HMO payments to be reduced by $277M this biennium
On the spreadsheet outlining the details of Minnesota’s $11 billion health and human services budget, “Managed Care Contracting Reform” is booked for a savings of $135 million in the current biennium. That amounts to more than 10 percent of the $1.2 billion in cuts agreed to by GOP legislative leaders and Gov. Mark Dayton’s administration.
So what exactly constitutes “Managed Care Contracting Reform?” It simply means delaying a $135 million payment to the state’s health plans by one month. In other words, it’s not actually saving the state a dime, but rather postponing part of the financial hit until the next biennium.
The health and human services sector is among the largest and most complicated pieces of the state budget signed into law by Dayton in July. Because the details were negotiated behind closed doors — and the bill was only available for vetting just hours prior to votes in the House and Senate — lobbyists and health-care providers have been sifting through the details of the nearly 300-page bill ever since.
Among some of the highlights:
• The bill reduces payments to relatives who work as personal care attendants for disabled individuals by 20 percent. This saves the state $24 million in the current biennium and $33 million in the next budget cycle.
• Individuals with disabilities will be enrolled in managed care plans rather than the current fee-for service programs. But they will be given the choice of opting-out of the change in coverage plans. It’s projected that roughly half of current enrollees would remain in a fee-for-service model. This change is expected to save the state $26 million in the current budget cycle and $41 million in the next biennium.
• Rebasing for hospitals and nursing homes will be repealed. These biennial bumps in payments have rarely been paid in recent years, but now will be completely eliminated. The change saves $106 million in the current biennium, but eliminates more than $600 million in anticipated spending for the 2014-15 cycle.
• Payments to the state’s HMOs will be reduced by $277 million. That figure will increase to $512 million in the next budget cycle. The projected savings are largely due to a new competitive bidding process put in place by the Dayton administration.
• UCare announced in March that it would return $30 million in funding to the state. That money is booked as a “donation.” Some health care experts worry that the federal government could seek half of that money. That’s because it was originally provided to UCare to pay for the state’s Medicaid program, half of which is paid for by the federal government.
• Childless adults who make over 200 percent of the federal poverty threshold will no longer be eligible for MinnesotaCare. Instead they’ll receive a voucher to seek coverage on the open market. The change affects roughly 8,000 individuals and will save the state $9 million in the current biennium.
• The Medical Education and Research Costs (MERC) grant program was cut by $25 million in the current biennium. Half of that funding is restored in the next budget cycle. The program helps pay for residencies and internships for fledgling medical professionals.
Perhaps the biggest surprise to emerge as health care officials scrutinized the bill is a change to the governance of some group homes for disabled adults. Under a provision of the bill, whenever a resident departs, that slot would not be allowed to be filled. Bruce Nelson, executive director of the Association of Residential Resources in Minnesota, says that he discovered the change while picking through the bill shortly after its passage. Because the Capitol had been locked down during the budget impasse, he hadn’t been aware of the language.
Nelson says it would have serious financial implications for his group’s members, which typically operate homes for four individuals. “You have to basically maintain the same staffing levels,” Nelson noted. “You have to keep paying your fixed costs with 75 percent of the money. It’s not going to take very long until you’re going to have to close your group home.”
Rep. Jim Abeler, R-Anoka, chair of the Health and Human Services Finance Committee, says he wasn’t aware of the provision and its financial implications. He’s asked the Department of Human Services to hold off on enforcing it until the matter can be scrutinized. “My view is that this thing should be held pending further review,” said Abeler. “It was nobody’s intention to cause harm to any of these providers.”
But the Department of Human Services insists that the extent of the policy change has been vastly exaggerated. According to Patrice Vick, a spokesperson for the agency, just 128 individuals would be affected by the change in the current biennium, saving $1.3 million.
“We’ve told counties not to rush to implement any of these provisions, and we will be getting language out to them,” said Vick. “It wasn’t as clearly written as it could have been.”
Other cuts affecting disabled individuals are much more straightforward. The 20 percent reduction in payments to relatives who work as personal care attendants is particularly troubling to disability advocates. Steve Larson, public policy director for The Arc of Minnesota, points out that such individuals typically only make $9 to $11 an hour currently. “The alternative, if someone can’t get the care they need, is going into a nursing home,” said Larson. “It’s just not good public policy.”
Larson’s also upset by the move to enroll disabled individuals in managed care plans. He argues that the proposal didn’t receive proper scrutiny.
Hospitals and nursing homes are also worried about the repeal of rebasing adjustments. These adjustments have been made every two years to reflect inflationary pressures and to take into account changes in the health-care-delivery system. Patti Cullen, president of Care Providers of Minnesota, points out that 16 percent of the nursing homes in the state stay afloat with operating margins of negative 5 percent or more. “That was a huge surprise to us,” Cullen said. “There had been no discussion of rebasing, no discussion of phasing that out.”
But Abeler insists that such carping is misguided. He points out that nursing homes and hospitals have almost never actually received the rebasing adjustments that are supposedly their due. He argues that eliminating it altogether is a more financially honest approach. “It’s a crock; it’s a hoax,” said Abeler. “The promise that that money was coming — you might as well wait for Santa Claus to drop in.”
Lawrence Massa, president of the Minnesota Hospital Association, doesn’t deny that this is the case. The last time hospitals received a rebasing adjustment was in 2007. That brought them up to 2002 payment levels. “They’ve put it off numerous times,” Massa said. “I think that’s certainly the debate that’s going on with my members: We haven’t gotten it, so did we really lose anything?”
Massa is also concerned about the reduced MERC funding. The program is particularly important in paying for residencies and internships for fledgling doctors at outstate hospitals that struggle to recruit medical professionals. “We’ve got to have a dialogue going forward about how we are going to pay for these kinds of costs,” Massa said. “That can be very problematic for rural Minnesota.”
Perhaps the biggest unknown in the HHS budget is how the $277 million cut in payments to health plans like Medica and HeathPartners will play out for front-line providers. The fear is that it will simply result in reduced payments for services. In other words, the health plans will simply pass the cost on to providers.
“It’s unclear whether they’ll pass them on across the board to all providers,” said David Renner, director of state and federal legislation for the Minnesota Medical Association. “Our assumption all along has been that a majority of those cuts will be passed on to providers and will put some of those clinics in financially hard spots.”
Health care officials are still trying to understand all of the ramifications of the bill. While most of the provisions were taken from earlier proposals put forth by Dayton and the Legislature, some were only adopted during the closed door negotiations on the final bill. That means most lobbyists and providers didn’t find out about them until they had already become law. “I really hope this doesn’t become standard operating procedure,” said Renner.