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Department of Human Services claims it saved $175 million through competitive bidding for state-funded insurance programs.

Critics question merits of HMO bidding process

“We were actually quite pleased with the results of the bidding,” said Scott Leitz, assistant commissioner for health care. (Staff photo: Peter Bartz-Gallagher)

DHS claims it saved $175 million through competitive bidding for state-funded insurance programs

Officials with the Department of Human Services are portraying the introduction of competitive bidding in awarding contracts to provide state-funded insurance for low-income families in the Twin Cities as a significant cost-saving achievement. They estimate that the proposal will reduce anticipated costs by $175 million for providing coverage to roughly 270,000 individuals in the seven-county metro area.

“We were actually quite pleased with the results of the bidding,” said Scott Leitz, assistant commissioner for health care, during a Monday hearing before the House Health and Human Services Finance Committee. “It had a substantial monetary impact to the state.”

Leitz further stated that there are plans to look at rolling out the competitive bidding initiative across the state. “What we are committed to is examining each of those opportunities to see whether or not it is an area that makes sense to have a competitive bid process,” he said. “There may be areas of the state where the population simply isn’t large enough. … We think this was a good first round of it, but I think, as with anything, it can always be improved moving forward.”

But Monday’s hearing also raised questions about changes in health care delivery driven by the competitive bidding process and lingering questions about the transparency and accountability of the state’s health maintenance organizations. Under the new contracts, roughly 78,000 individuals will have their coverage switched to different health plans at the start of 2012.

Rep. Nora Slawik, DFL-Maplewood, questioned what will happen to children with autism who receive intensive treatment through a program that is only covered by Blue Plus if that plan is no longer available in their county. In Slawik’s district, specifically, Ramsey County residents will have access to coverage through Blue Plus, while Washington County residents will not. “When we make policies that are [intended] to save money, we have to look at the unintended consequences,” Slawik said. “And in this one, there might be kind of a big unintended consequence.”

Leitz said that the agency is committed to working out any problems on a case-by-case basis. “I don’t want to leave the impression that moving 78,000 people is going to be an easy thing,” Leitz said. “It’s not. There will be some disruption along the way.”

But other testifiers raised more fundamental questions about the competitive bidding process. Dave Feinwachs, former general counsel for the Minnesota Hospital Association and a persistent critic of the health plans, questioned why all four main health plans continue to receive state contracts. The only health plan that was eliminated through the competitive bidding process was the Metropolitan Health Plan, which is run by Hennepin County and has fewer than 20,000 enrollees. The state’s largest providers — Blue Plus, Medica, HealthPartners and UCare — all received contracts. “We started out before competitive bidding with essentially four health plans,” Feinwachs said. “And after competitive bidding, we have essentially four health plans.”

Other testifiers also raised longstanding questions about the accountability and transparency of the state’s health plans, which are slated to receive roughly $4 billion in state funds this year. During the 2011 legislative session, at least a dozen proposals designed to increase scrutiny were introduced by legislators. But none of the bills even received a committee hearing.

Dominic Sposeto, a lobbyist for the Minnesota Dental Association, pointed out that dentists are reimbursed only 28 to 30 cents for every dollar of coverage that they provide to individuals in the state-funded program. “We’re the 49th lowest reimbursement in the country,” Sposeto said. “That’s one reason why we have a dental access problem. My concern is, how is this going to be affected by cutting another $175 million out of an already sparse budget for dental care services?”

Sposeto argued that providers don’t have any idea how much the state is actually paying for dental care and whether they’re getting their fair share. “We do not have that information,” he said. “I think the number one problem to any redesign of the dental portion of the delivery system is to get the data.”

Legislators indicated that they continue to be troubled by questions about whether the health plans are spending state dollars efficiently. “The one thing that I think is missing for us in a major way is any way for us as policymakers … to be able to evaluate the money that we’re spending and the way it makes its way through the process to the providers,” said Rep. Erin Murphy, DFL-St. Paul. “We appropriate money, a budget’s set, and then we hear back from providers that they’re being underpaid. And somewhere in there is a whole lot of money.”

Rep. Larry Hosch, DFL-St. Joseph, expressed frustration that there were no hearings on legislation that he and others introduced during the 2011 session. “I’m wondering if we’re going to actually have hearings on some of these ideas and different ways that we can implement some oversight or transparency,” Hosch said, “or if we’re just going to keep expressing our frustrations and not having a discussion further than we had today.”

Rep. Steve Gottwalt, R-St. Cloud, who chairs the Health and Human Services Reform Committee, indicated that he’s open to hearings on the topic. “We share the frustration about the lack of transparency,” Gottwalt said. “I’m open to any proposals that would allow greater transparency in that area.”

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