Minnesota health plans will now be required to compete against each other to manage state-subsidized health care programs for elderly, disabled and poor Minnesotans.
Gov. Dayton announced the change in state policy Wednesday. He said noncompetitive contracts have favored managed care plans at the expense of taxpayers. Last year the state paid more than $3 billion to health plans doing business with the state.
When Lucinda Jesson took over as Human Services Commissioner in January, one of the first things she did was examine the state's contracts with its health plans. What she found was a system that paid health plans based on what they had gotten in previous contracts, plus adjustments for growth and inflation.
"When Gov. Dayton and I looked at these contracts in January, we were surprised there wasn't competitive bidding," said Jesson. "We think we'll get better quality and better price if we have competition in this market."
Jesson wouldn't put a number on what the state hopes to save. But she said she thinks it will be significant.
One example of the type of savings that are possible made news headlines last week, when UCare voluntarily returned $30 million in excess reserves it had accumulated from doing business with the state. UCare's donation suggests that plans could be profiting from state programs.
In announcing the UCare giveback, Gov. Dayton called upon all of the state's public health plans to also return their excess earnings and reserves.
The governor also issued an executive order that requires regular audits of health plans, and full public disclosure of their profits, reserves, and administrative expenses.
"It is critical for public trust that Minnesota's taxpayers understand how public dollars for state public programs are being used," the order said.
Commissioner Jesson said the state hasn't had enough access to this type of financial information in the past.
"We need to be a smarter purchaser, have more competition, have more transparency so that health care hopefully costs less, but with the continued good outcomes, so that we don't have as much of this deficit driven by health care costs in the future," said Jesson.
“We think we'll get better quality and better price if we have competition in this market.”Human Services Commissioner Lucinda Jesson
If the health plans are displeased with the governor's actions they're not showing it publicly.
"We think it's time the entire health care system has to change," said Julie Brunner, executive director of the Minnesota Council of Health Plans. "We cannot sustain the growth in health care spending. And so if this is the part that the plans contribute in helping the change, we'll go down that road and work with the administration on it."
But Brunner also added she hopes the governor's decision to change the contracting process isn't the first step toward cutting health care benefits.
University of Minnesota economist Jean Abraham said it's possible that Dayton's new strategy could result in fewer benefits, if health plans are already fairly competitive on price. She said health plans might be tempted to eliminate add-on services such as transportation, wellness programs or chronic disease management.
"Things that are typically not available across other states, Medicaid programs or Medical Assistance programs," said Abraham. "So to the extent that they're getting a richer benefits package or additional services for that money, you know that's a good thing. But is it worth it, and should the taxpayer be paying for it, I think is the question."
Dayton's order requires the Department of Human Services to take three actions. They include creating a managed care website to display public data on the health plans; preparing an annual report; and submitting data to the Department of Commerce "so that regular financial audits of data will be conducted."
The order includes a long list of information the department should include in the annual report: "detailed information on administrative expenses, premium revenues, provider payments and reimbursement rates, contributions to reserves, enrollee quality measures, service costs and utilization, enrollee access to services, capitation rate-setting and risk adjustment methods, and managed care procurement and contracting processes."
(MPR reporter Madeleine Baran contributed to this report)