State auditor finds MDHHS allowed $82 million contractor to self-report compliance for years with no independent verification

The Michigan DOGE Task Force, chaired by State Rep. James DeSana (R-Carleton), today responded to a performance audit released by the Michigan Office of the Auditor General (OAG) finding that the Michigan Department of Health and Human Services (MDHHS) failed to adequately monitor service level agreements (SLAs) governing its $82 million Medicaid Pharmacy Benefits Manager (PBM) contract, a contract held by Prime Therapeutics State Government Solutions, LLC.

The audit, Report Number 391-0117-25, concluded that MDHHS’s oversight efforts were “not sufficient,” citing two material conditions, the most serious category of audit finding.

“This is exactly the kind of systemic failure the Michigan DOGE Task Force was created to expose,” said DeSana. “Michigan taxpayers have $82 million on the line, and MDHHS was essentially taking the contractor’s word for it. That is not oversight, that is negligence.”

The OAG identified two material conditions in MDHHS’s contract oversight. First, MDHHS’s contract monitoring plan was found to be critically inadequate. The plan lacked specificity about planned monitoring activities, was limited exclusively to desk review of contractor-submitted work product and had not been updated since its creation in May 2019 — nearly seven years ago. The department also had no internal policies or procedures governing how SLA monitoring was to be conducted.

Second, and more troubling, MDHHS was found to have relied entirely on Prime Therapeutics’ self-reported compliance with contract requirements, with no independent verification of the contractor’s claims. The department also failed to consistently document other monitoring activities it did conduct.

Compounding the concern, MDHHS formally disagrees with both findings signaling that the department does not believe stronger oversight is warranted.

“When a department receives two material conditions from the Auditor General and responds by disagreeing with both, that tells you everything about the culture of accountability inside that building,” said DeSana. “MDHHS processes pharmacy claims for hundreds of thousands of Michigan Medicaid recipients. This is not an administrative technicality it is a failure of basic fiduciary duty.”

The Michigan DOGE Task Force is calling on the Michigan Legislature to take the following steps:

• Require MDHHS to immediately update its PBM contract monitoring plan with specific, enforceable standards
• Mandate the establishment of internal policies and procedures for independent SLA oversight
• Commission an independent audit of Prime Therapeutics’ compliance record for the full contract period
• Condition any future PBM contract renewal on demonstrated, documented, and independently verified compliance with all service level standards before the current contract expires on September 30, 2026.

“Michigan taxpayers deserve a government that actually watches how their money is spent,” said DeSana. “The Michigan DOGE Task Force will continue shining a light on every contract, every agency, and every dollar until that standard is met.”

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The full OAG performance audit report is available at audgen.michigan.gov.

The Michigan DOGE Task Force is dedicated to identifying government waste, fraud, and inefficiency across state agencies and advocating for accountable, fiscally responsible government on behalf of Michigan taxpayers. The Task Force is chaired by Rep. Jim DeSana.