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Minnesota Investigation Never Bothered to Ask Jonathan Gruber to Provide Contract Details

The Minnesota Office of the Legislative Auditor (OLA) is blasting the performance of Minnesota’s health exchange, MNsure, in a report that focuses on the disastrous launch of the exchange’s website, the poor performance of its former executive director and a faulty organizational structure.

“In its first year of operations, MNsure’s failures outweighed its achievements,” the OLA report concluded.

But the OLA failed to examine an equally troubling aspect of MNsure: the roles embattled Obamacare architect Jonathan Gruber and former MNsure executive director April Todd-Malmlov played in persuading the Minnesota State Legislature to pass the 2013 legislation that established the Minnesota Insurance Marketplace (MNsure) by creating rosy enrollment and cost projections used in “fiscal notes” that are criticized by Republican State Representative Greg Davids as “beyond laughable.”

“Those projections were so far off that it has proved absurd, ” Davids told Breitbart News in December.

On April 9, the day that Minnesota’s Legislative Audit Commission formally charged the OLA with conducting the MNsure evaluation report, Legislative Auditor Jim Nobles told the commission his investigation would “go as broad and deep as possible,” and that he intended to secure the testimony of Todd-Malmlov as part of that investigation.

“MNsure, I think we all understand what MNsure is, and the issues that are involved,” Nobles told the commission. “I think if you choose that one [as a topic to require the OLA to conduct an evaluation report] we would certainly want to address all of the various issues and questions and go as broad and deep as possible so I think that would also be one that would take us through the rest of the year to complete.” You can hear the audio at the 4:06 mark here.

Nobles also said that he would look into issues surrounding the development of MNsure that predated its disastrous 2013 launch.

“The development of MNsure has gone on for several years now, and that’s really what we would be looking at,” he told the commission. (Starting at the 8:20 mark.)

But the OLA report issued last week seems to have a narrower scope than Nobles said would be the case when he testified before the Legislative Audit Commission.

“In Spring 2014, the Legislative Audit Commission directed the Office of the Legislative Auditor to evaluate MNsure. . . . Our report focuses mainly on MNsure’s first year of enrollment, and we recommend changes in the governance of both the agency and its enrollment system,” the cover letter stated. (emphasis added).

However, the OLA’s Joel Alter, a program evaluator and project manager for the report, disputes Breitbart News’s characterization that the scope of the final report was narrowed substantively.

“Our report focused on the period through the first year of enrollment, not just the first year of enrollment,” OLA’s Alter told Breitbart News.

“Chapter 2 is largely devoted to the development of the exchange, including things like the period when MNobtained federal grants, conducted planning, entered into contracts to build the exchange, and sought statutory authority for the exchange. Chapter 6 also discusses pre-launch preparations (e.g., for the call center). We didn’t narrow the period we examined; we only excluded the second enrollment period, as we always intended,” Alter said.

Nobles also told the commission in April he intended to obtain Todd-Malmlov’s testimony: (Starting at the 9:45 mark.)

The Legislative Oversight Committee for MNsure is meeting [this morning] … they’ve asked me to be there as soon as I can get there because, as I think you know from an account in the Star-Tribune they requested the presence of certain people, namely the former executive director [April Todd-Malmlov] and the Commissioner of Human Services and it’s my understanding that neither of those people will appear.

We have methods of obtaining testimony from people. In fact I have already obtained considerable testimony from the Commissioner of Human Services and do intend to obtain testimony from the former executive director which I understand the Oversight Committee is having difficulty obtaining.

But Nobles did not secure Todd-Malmlov’s testimony. It was a remarkable omission since Todd-Malmlov, who resigned under fire in December 2013, remained a resident of Minnesota for more than four months from April 2014 to September 2014, when she moved to the Washington, D.C. area for a new job. The OLA says it wanted to interview her, but it did not use its full array of legal tools to secure her testimony.

“When Ms. Todd-Malmlov failed to comply with our subpoena, we did not pursue other legal actions to compel her testimony,” Alter told Breitbart News.

“We sought her testimony partly as a matter of fairness—to hear her perspective on MNsure’s development and the problems that arose. We interviewed numerous others about these issues. We would have preferred having testimony from Ms. Todd-Malmlov, given her central role in MNsure’s early history, but our evaluation report did not hinge on a single person’s testimony,” Alter added.

When pressed on why the OLA did not push harder, Alter cited the desire to avoid a “protracted legal battle.”

“We decided that if she did not wish to comply with our subpoena, we did not wish to engage in a protracted legal battle,” Alter told Breitbart News.

“Ms. Todd-Malmlov,” he added, “was no longer a state employee and Minnesota resident at the time we issued our subpoena, so there were some questions about whether the subpoena could be legally enforced.”

As for Gruber, the OLA has acknowledged that his projections played a “key part” in the Minnesota State Legislature’s passage of the law authorizing the establishment of MNsure.

“In early 2013, the Gruber-Gorman enrollment projections played a key part in ‘fiscal notes’ developed for legislation to establish Minnesota’s exchange,” OLA ‘s Alter told Breitbart News.

“Fiscal notes,” Alter explained, “represent an executive branch agency’s estimate of the likely expenditure and revenue impact of proposed legislation; exchange staff prepared the fiscal notes. Later in 2013, MNsure developed revised its enrollment projections, partly using the Gruber-Gorman estimates.”

Gruber’s projections played a similar role in the passage of the 2010 Affordable Care Act (Obamacare), though in a less direct way.

The Congressional Budget Office used an economic modeling tool largely based on the proprietary Gruber Microsimulation Model in preparing its cost estimates for Congress. Critics say that Gruber’s 2009 contract with the Department of Health and Human Services was apparently for the purpose of helping the Obama administration to write the bill in such a way so as to trick the Congressional Budget Office to give it a positive economic modeling review.

The OLA’s Alter told Breitbart News it is too early to discard Gruber’s projections.

“[T]he report says that because the projections were for 2016, it is ‘premature to fully assess their accuracy.’ We discuss how the most recent data (from 2014) compare with the 2016 projections, but we did not think it was appropriate to draw conclusions yet about the accuracy of these projections,” Alter said.

But State Representative Davids is not buying that argument. As he wrote to Minnesota Attorney General Lori Swanson in November:

As you may know, the State engaged Dr. Gruber through a single source contract to provide modeling and analysis for the development of the State insurance exchange (a/k/a MNsure). The contract and subsequent amendment specify that Dr. Gruber was to deliver an updated final report to the State by October 30, 2012. . .

The updated final report, written with Bela Gorman, provided the State with enrollment projections and other analysis of the exchange through 2016. These projections were used to justify assertions that the exchange would be financially stable and self-sufficient. Recently, in the face of lower-than-expected commercial enrollment, MNsure informed the public that it has abandoned Dr. Gruber’s projections.

Breitbart News has obtained a copy of Dr. Gruber’s contract with the state of Minnesota as well as the invoices he submitted to receive payment on that contract. His original contract, in the amount of $229,000, was amended by adding an additional $100,000 for his services. All told, Gruber received $329,000 for his work, which resulted in two “Gruber-Gorman” reports: the first completed in April 2012, and the second completed in February 2013.

(Note: Gruber’s contract was paid by a $1 million grant Minnesota obtained from the federal government in early 2011. The Department of Health and Human Services eventually issued similar $1 million grants to each of 49 states, including Minnesota, citing the 2010 Affordable Care Act as the authorizing legislation.)

Breitbart News provided an expert in state contracting procedures with copies of both documents.

“After reviewing the Minnesota contract and Jonathan Gruber’s bills, I find that both Minnesota and Gruber were lax in their conduct and responsibilities,” the expert told Breitbart News after examining those documents.

“Gruber did not present ‘itemized bills’ as required by the contract, and Minnesota accepted his invoices that did not conform to their contractual requirements,” the state contracting expert said.

“Gruber’s invoices were missing itemized deliverables, dates of work actually performed, whether he used subcontractors, which work he or the subs performed, hours worked, hours billed, and verification of work actually performed,” the state contracting expert added.

“Essentially,” the expert noted, “Gruber just says, ‘Here, I did this – send me a bunch of cash.’” (emphasis added.)

“Most notably,” the expert concluded, “his third invoice has no correlation at all to the contractual Deliverable C that he is being paid for.”

The expert also stated that “Gruber’s invoices were not authentically signed; all signatures were identical. It appears that Gruber used a rubber stamp.”

But this was not a line of inquiry the OLA chose to follow.

“For our February 2015 evaluation report, we did not examine the former MNsure executive director’s [April Todd-Malmlov] review of invoices submitted by Dr. Gruber,” Alter told Breitbart News. “Issues regarding contract compliance and billing are typically examined in our office’s financial audits, not its evaluations,” Alter added.

“Our office’s financial audit staff have, in fact, reviewed the Gruber expenditures. In their judgment, the invoices aligned with the deliverables required by the Gruber contract,” Alter said. Yet, the OLA did not speak to Gruber. “We did not attempt to interview Dr. Gruber,” Alter told Breitbart News.

Since the disastrous launch of MNsure, Todd-Malmlov has taken a job as senior vice president at Avalere Health, which is located in Washington, D.C. Presumably, she is currently a resident of either Maryland, Virginia, or the District of Columbia.

According to press reports, controversy surrounding a two week vacation Todd-Malmlov took to Costa Rica in December 2013 with James Golden — then the State Medicare Director at the Minnesota Department of Human Services — played a role in her decision to resign as executive director of MNsure that month. In their professional capacity, Todd-Malmlov and Golden frequently interacted during the lead up to and launch of MNsure.

As the Minneapolis Star Tribune first reported in December 2013:

The outrage over Todd-Malmlov intensified following revelations that she and state Medicaid director James Golden took a nearly two-week tropical vacation late last month, even as the program was swamped with problems.

According to Star Tribune records, the two live together and have worked closely on the implementation of the new exchange.

In September, 2014—the same time Todd-Malmlov joined Avalere Health—Golden resigned from his job in Minnesota, and was named director of the Division of Managed Care Plans for the Centers for Medicare and Medicaid Services, a key division of the federal government’s Department of Health and Human Services. According to Linked-In, this division is located in the Baltimore, Maryland area.

The OLA report noted that when it tried to hear her testimony, the “conditions” Todd-Malmlov’s politically connected Minneapolis attorney, Marshall Tanick, imposed “for an interview with the former director were not acceptable.”

“Primarily,” the report explained, “her attorney said the former director would only cooperate if the Office of the Legislative Auditor paid all expenses she incurred by cooperating, including her attorney’s fees.”

A search of Federal Election Commission records shows that Tanick was a generous contributor to Democratic Sen. Mark Dayton in 2003. Dayton is now governor of Minnesota. Tanick also contributed to the presidential campaigns of John Kerry, Hillary Clinton and Barack Obama.

Todd-Malmlov became MNsure’s first executive director shortly after the enabling legislation was signed into law by Governor Dayton in March 2013.

Todd-Malmlov had served, since February 2011, as the exchange director for the “under development but not-yet legislatively authorized or named” state health exchange, operating first as an employee of the Department of Commerce, and subsequently under the direction of the Commissioner for Management and Budget since February 2011.

The MNsure Board “assumed its statutory authorities and responsibilities” on August 21, 2013, according to the OLA report. It was at that time that Todd-Malmlov began reporting exclusively to the MNsure Board, and no longer to the Commissioner of Management and Budget.

The MNsure Board apparently never formally reviewed Todd-Malmlov’s qualifications to serve in the executive director’s position. Neither did it explore whether Todd-Malmlov, whose entire career to that point was as a health care economist, had the proper skills and experience to supervise the launch of a highly technical website.

For her part, Todd-Malmlov never explained to the OLA the level of managerial oversight the MNsure Board exercised over her as executive director because she steadfastly avoided interaction with the OLA investigative team from the beginning of its evaluation.

“In the early months of the evaluation, we didn’t know Ms. Todd-Malmlov’s status–whether she had taken a post-MNsure job, and whether she was still in MN,” the OLA’s Alter told Breitbart News.

“In fact,” Alter continued, “at one point before we issued the subpoena, we tried to find a current address for her and the address we found was outside of Minnesota. (This was prior to her DC job.) So, I don’t know exactly where Ms. Todd-Malmlov lived in the months prior to taking the DC job.”

But as the December 2013 article in the Star Tribune confirmed, it was public knowledge at the time that Ms. Todd-Malmlov was living with Minnesota’s Medicaid Director James Golden, a state employee. The OLA apparently did not consider asking Golden where Todd-Malmlov might be found.

“We did not serve a subpoena until Ms. Todd-Malmlov had taken her DC job,” Alter told Breitbart News.

“A subpoena is a last resort, and we made other efforts to seek her cooperation before sending her a subpoena. We didn’t know she would take a job out-of-state, and we intended to interview her after we had a more complete understanding of the exchange’s development and history,” Alter added.

“When we learned that Ms. Todd-Malmlov had taken the Avalere job, we knew where to reach her–which, as I indicated above–we did not know for sure during Summer 2014. By the time she took the Avalere job, we felt we knew the exchange’s history well enough to ask the right questions–so we sent the subpoena and specified a date and time for a phone conversation,” Alter said.

It is clear, however, that subsequent to sending Todd-Malmlov the subpoena, the OLA did not put on a full court press to compel her to comply with it and provide what would certainly have been critical testimony about the selling and launch of MNsure in Minnesota.

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