcoming legislative hearings on this topic.
Recommendation 2:
The Legislature should clarify in law whether the Department of Human Services has authority to pay a
health care provider a service payment when a patient or client self-administers medication outside of the
provider's facility.
Response to Recommendation 2:
For payments to tribal providers, the Department disagrees with Recommendation 2, because the
Department believes the law is clear at the state and federal level.
For payments to nontribal providers, the rate structure is different, and the Department is committed to
examining the issues related to that topic raised in this audit.
Recommendation 3:
The Legislature should consider enacting exceptions to the law that requires the Department of Human
Services to recover payments to providers that resulted from department errors.
Response to Recommendation 3:
We support a legislative review to allow for exceptions to the repayment requirement when there is
department error and good faith reliance on that error by recipients of Department payments. To clarify,
state law, specifically, Minnesota Laws 2019, section 256B.0641, subdivision 1(1), requires the Department
to collect an overpayment.
Thank you again for the professional and dedicated efforts of you and your staff during this Special Review.
The Department’s policy is to follow up on all findings to evaluate the progress made to resolve them. If you
have any further questions, please contact Gary L. Johnson, Internal Audit Director, at (651) 431-3623.
Sincerely,
/s/
Jodi Harpstead
Commissioner

   For more information about OLA and to access its reports, go to: www.auditor.leg.state.mn.us.

To offer comments about our work or suggest an audit, evaluation, or special review, call
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Relay by dialing 7-1-1 or 1-800-627-3529.
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