MINNEAPOLIS — Minnesota officials are seeing a massive spike in new reports of fraud in social services programs, overwhelming the ability of investigators to handle all the cases.

That’s led state authorities to farm out more cases to federal investigators, and delayed their ability to identify and shut down credible allegations of fraudulent providers.

On Tuesday federal and state law enforcement executed 22 search warrants in Minnesota tied to fraud investigations. It was the first major public action on fraud cases by law enforcement since December. But no charges were immediately filed and the search warrants remain sealed.

It may take years to get through the backlog of fraud referrals, Minnesota Department of Human Services Inspector General James Clark said. And the proliferation of referrals also means that the timeline from when a tip comes in to when potential fraudsters get charged is getting longer, delays that could leave the public with questions and service providers — some of whom dispute allegations against them — in limbo.

“It’s a volume issue,” Clark said. “And it’s also an issue that investigative capacity, technological capacity, has not … (had) a corresponding increase to meet the volume we’re facing."

The Department of Human Services withheld Medicaid payments to 546 providers over fraud allegations last year, compared to 160 withholds the year before. It referred 265 suspicious cases to law enforcement, more than triple the prior year’s referrals.

The number of suspicious cases being sent to law enforcement appears on track for a record-breaking year, with 53 referrals as of March 6.

Arnold Kubei, who runs Metro Care Human Services, stopped getting payments in early December.

“I am so confused. I don’t know what we did wrong,” he said, and urged state Human Services officials to “please come and investigate.”

The disability service provider said officials showed up more than two months later, and after that the FBI called one of his clients and a former employee. Meanwhile, his Medicaid payments remain on hold.

“We have opened our doors and given you what you’ve asked of us, but still you are not willing to resolve the issue,” Kubei said, who said he worried about the vulnerable people they serve.

It’s not just fraud investigators who are swamped.

Legislative Auditor Judy Randall said their six-person team got 765 reports last year, up from 481 the year before. Her office gets reports about a wide range of issues, not just misuse of public funds. But Randall said every news story about fraud leads to an uptick in reports.

“The only way the state is going to get a handle on this is to prevent it from happening in the first place,” Randall said. “In the short term, I think we’re all drowning, and it’s not sustainable.”

The Minnesota Attorney General’s Office has been asking legislators to boost their Medicaid Fraud Control Unit’s ranks from 32 to 50 people.

Nick Wanka, who leads the Medicaid Fraud Control Unit of the Attorney General’s Office, said his staff is “drowning in referrals.” Wanka said his team cannot be expected to take on two or three times as many cases as they used to and get quick results.

In the past, state and federal investigators would collaborate on complex Medicaid fraud cases, like a massive Faribault-based case involving interpreters and medical transportation that has led to more than 30 people charged.

Now Wanka said they must rely more on federal law enforcement to lead the charge, with his staff potentially providing some data analysis or other secondary help. And they have to be more judicious about which allegations they take on, opting for potential cases that are more sweeping in scope, bigger dollar and more recent.

“Other cases are going to fall by the wayside,” he said.

There’s no quick fix with technology, he said, as investigations often involve reviewing reams of health care provider records, knocking on doors and building a rapport with Medicaid clients who aren’t getting services and workers or community members who observed fraud.

“To get the conviction, you still need people to testify in court,” Wanka said. “You can’t have software programs do that. You need compelling witnesses who can tell juries, ‘This is what happened, and this is why it was fraud.’”

But technology is part of the answer for the state Human Services Department’s fraud detection efforts, said Clark, whose office has about 25 Medicaid fraud investigators. There is roughly $20 billion in Medicaid funds flowing through the state and about 300,000 providers of those services.

This January alone, the Department of Human Services got about 1,200 tips.

“There’s not enough people in the world, right, to oversee $20 billion of spending,” Clark said. “We need to have modernized technology.”

Tips are coming in from a range of sources, from providers to managed care organizations (MCOs), like Medica and Hennepin Health — health plans that handle benefits for more than 80% of Minnesotans enrolled in Medicaid — and other entities.

Wanka said his staff is spending more time figuring out whether something is “a quality referral that could lead to a criminal case” or largely paperwork errors that doesn’t look criminal.

“That presents a growing challenge,” he said. “The referrals appear to be coming over much quicker. Some of them do not have as much detail as they did in the past when DHS or MCOs just had fewer providers to investigate, maybe could spend more time delving into each one.”

Some service providers have raised concerns that Clark’s team is not doing enough work before referring fraud allegations to law enforcement and is sending along cases that are minor paperwork issues rather than fraud.

But Clark said a tiny fraction of the tips they get result in payments withheld and a referral to law enforcement.

“Folks who are saying that we’re doing this willy-nilly, I think the numbers show we’re just doing this judiciously,” he said.

Clark said the agency is open to ideas about how to improve the process for providers such as Kubei, who are stuck on long payment withholds and frustrated by the lack of information they can respond to from investigators.

The state cannot provide too much information to a provider, because it might jeopardize an investigation, Clark said.

“It’s a tough situation,” he said. “The answer is more resources. If folks want things to move faster, law enforcement definitely needs more resources, and the department needs more resources.”

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