Dayton signs HMO accountability order…but is it too early to celebrate?

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On March 23, Governor Mark Dayton announced a series of major reforms to Minnesota’s managed care program. The move is designed to increase accountability and cost-savings for one of the state’s biggest expenditures, without making cuts in services, by taking a long-overdue look inside the HMOs’ black box.

According to the press release from the governor’s office, the reforms include:

  • competitive bidding in managed care,
  • a call for HMOs to follow the example of UCare and return “excess reserves and profits” to the state,
  • an Executive order “requiring regular audits of the managed care plans, creating a comprehensive annual report on all administrative expenses and premium revenues, and making data on the plans and contracts open to full public disclosure via a newly created website,”
  • a request for information to “kick-start the development of efficient and effective health care delivery by connecting patients directly with hospitals, clinics, and community health providers and holding providers accountable for quality of care.”

While the Greater Minnesota Health Care Coalition welcomed the reforms, HMO critic Dave Feinwachs said they did not go far enough.

“Greater MN Healthcare Coalition is very pleased and gratified at Governor Dayton’s executive order and the changes it will bring to how health care plans are administered in the state,” said GMHCC’s staff director, Buddy Robinson. “We have been working for these changes for the past four years and we are now working closely with the new commissioners for accountability and fairness and an efficient use of taxpayer dollars.”

Previous administrations have been like the fox guarding the henhouse, said Robinson, but the executive order is evidence that the Dayton administration is really serious. Dayton could turn up the heat even more after April 1, because that’s when the HMOs must turn their profit reports from 2010 in to the state. GMHCC reports that in the previous fiscal year, 2009, the HMOs collectively made about $130 million in profits off of the state.

Advocates will monitor whether other HMOs follow suit with UCare’s recent giveback. Robinson said that the fact that UCare gave back $30 million somewhat precipitously is, in fact, a testament to how much more they have in the bank. At the end of 2009, UCare’s financial reserves were in excess of $246 million, compared to a legal minimum of $106 million. The other HMOs have even greater reserves than UCare, said Robinson.

Earlier this week, said Robinson, GMHCC met with a Medica official who claimed that they could not give back a large sum the way UCare did because they need sufficient reserves to cover losses in their commercial programs. According to GMHCC, the amount of Medica’s excess reserves roughly matches the amount of profits the company is making off the state-suggesting that Medica may be using the public’s money to subsidize losses in its private program.

A negative assessment of Dayton’s plan comes from Dave Feinwachs, the former Minnesota Hospital Association general counsel turned health care advocate. According to Feinwachs, a reading of the fine print reveals the governor that will maintain the status quo.

The governor’s executive order calls for the Commissioner of Health to “submit data from the managed care plans for state public programs to the Commissioner of Commerce so that regular financial audits of data will be conducted.”

Feinwachs said that the governor’s plan did not provide that auditors would be independent third parties, so this is a waste of time. “Unless you have a real auditor who knows what they’re doing and isn’t beholden to anyone,” said Feinwachs, “you’re not solving anything.”

According to Feinwachs, competitive bidding does not require a single winning bid, but could potentially lead to a situation where five RFPs are submitted and all five are chosen.

Feinwachs said that although everybody is celebrating now, nothing has changed. “The way you can tell that nothing has changed is that there’s no pushback from the health plans,” he says. “It’s all politics.” The executive order requests that the HMOs give their reserves back, but there’s no way to enforce it-and in fact, the HMOs have already told the governor’s office that they won’t do it. “But,” says Feinwachs, “it certainly made a good show.”