Gov. Mark Dayton's announcement Tuesday that four large HMOs have agreed to give any excess earnings back to the state will slow spending in health and human services — one of the fastest-growing areas of the state budget.
The state faces a projected $5 billion budget deficit.
Officials with Blue Cross Blue Shield, HealthPartners, Medica and UCare say they will cap their 2011 profits from state government business and give back any profits above 1 percent that they get from state health plans.
"This is an agreement with the health plans which recognizes both the profits they have made off of state programs in the last couple years and the reality of the state's financial crisis," said Human Services Commissioner Lucinda Jesson. "The health plans stepped up to the plate and agreed to do the right thing, and we're delighted."
The state spends about $3 billion every year to contract with the HMOs to manage care for people on public health care plans. UCare announced last month that it would voluntarily give back $30 million, and Dayton urged other health plans to do the same. The governor also directed Jesson to develop a competitive bidding process for 2012 managed care contracts.
Jesson said the amount of 2011 savings is still not known, but she said the state would have received $85 million based on 2010 profits.
REPUBLICANS TAKE DIFFERENT APPROACH
Republicans in the House and Senate are also trying to rein in health care spending, but their budget plan relies on some assumptions that might never materialize.
The governor's announcement came shortly after the House Ways and Means Committee approved a Health and Human Services budget bill, which takes a significantly different approach to cost control.
“We spend a lot of money in ways we wouldn't spend it right now, because the money from the feds is free.”State Sen. Jim Abeler, R-Anoka
On a vote of 15 to 11 Tuesday, the committee sent the budget measure to the House floor, where a vote is scheduled Wednesday. The bill reduces projected spending by $1.6 billion.
Republican leaders contend that Minnesota could save millions if only federal officials would waive some of the current rules states must follow when spending Medicaid funding.
"It would give us flexibility," said Rep. Jim Abeler, R-Anoka. "We spend a lot of money in ways we wouldn't spend it right now, because the money from the feds is free."
Abeler, chair of the House Health and Human services finance committee, is seeking several federal waivers in his budget bill, including one he terms a "global" Medicaid waiver.
He's also counting $300 million in savings from flexibility the state has yet to receive. The legislation lists a series of goals for a more flexible Medicaid program, but Abeler said specifics were intentionally left out.
"Sometimes a waiver is designed to stop serving somebody, or to find a way to terminate coverage that somebody doesn't want to provide," Abeler siad. "In our waiver method, I would think we would actually serve more people in better ways, or at least the same number of people."
Abeler is optimistic about Minnesota's chances of getting the proposed waiver. He points to similar successful requests from New Jersey and Rhode Island.
But if the feds say no, his bill directs the human services commissioner to come up with an equal amount of savings by cutting Medicaid payments to doctors, hospitals and clinics.
Democrats say the bill claims to save $750 million that may not materialize and oppose the waiver request. Rep. Erin Murphy, DFL-St. Paul, said the proposal is more wish than reality. Murphy said she doubts federal officials would ever grant a waiver without seeing a specific plan.
"We need to be able to tell them who would be covered, what services would be covered, who would deliver it, how we would pay for it," Murphy said. "We haven't done any of that hard work yet in the Legislature."
Murphy said she can't imagine Dayton signing the HHS bill in its current form. Dayton has previously characterized the assumed savings from waivers as "Fantasy Island." He also promised to veto any bill that rolls back his recent expansion of Medicaid coverage.
Abeler added a repeal of the Medicaid expansion to his bill during Tuesday's Ways and Means hearing.