ST. PAUL — "Troubling dysfunction" at the Minnesota Department of Human Services allowed for the overpayment of two tribes and could cause financial and legal problems for the state and tribal governments.

That's according to an audit of the overpayments to the Leech Lake Band of Ojibwe and the White Earth Nation released by the nonpartisan Office of the Legislative Auditor on Tuesday, Oct. 29. Between 2014 and 2019, the state overpaid the tribes more than $29 million for medicine-assisted opioid treatments.

And based on the review of state and federal records as well as interviews with DHS employees, it wasn't clear why the department, which administers the state Medicaid program, decided to allow the higher reimbursement rates, why that practice was allowed to persist and what could happen now that the audit has brought to light those questions.

“We think that the dysfunction, the lack of controls were so egregious that you need to mandate (internal controls),” Legislative Auditor Jim Nobles told state lawmakers on Tuesday, after noting he rarely tells lawmakers to mandate requirements for departments or agencies.

The office initiated the special review in an effort to determine why DHS administered the payments for in-office opioid treatment services when some of the doses were taken at home and billed as though a patient took them in a doctor's office. The encounter rate when a patient seeks care at an Indian Health Service (IHS) facility is $455, but that wouldn't apply for patients who obtain the medication in a doctor's office but self-administer some of the medication.

The issue came to light in February when members of the Red Lake Nation reached out to DHS to ask whether they could also bill the $455 encounter rate for individuals taking the medication at home, according to the probe.

“That really triggered a fury of meetings and emails in the department,” Nobles said on Tuesday.

But DHS officials didn't have clear answers on what happened between the time red flags went up about the practice in February and May, when the Walz administration put a stop tot he problem payments and reversed course on previous guidance that allowed tribes and opioid treatment providers to be reimbursed for that $455 encounter fee even when medications were taken at home. Following top-level turnover at the department as well as news of the overpayments, the Office of the Legislative Auditor also launched a probe into the issues.

"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," the auditors wrote in their report. "We think fundamental and deep reforms within DHS are needed."

DHS Commissioner Jodi Harpstead said the department had erred in its guidance to the tribes and hoped that the Legislature, the tribes and the department could come together to find a solution to repay the $29 million. State law requires the state to claw back the overpaid funds.

"The guidance that was given to tribal governments was wrong and it's impossible for us to serve Minnesotans in a trustworthy way if they believe that their interactions with DHS could leave them on the hook for tens of millions of dollars," Harpstead said. "I am especially sorry that this error in the department unfairly affected the tribal nations with whom Gov. Walz and Lt. Gov. Flanagan are working to restore trust and rebuild our government-to-government relationships."

The DHS commissioner who had been on the job for 57 days said she would launch an internal investigation to better understand how the overpayments began and were allowed to continue. She said that effort would also look into excess payments for opioid treatments for non-tribal services. Those overpayments were believed to be ongoing as of Tuesday.

The opioid treatment programs serve hundreds of tribal members each year and leaders from the Leech Lake Band and the White Earth Nation have told lawmakers that having to pay back $29 million would be a devastating hit for the tribes, especially when they'd followed the state's instructions in billing for the services.

"The Leech Lake's Band's position from the outset has been that we will not repay this money because we are not at fault," LeRoy Staples Fairbanks, a district representative from the Leech Lake Band, said. "We know that simply demanding the tribes to repay this money will not reach a meaningful resolution nor address the ongoing crisis our communities face."

State lawmakers on Tuesday said the department's failures shouldn't fall to taxpayers and the department should instead bear the blow of that loss. DHS heads said sustaining that financial hit could affect services for the vulnerable, elderly and children.

"Minnesota taxpayers should not be forced to foot the bill for the dysfunction at DHS," state Rep. Joe Schomacker, R-Luverne, said in a news release. "DHS should take responsibility for their mistake, and find the $29 million within their own $18 billion budget to make amends for their mismanagement of federal funds."

A Senate Health and Human Services Committee is set to take up the audit and hear from Nobles and Harpstead on Wednesday morning.