UCare’s recent loss of a statewide Medicaid contract (“Disruption of UCare rankles state legislators,” Aug. 24) raises the question: Do we really need managed care in Minnesota?

UCare’s 390,000 Medicaid enrollees will soon be shifted to three managed-care organizations (MCOs) — Blue Cross, Medica and HealthPartners. This is expected to cause major disruptions in patient care. Such disruptions in continuity of care between and within MCOs, however, are nothing new as each MCO micromanages “provider networks” of doctors and hospitals, “utilization review” of claims, drug coverage formularies, drug and procedure “prior authorizations” and hospital “pre-certifications.” Moreover, if you miss the “eligibility” deadline to submit your six-month income statement, the MCO immediately drops your coverage. Claims for medical and all services are rejected. To get your health insurance back, you must apply for “transitional” Medicaid and hope you get shuffled back to the MCO before the bills arrive.

Our pharmacy had a recent patient with chronic obstructive pulmonary disease (COPD) on very expensive inhaler medications, whose insurance was cut off in this way. The inhaler medication claims were denied; she could not afford the medications, and that weekend she ended up in the emergency room.

UCare (indeed, all of the big four MCOs) further fragments and disrupts the continuity of care by subcontracting most services: pharmacy to Express Scripts, dental to Delta Dental, chiropractic to Landmark Administrative and mental health services to a behavioral health managed-care network, all of which use the aforementioned micromanagement techniques. At every handoff, private “managed care” middlemen skim off profits and increase complexity.

Meanwhile, UCare relies on public employees from Minnesota’s 87 counties to provide outreach, determine eligibility and enroll members. By leveraging your tax dollars, UCare internalizes profits and externalizes administrative costs.

Before managed care, Medicaid and MinnesotaCare (for those with incomes slightly above Medicaid’s) were exclusively public programs run quite efficiently. Minnesota’s Department of Human Services contracted directly with hospitals, clinics and pharmacies. All services were integrated, there was one drug formulary, and billing and claims were processed in-house. Each county administered Medicaid’s outreach, eligibility and patient enrollment.

In 1983, the Legislature added “fiscal intermediaries” to the public Medicaid program as a “demonstration project.” Private insurers were to micromanage patient care, placing both practitioners and patients at financial risk. Patient “copays,” for example, a managed-care invention and difficult to administer, cause delays in seeking care, which studies show result in increased hospitalizations and emergency-room visits.

Before the middlemen got involved, administrative costs were 5 percent of Medicaid spending. Today, administrative costs for “managed care” are about 15 percent. The 30-year “demonstration project” has yet to show that tripling administrative costs has significantly improved patient outcomes.

The winners in this scenario are MCOs such as UCare. As reported to the IRS on Form 990, UCare cleared an average profit of $38 million per year between 2003 and 2013. The CEO, executives and management are highly remunerated.

MCOs commonly maintain solvency reserve funds far above the level required to stay afloat in a fluctuating market. If UCare’s solvency reserves were down to a reasonable level, an additional $120 million between 2003 and 2011 could — and should — be transferred to UCare’s already extensive capital reserves, $387.7 million as of 2012. (See the Minnesota Department of Health’s 2014 report of capital reserves, page 182.) Or better yet, since UCare is a “nonprofit,” transferred back to the state and communities.

Under the Affordable Care Act, Oregon has begun to replace MCO contracting with an integrated funding model that is more directly accountable to communities. Oregon’s coordinated-care organizations (CCOs), launched in the fall of 2012. They are community-based organizations governed by local partnerships among health care providers, community members and stakeholders that assume financial risk. By eliminating managed-care fragmentation and improving continuity of care, CCOs will be in a much better position to integrate care and achieve the “triple aim” of improving health care outcomes and the patient experience and lowering costs.

If we are going to integrate care in Minnesota, the first step is to remove private insurers from our public health insurance programs. Oregon offers an accountable alternative to Minnesota’s managed-care experiment.


Joel M. Albers, a health economist and pharmacist, is co-chair of Co-op Care (www.coopcare.org), an emerging cooperative health insurance pool in Minnesota.