The ouster of UCare as an insurer in most of Minnesota’s public health care programs could have an unintended consequence: A squeeze on the training of much-needed family practice doctors in the state.

As part of its mission, the Minneapolis health insurer has diverted excess revenue — often $4 million to $10 million per year — to the University of Minnesota’s Department of Family Medicine and Community Health. And over time, that money became the department’s primary funding for the training of 150 residents — doctors who have completed medical school and need on-the-job training in hospitals and clinics.

“We would have been asking for millions from the state and the medical school to sustain this enterprise if it had not been for UCare,” said Dr. Macaran Baird, chairman of the university department and UCare’s board of directors.

The funding was put at risk this year when a public bidding process eliminated UCare as a provider of health insurance in 2016 to low-income Minnesotans through the state’s Medical Assistance and MinnesotaCare programs. Roughly half of UCare’s annual revenue comes from these programs.

Losing the bidding process was such a shock to UCare, which this year served 370,000 low-income Minnesotans through state programs, that the organization sued the Minnesota Department of Human Services (DHS) and claimed that the process was biased. An injunction that would have retained UCare as a provider in 2016 was denied, but the lawsuit is still proceeding. UCare also could remain a provider in individual counties that are challenging the bid results.

But Baird said the family medicine department can’t count on UCare’s support — and either needs to ask the state for as much as $4 million per year to make up the difference or trim its training program.

A threat to family medicine education funding is ill-timed for Minnesota, which is projected to have a shortage of 800 doctors in its rural areas within a decade. Concerned about the shortage, legislators this summer increased loan forgiveness funding for new doctors who commit to serving high-need corners of the state, and to create a special program to support immigrant or refugee doctors through their residencies.

In theory, the state saved so much money from competitive bidding for Medical Assistance and MinnesotaCare that some could be considered for medical education. The DHS has estimated savings of $173 million next year through bidding, which winnowed the providers of state health insurance to a smaller group that included Blue Cross and Blue Shield of Minnesota, HealthPartners and Medica.

Saving money for taxpayers and letting lawmakers and the government decide how to use it — whether for doctor training or other health needs — is preferable to having a health insurance company give it out as excess revenue, said Lucinda Jesson, DHS commissioner.

Jesson pointed to a recent report by health care analyst Allan Baumgarten that showed UCare received $99 million in underwriting income from its state programs in 2014.

“There’s a great need for [family practice doctors] especially in greater Minnesota,” Jesson said. “But the way to talk about this is in an open way — looking at that need vs. a lot of other needs we have in the health and human services world.”

Training is costly

Payments from UCare to the family medicine department trace back to the common history of the two organizations. The department created UCare in 1984 with two goals — providing an insurance option to low-income patients that university doctors were treating, and supporting the department financially whenever possible.

Some years, UCare provided zero to the department. But in 2013, it gave back $7 million, according to UCare tax records.

Even if UCare loses state business next year, the insurer will look to continue its financial support, said Ghita Worcester, UCare’s senior vice president for public affairs. “I can’t say today what the difference would be for what we would be able to contribute. I know we would intend to contribute as we are able.”

UCare also donates to other organizations such as Meals on Wheels, the Children’s Defense Fund and Portico Health, the latter of which connects needy Minnesotans to health benefits. UCare isn’t alone, though; tax returns for HealthPartners show similar payments to groups such as the Science Museum of Minnesota, St. Paul Public Schools Foundation and Minnesota Special Olympics.

The university’s Family Medicine Department has used UCare funding for various purposes, including research grants, but increasingly earmarked it for residency training due to state budget constraints. Special state funding for family medicine residencies came in part from the state’s 1998 lawsuit settlement against tobacco companies, but lawmakers diverted much of the tobacco money to cover state budget deficits in later years.

Other family medicine residency programs in St. Cloud, St. Paul and Rochester still receive this state support, which is roughly $20,000 to $30,000 per resident per year, and Baird said he will seek it again.

Fragmented funding

Funding for graduate medical education is complex and fragmented, coming largely from the federal Medicare program. The state also maintains a Medical Education and Research Costs program that taps state and federal funds to support teaching hospitals. The special state funding for family medicine residencies is on top of that.

All three sources combined usually can’t cover the cost of training medical residents, leaving hospitals and clinics to make up the difference. Allina Health loses money on the training of 18 residents at United Family Medicine in St. Paul, for example, but considers it an investment with the hope that many of the new doctors will stay in the local health system, said John Bien, United’s vice president for finance.

The good news is that investments in family medicine residencies pay off, said Troy Taubenheim, director of the Metro Minnesota Council on Graduate Medical Education. Of the 74 family medicine residents in Minnesota who graduate each year, about 55 remain in the state to practice medicine. And half of them practice in rural Minnesota.

“A really, really high number of them end up being our family doctors in the state,” Taubenheim said. “It certainly would be tragic for those [residency] programs to struggle.”