Judge upholds auditor effort to subpoena Medicaid records

DOVER, Del. (AP) — A Superior Court judge on Wednesday denied a motion by Delaware’s Department of Health and Social Services to quash a subpoena from the state auditor’s office seeking information regarding eligibility for Medicaid programs.

Judge Craig Karsnitz rejected the notion that Auditor Kathleen McGuiness does not have the authority under Delaware law to conduct performance audits of state agencies such as the Division of Medicaid and Medical Assistance. DHSS attorneys had argued that the auditor’s duties were limited to conducting after-the-fact “postaudits” of financial transactions by state agencies.

“To me, this argument is unnecessarily convoluted, and the language of the Delaware statute is clear,” Karsnitz wrote. “A postaudit is an audit of a transaction or transactions after the fact, and a performance audit is a form of postaudit. This is exactly what we have here.”

A spokeswoman for DHSS said the agency is reviewing the ruling “and will take appropriate next steps.”

McGuiness’ office did not immediately respond to an email seeking comment.

McGuiness resorted to her subpoena power last August after notifying DHSS in May 2021 that her office would be conducting an audit of Medicaid eligibility for the period from July 1, 2017 through June 30, 2020. In her audit notification letter, McGuiness requested 14 different categories of records, including a list of all individuals who received Medicaid support during the three fiscal years. She also requested read-only access to Delaware’s Medicaid computer systems for two members of the audit team.

DHSS Secretary Molly Magarik responded by asserting that the release of certain information, such a list of Medicaid participants, is prohibited by law. DHSS also argued that the proposed audit was both unauthorized and duplicative of reviews conducted by other government entities that have legal authority to investigate Medicaid, a program that serves almost a third of Delaware’s population.

Magarik offered, “in a show of good faith and transparency,” to provide a much smaller amount of information, including organizational charts, training manuals and links to DHSS websites that are already publicly available.

McGuiness refused to back down, however, saying DHSS had been unable to demonstrate for several years that it was effectively screening Medicaid applicants for eligibility before approving or denying benefits.

McGuiness noted that a required independent annual audit of federal programs administration in 2020 included five repeat findings of problems involving DHSS that had been previously noted in the prior year’s audit. Three of the five repeat findings involved the Division of Medicaid and Medical Assistance, with “material weakness” found regarding compliance with Medicaid provider eligibility requirements and with Medicaid provider health and safety standards. The audit also found a “significant deficiency” regarding compliance with Medicaid client eligibility requirements.

“It is unconscionable that these failures continue to happen, especially within the Medicaid program, which serves such a vulnerable population,” McGuiness said in a news release last year. “Clearly, this is a problem that has existed for years — long before the COVID-19 pandemic, so that’s not a valid excuse for why these critical Medicaid reviews aren’t happening.”

The dispute involving scrutiny of the Medicaid program began a few months before McGuiness was indicted last October on felony counts of theft and witness intimidation, and misdemeanor charges of official misconduct, conflict of interest and noncompliance with procurement laws. The charges involved allegations that McGuiness engaged in favoritism in hiring her daughter as a part-time employee in 2020, improperly structured payments under a contract with a company she had used as a campaign consultant when running for lieutenant governor in 2016, and intimidated and harassed employees who questioned her conduct.

McGuiness, who is responsible as auditor for rooting out government fraud, waste and abuse, was acquitted on the felony charges last month but convicted on the misdemeanor charges of conflict of interest, official misconduct and structuring a contract payment to avoid compliance with state procurement rules. The case marked the first time in Delaware history that a sitting statewide elected official had been convicted on criminal charges.

McGuiness, who is seeking re-election and faces a Democratic primary challenger next month, faces a presumptive sentence of probation, but the convictions have not been formally entered and no sentencing date has been set. The trial judge is currently considering post-trial defense motions asking for a judgment of acquittal, or, in the alternative, a new trial.