An overview of the DHS document release – part 1


Last month, the Minnesota Department of Human Services (DHS) released a large batch of internal documents to PRM. Most of these documents dealt with the process of “rate-setting” for Minnesota’s public health care programs. These programs are paid for by both state and federal funds, and are administered through managed care plans, whereby managed care organizations (HMOs, in many cases) contract with the State, and are given lump-sum payments to disburse out to providers (hospitals, clinics, and others) who service various enrolled populations.

Brief history

Since the early 1990s, the amounts paid to managed care organizations (MCOs) have been established by DHS, in conjunction with outside actuarial firms. These firms are used to verify that the rates established by DHS are “actuarilly sound” before DHS finalizes its contracts with MCOs. In recent years, this rate-setting process has been the subject of controversy, as we briefly described in a previous PRM post on this subject.

This post offers an overview of documents that provide a window into the DHS rate-setting process, as it existed from 2007-2009.

It should be noted that the DHS rate-setting process has changed since many of these documents were written. In 2011, the Minnesota Legislature established a two-year pilot program for the Twin Cities area that replaced the DHS rate-setting model with a competitive-biding process, with the intention of keeping costs down through open competition. 2012 will be the first year in which select MCOs operate under contract rates established through this process.

Document overview

DHS provided several hundred pages of memos and reports to PRM, many of which we are still evaluating. Most of the documents were produced by Milliman, Inc., the actuarial firm retained by DHS to help establish the rates for Minnesota’s public health care programs. Many of the Milliman reports provide proposed rates for coming program years, and review the methodologies and assumptions about how these “capitation rates” were calculated for future program periods.

Below is a list of select DHS document summaries, with key names and dates noted, as well as pertinent quotes and data. Above the name and date set is a capsule of key points, along with a link to the document posted in PRM’s document archive.

The summaries are provided in no particular order, but relate to documents that contain interesting or notable information. We will post additional summaries soon.

Collection of payment data from MCOs


October 9, 2009

Draft DHS Memo regarding Managed Care Payment Data Collection and Reporting

Memo describes the format for the collection of payment data from managed care organizations (MCOs). The collection of this information was mandated by the legislature in 2008, in response to a report issued by the Office of the Legislative Auditor, regarding the need for increased oversight and reporting about the activities of MCOs under contract with DHS. Specifically, the memo notes that new reporting intends to track the disparity between “DHS’s targets for MCOs’ net income, and MCOs’ actual net income.” The memo goes on to explain the parameters of the reporting template.

No auditing of DHS data


Dec 10, 2009

Letter from Leigh Wachenheim of Milliman, Inc. to Karen Peed of DHS Letter details changes to benefit and reimbursement rates for various public health care program categories. Analysis undertaken in order to help DHS guide its capitated rate setting process.

Quotes: “I have performed a limited review of the data … for reasonableness and consistency, and have not found material defects.”

“In performing my analysis, I have relied upon data and other information provided to me by DHS. I have not audited or verified this data and other information. If the underlying data is inaccurate” … then “the results of my analysis may likewise be inaccurate …”

Similar language is included in the cover letter of all rate-related letters.

State shutdown – effect on provider payment reports


August 17, 2011

E-mail from Chandra Breed to various DHS employees

E-mail notes the impact that the 2011 State shutdown had on the submission of “provider payment reports.”

Changes to “capitation rates” due to changes to GAMC


March 10, 2009

Letter from Leigh Wachernheim of Milliman, Inc. to Karen Peed of DHS.

Letter discussing “capitation rate changes by rate cell” related to MNCare costs. Changes are noted as a reaction to legislative changes to the General Assistance Medical Care program (GAMC).

Quotes: “There may be significant migration of current GAMC enrollees into MNCare in the near future due to legislative changes. The factors in this letter to do reflect the impact of this potential migration.”

Overview of contract renewal/rates for MnDHO-DD program


December 27, 2007

Financial review checklist for At-Risk Capitated Contracts Rate Setting; other documents related to MnDHO-DD program, including Milliman rate-setting letter.

Summary of the contract renewal for the MnDHO-DD program, administered by UCare Minnesota. MnDHO-DD provides health care services to a location-specific sub-set of Minnesota’s disabled population. MnDHO-DD is one small state program among many.

Quotes: “The MnDHO-DD payment model is designed to make Medicaid payments more accurate and timely, especially for enrollees with varying medical needs.”

“Minnesota Disability Health Options is a voluntary managed care program for people with Developmental Disabilities (MnDHO-DD) age 18-64, who live in Hennepin, Carver, or Scott Counties and receive their residential and rehabilitative services from Mount Olivet Rolling Acres (MORA) Partners Choice Network (PCN).”

Under MnDHO, “the State contracts for Medicaid services with a Medicaid Special Needs Plan (SNP) in order to integrate Medicare and Medicaid services.” The SNP is approved by the CMS, the federal agency that oversees the matching of Medicaid dollars to state programs to serve subsets of people defined by the State. As of December 2007, there were 45 people enrolled in MnDHO-DD. The program is only open to a maximum of 120 individuals.

“For 2008, the State has updated and adjusted rates that had been approved for the 2007 rate year. The rates reflect fee-for-service experience updated to the 2008 calendar year rating period, based on trends provided by the Reports and Forecast division of DHS.”

Milliman memo

“The State assigns MnDHO-DD enrollees to one of six Rate Cell categories … Within the Rate Cell Categories, MnDHO-DD Medicaid rates have up to four main rate components:”

1. Acute care service rates;

2. “LTC” bundled service rates. These include home health aides, personal care assistants, and skilled nursing;

3. Various sorts of prescription drug coverage;

4. Stop-loss reinsurance to cover “catastrophic acute care costs” that may arise within the highest-risk enrollee population.

“Projection of expenditures”

“Costs under this project may not exceed costs that would have been incurred under fee-for-service.” … “Total costs of 2007 were $245,974. Total costs for 2008 are projected to be $269,770 … for a total increase of 5.8%”

The rate-setting process is described as one where the State sets rates using an “open cooperative contracting process” between DHS and the MCO participating in the MnDHO-DD program. DHS provides the MCO(s) participating in the program with “actuarilly sound rates” developed by the State in consultation with its actuaries. MCOs must pay for all services required by those in the population served from the contract payment provided by the State. The MCO must absorb any losses if costs exceed payments, although stop-loss reinsurance is part of the covered costs.”

In this report, rates were trended forward to the midpoint of 2008, using forecasting data provided by DHS.

“Administrative cost allowance calculations”

“Overall we assumed managed care savings of 5.5% and administration/profit of 5.5% for the 2008 contract year.”

“Medical cost/trend inflation”

Trends were affected by “a legislatively mandated cost-of-living adjustment (COLA)” for service rates in home and community based services.

Milliman rate certification letter

The document batch also contains Milliman’s actuarial certification letter for the MnDHO-DD program for the year 2008, authored by Eric P. Goetsch.