HMOs eyeing a slice of the universal health care pie


The July 20 opinion piece by HealthPartners CEO Mary Brainerd calling for universal health care is strong evidence that barricades to health care for all are crumbling. But keeping health maintenance organizations (HMOs) in the middle of health care delivery may not achieve the other desired results of cost savings and efficiency.

Since HMOs began administering government health programs with Medicaid in the mid-1980s, program costs have risen steadily. HMOs now devote 15 to 35 percent of their revenues on administration, including marketing, lobbying, claims processing, communication with physicians, and CEO benefits. In comparison, federal administration of Medicare adds 3 percent in overhead, according to Physicians for a National Health Care Program,

In her article, Brainerd states flatly, “I do not mean a government-run, single-payer system” but doesn’t address why other than sharing the opinion that “Minnesota is better poised to provide universal coverage than Massachusetts.” (Massachusetts recently enacted a law requiring that all citizens be ensured, and added new low-cost options for individuals and some state subsidies.) Presently, HMOs subcontract with the state of Minnesota to administer health care delivery for some 640,000 Minnesotans through the state’s three public programs: Medical Assistance (MA), General Assistance Medical Care (GAMC), and MinnesotaCare.

A statewide program would save millions

Two Minnesota health care reform advocates say that reorganizing the state’s current health delivery system would make it more efficient by removing costly middlemen and unnecessary complexities in order to provide a fair and equitable system. A statewide program with one administrative body would save businesses and the state millions of dollars while delivering health care to all.

Kip Sullivan is on the steering committee of the non-profit Minnesota Universal Health Care Coalition. MUHCC’s 12 member organizations advocate for a single-payer system. Sullivan recently published a primer on health care called, “ The Health Care Mess: How We Got Into it and How We’ll Get Out of It.”

John Schwarz recently established United Health System, a non-profit, health system research, education, and citizen advocacy organization. He was previously associated with MUHCC and also advocates for universal single-payer health care.

Schwarz says there are myths about the uninsured (46 million nationally according to the U.S. Census; 340,000 in Minnesotan, according to a joint study by the State of Minnesota and the University of Minnesota), that may be delaying the enactment of health care reform. “Seventy percent of people who are uninsured are working full time,” says Schwarz. “It’s a mainstream issue.” He also said that working poor often don’t qualify for state subsidized programs because of income guidelines.

A bill that would establish a state-run single payer program, SF 414/HF481, has been introduced in the Minnesota Legislature every year since 1991. Thirteen House members and three senate members currently co-sponsor the legislation. The bill creates a single, public-financed program that would provide comprehensive health coverage to all residents. The program would be funded by a trust fund established using cost savings from consolidating existing programs, revenues from existing state and federal programs, and a progressive income tax.

But most legislators still believe in HMOs

With endorsements from nine medical associations, nine labor unions, and 14 community groups, and a preference from a majority of citizens for universal health care coverage, the bill won’t pass. Why not?

Too many legislators still cling to a “faith-based belief that HMOs could improve quality and bring costs down,” says Sullivan. Through more than 100 articles, hundreds of hours of testimony, lobbying and analysis, Sullivan has sought to educate policymakers on the cost efficiencies of a single-payer program compared with having HMOs administer various programs. For example, overhead associated with the administration of MinnesotaCare, the sliding fee health insurance for the working poor, ranges from 15 percent to 35 percent, says Sullivan. Created in 1992, MinnesotaCare was placed under HMO administration in 1996.

MinnesotaCare had an average monthly enrollment of 148,000 in 2004, according to the Department of Human Services. While it represents a small portion of the state budget and is the smallest of the three public health programs, MinnesotaCare is continually targeted for cuts. The Minnesota Legislature spends much time each year grappling with health care funding, delivery and oversight issues, adding more inefficiency to the current system.

Schwarz and other reform advocates who lobby the Legislature, publish articles, and organize grassroots support for single payer universal health share that it’s been difficult to be heard over the much better funded trove of professional medical industry lobbyists.

People are ready for a change

America, while paying more per capita on health care than any other nation, is the only industrialized country not offering universal health care as a right for all citizens.

A 2005 Pew Research study found that 65 percent of all Americans favor the government guaranteeing health insurance for all citizens, even if it means raising taxes. A similar poll in Minnesota found an even stronger preference for guaranteed health care.

Most physicians favor universal health care. They see how harmful the profit-based system is to the individuals it is intended to serve. Medical specialists such as neurologists, cardiologists and oncologists are concerned by the growing numbers of patients who cannot obtain needed tests, medications and procedures because they simply don’t have the resources to pay for them. One specialist told me that he has attempted to waive fees or reduce charges for patients but that legally binding hospital regulations prevent them from doing so. Often, patients referred to a specialist by a general practitioner cannot follow through because insurance companies block their access.

Repeated cuts in Medicare and Medicaid reimbursements to physicians has put a greater strain on their ability to accept new patients, as well as added to restrictions on time spent with patients. Because of complex coding and reimbursement rules, neurologists are reimbursed more for treating a migraine patient than they are for treating a patient with Alzheimer’s.

Because they must deal with insurance company billing, physicians know better than any of us where the inefficiencies are.

Continued privatizing of health care delivery isn’t the answer

State government provides public safety through law enforcement and fire departments; education through public schools; and transportation infrastructure through the highway system, but does not guarantee basic health care for all of its citizens. Is shifting state tax dollars toward a handful of companies to administer various programs really worth the inefficiencies, the revenue drain on state budgets, and the anxiety of living without health care?

Kathy Stone is a St. Paul-based writer who has covered the business of health care, health policy, and science and consumer health news for nearly two decades. Her bi-weekly column, Health Politics, will comment on health care trends and their impact on real people. Send us ideas for health topics that you’d like Kathy to cover at