An audit released Tuesday shows Minnesota’s Department of Human Services has not been adequately verifying the eligibility of participants in some of its public assistance programs.  Such verifications are a requirement of state and federal law, and the legislative auditor says his office first alerted the department to some of the problems more than a decade ago.

The state requires those who apply for medical, cash, or food benefits to provide their Social Security numbers and report their income.  Government assistance programs are limited to recipients with lower incomes.  In addition, federal regulations require the Minnesota Department of Human Services (DHS) to verify that information is accurate and to have a process to electronically match the applications with verified Social Security numbers and income.

The legislative auditor’s report finds DHS did not adequately verify Social Security numbers and income provided by participants in its MinnesotaCare program. MinnesotaCare is a subsidized health insurance program for low-income residents funded by a state tax on health care providers, federal matching funds and enrollee premiums.

The auditor also found DHS didn’t adequately monitor how county workers resolved discrepancies when income amounts reported by participants in Medical Assistance, Temporary Assistance for Needy Families and Supplemental Nutrition Assistance Programs didn’t match government data.

James Nobles, the Minnesota legislative auditor, says the lack of electronic verification means DHS could have deemed people eligible for government programs who weren’t eligible and could have denied coverage to those who were.

“The concern, I guess, could be summed up in two words: errors and fraud,” says Nobles. “If it is widely known that the department does not verify income, you really open the door to fraud, and that’s a very serious concern.”

During the fiscal year that ended last September, the state paid more than $290 million in medical benefits on behalf about 129,000 participants; the federal government’s share was about $234 million.  By 2016, the Dayton administration expects federal funds will cover nearly 95 percent of MinnesotaCare’s cost. The auditor’s report looked at fiscal years 2012 and 2013 through February 2013.

In a letter to Nobles, DHS Commissioner Lucinda Jesson said, “The department agrees with and supports the findings and recommendations of this report.”

The chief financial officer for DHS, Chuck Johnson, called the problems outlined in the auditor’s report “a couple of weaknesses” in the way DHS verifies who’s eligible for some of its programs. Johnson said DHS does verify income for MinnesotaCare using other methods.

“The income eligibility verification system is just one verification tool that we have,” said Johnson.  “We also have cross matches of quarterly wage information. We get tax information from participants that we use to verify their income.  So it isn’t a complete lack of verification in MinnesotaCare.”

But according to the auditor’s report, a state statute requires the department to use electronic file matches as the primary method of verifying eligibility.

The verification problem for MinnesotaCare has existed for more than a decade.  The auditor’s report says in 2003, when first alerted to it, DHS said it was developing a Web-based computer system called HealthMatch as a solution.  Plagued by delays, missteps and spending about $40 million, the department abandoned the project in 2008.

Now, DHS is hoping that the new information technology platform it’s building as a part of the federal health care law will help.  Just last week, Gov. Mark Dayton signed into law Minnesota’s new online marketplace or health insurance exchange — MNSURE — where more than a million Minnesotans are expected to obtain health care coverage, including government health programs such as MinnesotaCare.

House Majority Leader Erin Murphy, a Democrat from St. Paul, says she’s disappointed that there are problems again over the state’s ability to verify income for public programs such as MinnesotaCare.   She says building MNSURE will give the state the opportunity to modernize the state’s technology infrastructure.

“And so while I think it is the right answer, it would be simple to say it’s a quick fix,” says Murphy.

She says the work the state has to do between now and October with MNSURE is challenging.

The legislative auditor’s report did not look into whether errors or fraud resulted from the lack of income verification.  But Nobles says his office may in the future.  He says his office felt it was urgent to get the problem in front of legislators and DHS so they could address the issue.

This story is part of a collaboration that includes Minnesota Public Radio News, NPR and Kaiser Health News.