Editorial: Repayment doesn't end HMO concerns

A year of controversy over Minnesota health plan profits earned from taxpayer-paid medical programs has yielded a remarkable development: $73 million will soon be returned to state and federal coffers.

Gov. Mark Dayton and Department of Human Services Commissioner Lucinda Jesson are to be commended for negotiating the one-time, 1 percent caps for 2011 earnings on two big programs: Medicaid and MinnesotaCare, which are funded by the state and federal governments.

Like many states, Minnesota outsources some medical assistance programs to private insurers. Medicaid managed care is a $3.8-billion-a-year business in Minnesota.

HealthPartners, one of the state's big plans covered by the cap, deserves credit for quickly agreeing last year to this arrangement, and for pushing the state's three other big nonprofit plans -- Medica, UCare, and Blue Cross and Blue Shield -- to do the same. UCare's $30 million voluntary giveback last year raised heated questions about plan profits, but the move also spurred other plans to act.

The $73 million windfall is momentarily reassuring, but serious questions remain about the repayment and, more importantly, about state and federal oversight of the Medicaid program. Problems in Minnesota may indicate inadequate Medicaid management in other states.

Two separate federal investigations are still scrutinizing Minnesota's Medicaid program. Key questions include whether the state is overpaying the health plans and whether the state has improperly used federal money to subsidize state-only medical programs.

Sen. Chuck Grassley, an Iowa Republican leading one investigation, issued a sharp statement Wednesday about the $73 million. He said the repayment doesn't resolve questions about how the state paid plans in previous years. He also said he doesn't have much confidence in the repayment because of the state's track record of "arriving at questionable payments."

Yet Blue Cross had 21 percent of enrollees of the state's biggest Medicaid managed-care program and 38 percent of its MinnesotaCare enrollees. HealthPartners, with much smaller market shares in these two programs, gave back $31 million. Medica contributed $25 million, while UCare added $8 million to its $30 million giveback.

State lawmakers need to authorize a strong, additional independent audit of the big health plans to restore public trust in this spending. The federal agency charged with Medicaid oversight also needs to wake up. More than a year after questions were raised about Medicaid overpayments in Minnesota, the agency finally sent a letter to Minnesota on March 21 demanding answers about rate-setting.

The letter's tone is aggressive, but the questions are alarming. The agency charged with Medicaid oversight should already have had these answers. Congressional hearings are needed.

State lawmakers must also ensure that their plans for spending the state's half of the repayment don't exacerbate HMO transparency concerns. An ill-advised House Republican plan to funnel the savings back into the health care system through the insurers would only deepen the cloud of mistrust.

A thorough, public discussion is needed of the money's best use. The $73 million belongs to federal and state taxpayers. Industry special interests shouldn't get first dibs on it.