Editorial: Driving a harder health care bargain

Star Tribune Editorial

It's high time that Minnesota started treating its nonprofit health plans for what they are -- some of state government's largest vendors.

Reforms announced this week by Gov. Mark Dayton's office are a promising first step toward scrutinizing health plan contracts for savings and finding new ways to rein in Minnesota's soaring medical costs.

Managing care for more than 500,000 low-income, disabled and elderly Minnesotans enrolled in state public health programs is a $3.1 billion-a-year business for health plans in Minnesota, with the state and federal government jointly footing the bill.

Over the past decade, the state's portion of this outsourced care has increased from 5 percent to 11 percent of the state budget, according to Dayton's office.

The state also has more than 249,000 people -- typically the sickest of the sick -- in a fee-for-service public program. That spending is also ripe for a cost-savings review.

On Wednesday, Dayton announced plans to do what good business leaders do in difficult financial circumstances. His administration is going to start driving harder bargains with health plans.

Key parts of the plan include making the contracting system more competitive, making financial information more transparent, and doing deeper auditing of plans' books to analyze administrative and medical expenses.

The plans' reserves will also get more scrutiny. The state's nonprofit health maintenance organizations have $1.4 billion set aside.

The question that needs to be asked on reserves: How much is enough?

In a Thursday interview, Department of Human Services Commissioner Lucinda Jesson said the plans shouldn't expect that they all will do business with the state as a matter of course. Jesson said the contracting process will prioritize getting the best care for the best price -- not just accepting the lowest bid.

Although it's unclear at this point how much savings this will yield, it makes sense to finally start wielding the state's mighty purchasing clout, especially when the alternative is draconian cuts to benefits for the state's most vulnerable citizens.

Department of Human Services officials said Friday that a conservative savings estimate for managed care reforms is about $111 million for the biennium.

Why these reforms weren't done years before now is a huge question. Dayton and Jesson deserve praise for tackling this politically charged issue just three months into the governor's term.

Dayton has also pressed Medica, Blue Cross and Blue Shield of Minnesota and HealthPartners for "donations" after UCare recently announced a $30 million contribution to the state after making more money than expected in its state business portfolio.

All four plans are nonprofits and do a large business with the state. So far, no insurer besides UCare has announced a giveback.

Blue Cross President and CEO Pat Geraghty said in an interview this week that Blue Cross is willing to talk about an "investment" that would leverage his plan's expertise to help state programs work more efficiently into the future. Geraghty said it's too early to provide more details.

The state's respected nonprofit insurers understandably feel a bit beleaguered. The governor's proposals come amid the dramatic uncertainty caused by federal health care reform.

The plans also said their profit margins on state public health programs are thin on average; they earned less than 1 percent cumulatively over the past 10 years.

Insurers emphasized last week that they are part of the solution to rein in health care costs. The governor's reforms take them at their word.

Republican legislative leaders also have pushed for managed care reforms. They have worthy ideas that should be considered as well. There's much more work to be done. Proposals that recoup excess profits for the state should be a priority.

The takeaway message for health plans is not that they're the problem. Instead, those that want to be part of the Minnesota's future are simply being asked to prove how they can help.

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