When the state of Minnesota went through its budget crisis last year, Governor Mark Dayton got a gift from the company contracted by the state to handle its Medicaid program, UCare, in the form of a $30 million “donation.”  US Senator Charles Grassley wants an answer now, though, on whether that was a gift or a refund for overcharges — and whether Dayton’s Human Services Commissioner manipulated the transaction to avoid sharing it with the federal government:

When a health plan in Minneapolis made a $30 million payment last year to help the state through its budget crisis, should the federal government have received a piece of the action?

That’s the question at the heart of a letter sent Thursday to the Dayton administration by U.S. Sen. Charles Grassley, R-Iowa.

The payment came from a nonprofit health plan called UCare, which the state hired to manage care for patients covered by the Medicaid health insurance program.

Grassley’s letter quotes from an internal email in which Lucinda Jesson, the state’s human services commissioner, told other state officials that the UCare payment should be characterized as a donation “in order to have a good chance of keeping all this money.”

“If a refund, feds clearly get half,” Jesson wrote in the email.

Just in case anyone questions whether Jesson understood the implications of her communication, the e-mail ended with this:

Grassley noted that Jesson’s email closed with the line: “I thought we were going to handle this through phone calls.”

Be sure to read the entire report from Christopher Snowbeck at the Pioneer Press, because this is a rather complicated subject.  I’ll try to give a thumbnail version of why this looks a lot more like a refund than a “donation.”  Medicaid typically overpaid health insurers in order to compensate for losses through another program called General Assistance Medical Care.  When GAMC ended, Medicaid rates didn’t get dropped for the insurers involved, which resulted in overpayments — and that’s according to UCare’s CEO and president, Nancy Feldman.  The so-called donation “represents what we consider to be excess 2010 operating margin for state public programs,” Feldman wrote in a letter explaining the payment to Minnesota.

The crux is that Medicaid costs get split between states and the federal government.  If a refund occurs, then, the amount has to be shared with the federal government.  It appears that Dayton’s administration attempted to do an end run around this requirement by claiming that the returned “excess 2010 operating margin” was a gift instead of a voluntary refund of overpayments resulting from discrepancies arising from the ending of GAMC. This doesn’t mean that UCare did anything wrong; in fact, it looks like UCare was, if anything, more sensitive than required to the discrepancies and wanted to be proactively honest.  That impulse was apparently not shared by the Dayton administration.

Grassley has asked Attorney General Eric Holder to investigate this transaction, and in particular Jesson’s e-mail.  One would guess that her transactions these days are all conducted by phone.