Minnesota DHS ordered to pay back $113 million to the federal government for billing mistake — how government errors impact taxpayers and what you can do to protect your finances

"I am proud of our Behavioral Health Administration staff at DHS for detecting a decade-old coding error in our billing system and taking immediate action to diagnose the problem, and then fix it.”

But the miscalculation is now influencing the state's budget decisions and sparking criticism over the agency's management.

What went wrong?

According to KARE 11, state officials say no money was stolen and no fraud occurred; however, the financial consequences are significant for the state.

"It’s important to note that the amounts paid to the providers were not incorrect," State Budget Director Ahna Minge clarified. "It’s just the split between the state and the federal government that was wrong."

The issue, according to the Minnesota DHS Commissioner, is where the funds came from. DHS was using federal funds to pay for facilities that treat substance abuse disorders, which are ineligible for federal dollars, the Minnesota Star Tribune reported.

“State general fund dollars, rather than federal Medicaid funds, should have been used to reimburse a small number of residential [substance use disorder] providers over the previous decade,” DHS Commissioner Shireen Gandhi said in a statement.

Now, the state has to repay the $113 million to account for future costs, bringing the total financial impact to an estimated $150 million, according to KARE 11. The mismanagement has fueled political scrutiny, with Republican Senator Jordan Rasmussen, chair of the Senate Human Services Committee, arguing that this could have been avoided if DHS had correctly submitted federal waivers.

"This is a huge mistake," Rasmussen said. "If the Department of Human Services had submitted the proper waivers to the federal government, all of these costs could have been covered using federal dollars, avoiding putting the burden on state taxpayers."

Rasmussen and DHS officials should be able to obtain a waiver for the facilities to make them eligible for federal funding. However, the state has had to increase its Behavioral Health Fund spending by 62% to be able to cover the repayment.

How to safeguard your finances from government mismanagement

It's impossible to predict when a government agency might make an error that affects taxpayers. Still, there are proactive steps you can take to protect your financial well-being in the face of broad financial insecurities and budget cuts.

• Stay informed: Understand where your tax dollars are going and pay attention to news about your state budget, audits and financial reports. Being proactive will help you adjust your financial strategies as needed.
• Question irregularities: If you receive government benefits, be vigilant about unexpected changes. For example, if your Social Security check suddenly increases or a tax refund seems unusually high, don’t assume it’s a lucky break — contact the appropriate agency for clarification.
• Understand the limits of public services: Government programs and benefits can be subject to change due to budget cuts, mismanagement or administration changes. If you depend on these services, consider ways to reduce your reliance on them if necessary, such as exploring alternative resources or strengthening community ties for support in difficult times.
• Build a strong emergency fund: While you can't predict government errors, you can find ways to prepare for financial surprises. If possible, save up three to six months of expenses in an emergency fund. If that is out of reach, look for ways to stock up where you can, such as purchasing a few extra pantry staples.

Government mismanagement can be frustrating and unsettling for affected taxpayers. However, by staying informed, asking questions when things change and building financial reserves, you can reduce your risk of being caught off guard by errors like the one currently impacting Minnesota.