Minnesota’s Economic News – W/E 4/9/21
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Minnesota is home to the nation’s only split legislative body. On issues such as taxes and energy policy, the Legislature is predictably split along partisan lines.
But the DFL House and GOP Senate appear to be on course to agree on basic changes to address rampant fraud within the Child Care Assistance Program known as CCAP. The DFL and Gov. Walz, however, want to increase funding, while the GOP wants to freeze it, and absent real action to address fraud, defund the program.
With spending at about $254 million a year, CCAP is one of the smaller welfare programs. Minnesota’s human services budget is on schedule to spend $37 billion over two years in the next biennium.
We note the absurdity of asking taxpayers to pay for child care costs that exceed the income of participating mothers and wonder whether CCAP should be funded at all even in the absence of fraud, but that is another subject for another day.
The Center has identified at least one legal loophole in the CCAP program, detailed below, that the Legislature could also address this session. Perhaps legislative staff could work with the Department of Human Services (DHS) to identify others.
CCAP fraud has been the subject of two recent reports from the non-partisan Office of Legislative Auditor (OLA). The first report, issued on March 13, confirmed the existence of widespread fraud in the CCAP program. DHS investigators, who are at odds with the DHS Inspector General, put the fraud at about $108 million in 2018. Given the limitations of the OLA’s office and incompetence at DHS, it was not able to quantify the amount of fraud, but it did detail that the federal and state prosecutions of fraud have centered on the Somali community. The Inspector General, Carolyn Ham, was placed on paid administrative leave last month.
A damning second report, issued April 10, found that the “integrity controls are insufficient to effectively prevent, detect, and investigate fraud in…CCAP”.
In addition to demanding that DHS and all programs administered by DHS be subject to a complete overhaul, all of which will take time, lawmakers can take steps this session to demonstrate respect for taxpayer dollars. According to MPR news:
Sen. Jim Abeler, R-Anoka, wants a funding freeze next year and zero funding for CCAP in 2021, to prod Department of Human Services officials to fix the system.
“We tried the gentle nudge, and now it’s time to get their attention,” he said. “It’s an intervention. So, the first thing when you have a problem, you have to admit you have a problem, and then you have to get after it. Not just lip service, saying oh we’re working on it, but you have to actually get after it.”
Democrats object to the proposal, and say the program provides child care to help thousands of Minnesotans work and get an education.
We think Abeler’s approach is the right one.
Another great idea is to follow the OLA’s suggestion that DHS should make sure that child care providers are only being paid for services they actually provide. But this is not just a problem of fraud. There is a legal loophole in the CCAP program that lawmakers, if they are serious, could close this year.
According to current Child Care Assistance Program Policy, “Some children attending high quality providers can be authorized for more hours and their providers can be paid up to the applicable weekly maximum rate, not to exceed the provider’s charge.”
The DHS document designed to provide clarity to providers about this policy provides the following example:
“Example 1: A preschool age child attends an accredited child care center in Ramsey County. Parent works 3 days per week, on a varied schedule. Care is needed for 30 hours per week (60 hours biweekly).
■Prior to this policy, the child would have been eligible to attend care 3 days per week, 10 hours per day. The provider would have been paid 3 daily rates ($185.01), even though they may have had to hold a full-time slot for the child.
■Under this policy, the child is authorized for 50 hours of care per week (100 hours biweekly). If the provider and parent agree to a weekly schedule, the provider would receive payment at the weekly rate ($231.15). This is an increase of $46.14 per week.”
This legal loophole allows an annual CCAP payment increase of $2,399.28 on behalf of the child. The DHS website states, “This policy is designed to support consistent care schedules for young children attending high quality care and allow for higher assistance payments.”
But what is to prevent the program from enrolling another child on a part-time basis to utilize the other two days of care that the first child’s family is not utilizing?
The answer is nothing.
There is nothing to prevent a provider from charging tuition to another family who is essentially “sharing” the full-time slot by utilizing the other two days, but more importantly, there is nothing to prevent that program from billing the CCAP program for those two children at the higher daily rate of $61.67.
In other words, this legal loophole allows a program to legally bill the CCAP program for the equivalent of seven days for a five-day period. In-home child care providers, by the way, are only allowed to bill for the days CCAP children are in their care.
While the House and Senate move to conference committee, if they are not going to seriously cut or defund the program, the least they can do is to close this legal loophole. And, again, look for others.
This would not only free up resources to help more children as the program purports to accomplish but it would also satisfy the goals of both sides of the aisle in a bi-partisan manner: the goal of the Democrats to assist more children and the goal of the Republicans to ensure program integrity.
Perhaps by coming together on the CCAP fraud issue, lawmakers can begin to plan for a complete overhaul of Minnesota’s generous and infamous welfare system. What other programs are being ripped off? Welfare fraud is nothing new in Minnesota and began long before Somali refugees started arriving in the 1990’s.
Any major overhaul will require the support of Governor Walz to be successful. Perhaps the federal government could get the governor’s attention.
Given the report by investigators that “federal officials going back to 2015 [said] that it is an near certainty that at least a percentage of the [CCAP] fraud proceeds that go overseas are being syphoned off by one or more Designated Terrorist Organizations…” it seems reasonable for the federal government to put Minnesota on notice that federal funds will be frozen and even reduced until DHS can demonstrate DHS competence and program integrity.
That would focus the governor’s attention on cleaning up Minnesota’s welfare fraud problem.