Minnesota health CEOs taking a whack at Medicaid

  • Article by: WARREN WOLFE , Star Tribune
  • Updated: January 27, 2011 - 3:02 PM

A coalition of health CEOs released a plan to reshape spending in state's huge Medicaid program.

Concerned that the Legislature and governor might get it wrong, CEOs from seven major health plans and providers have drawn up their own plan to streamline Minnesota's massive Medicaid program -- and carve $1.8 billion from the projected $6.2 billion deficit.

The plan is sure to draw political fire. It suggests up to $170 million in cuts to state-funded services that help keep the elderly and disabled out of institutions, for example, and captures $280 million in higher taxes on tobacco and alcohol.

Nonetheless, its influential authors and specific targets will make it part of the debate as lawmakers grapple with a state budget in which health care consumes 30 percent of all spending.

"We're not saying this is what Minnesota must do," said Mary Brainerd, CEO of HealthPartners. "We're saying these are things we must consider to emerge from the current budget dilemma. We can create a system that costs less and keeps people healthier."

Most of the CEOs will meet Tuesday with the new commissioners of human services and management and budget to brief them on the report. Others in the group include Allina, Blue Cross and Blue Shield of Minnesota, Fairview, Medica, Park Nicollet and UCare.

The report, called Minnesota's Health Care Imperative, is the first of a handful expected from groups trying to avoid what Allina CEO Ken Paulus called "potentially disastrous, broad-ax cuts" to providers.

"This is not just damage control," he said. "This is an opportunity to get past a short-term budget crisis and tackle fundamental problems in how health care is structured and paid for, starting with state programs."

Trims and taxes

Among the group's other proposals:

•Maintain Gov. Mark Dayton's controversial early expansion of Medicaid, which a state Senate panel voted to reverse Wednesday. Gain: $800 million in federal funds.

•Increase federal Medicaid matching funds by raising a tax on care providers, then offset the tax by raising the reimbursement for care. Net gain to state: Up to $400 million.

•Shift people with disabilities from a fee for service plan into managed care, providing better care coordination and avoiding unnecessary hospital use. Savings: Up to $300 million.

•Set up a state Medicaid Institute to consider trimming Medicaid benefits, which in 2009 were 49 percent higher than the national average. Cuts or copays might come in care by dentists, occupational and physical therapists, psychologists and others. Savings: Up to $100 million.

"We have mixed feelings about some of these things -- cutting dental benefits, for instance," Brainerd said. "It may be that increasing dental benefits actually would lower overall health care costs."

Mixed reception

Some critics said Wednesday they wonder if the health plans are trying to enhance their profits by moving more people into managed care.

Together, the state's 12 HMOs earned $103.1 million in net income in 2009 from the three Minnesota health care programs. Historically, Medicaid has been profitable for HMOs, with those earnings typically offset by losses from the MinnesotaCare and General Assistance Medical Care.

State government business is often more profitable than earnings from private insurance. In 2009, the average HMO profit margin for state health plans was 4.1 percent, compared with 1.6 percent for commercial business, according to a Star Tribune analysis.

"As a group, these big firms have done great work with commercial plans through employers," said Michael Scandrett, who heads the Safety Net Coalition. "But that doesn't work very well with the chronically ill and disadvantaged people in state programs."

"When we've asked them how about the need for special services that these people need, they say, 'Oh, that's a good question.' There are good things in this report that need to be talked about," he said, "but it needs to be a far broader discussion."

The CEOs say they involved a broad range of other people in drawing up the report, but some advocates for the poor and disabled and rural health providers say they were cut out completely or only informed of the report in the past two weeks.

"We thought this would be an extremely difficult legislative session," said Steve Larson, public policy director of the Arc of Minnesota and co-chair of a coalition of disability groups. Like Scandrett, he said he was not asked to review the report. "I didn't think it would get this difficult this quickly."

Staff writers Glenn Howatt and Brad Schrade contributed to this report. Warren Wolfe • 612-673-7253

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