Health care providers weigh changes with new HHS budget

With a new state health and human services budget, it's clear that health plans, hospitals and providers will have less money to serve their patients with publicly-subsidized insurance.

What's unclear is how the budget substantially changes the way health care is delivered.

The legislation, signed into law a week ago, includes reforms that its sponsors hope will dramatically rein in costs, and improve the quality of care for people with state-subsidized insurance.

Republicans and Democrats disagree, as do providers and health plans, about whether these reforms are significant.

Republican architects of the budget say it's historic, not just for its spending reductions of nearly a billion dollars, but also for reforms that reward providers and health plans for improving the health of their clients.

In the health care portion of the HHS budget alone, Republicans say their cost-cutting reforms saved taxpayers 13 percent. One of the biggest changes they point out requires health plans to bid competitively to serve the Medical Assistance population. MA is Minnesota's version of Medicaid. This change was initiated by Gov. Mark Dayton early in the session, but the budget agreement with Republicans confirmed the policy as state law.

Another reform touted by the GOP is a 10 percent cut to providers who treat fee-for-service clients. These patients don't have the provider network restrictions that people in managed care plans do and are generally free to go to any doctor or hospital. But because payments are based per visit, providers have an incentive to administer care that could be unnecessary.

The 10 percent cut could seem harsh, but it's loaded with incentives designed to save the system money, said Jim Abeler, chair of the House Health and Human Services Finance Committee. For example, hospitals can earn back up to 5 percent of their losses from cuts, if they reduce their readmission rates and emergency room use.

"During the whole session I had talked about trying to reward providers who do the right amount of care, not those who do excessive care," Abeler said. "And I think the essence of a lot of that wound up in the bill which is really something. And to reduce the cost trend by 13 percent is something that should be a headline somewhere."

The reform efforts are supported by hospital officials relieved to have a way of earning back some of the money being withheld by the state. But they aren't so sure the fee-for-service incentives have as much potential as Republican lawmakers believe them to.

Providers will have to greatly alter the way they deliver care if they hope to reduce readmission rates and ER use, said Lawrence Massa, president of the Minnesota Hospital Association. Some hospitals won't have the resources to make those changes, he said.

"What it doesn't recognize is that it costs money for the hospital to put programs into place like care navigation or other kinds of care management systems that don't exist now, to save money on a program that's already paying you 20 percent less than your costs," Massa said. "So it's a bit of an unfair equation."

The pushback is not a surprise to Abeler. He's sympathetic to the plight of the providers for which adjustment may be difficult. But ultimately the reforms are about creating a better health care system for Minnesotans, he said.

Public program participants were largely spared in the budget. No one lost their insurance and about 100,000 additional Minnesotans are now covered when lawmakers agreed to continue the state's participation in the federal government's early Medicaid opt-in. Republicans strongly argued in opposition to the expanding the state's Medicaid commitment, that it was too expensive. But Dayton prevailed.

"We think that preserving that early MA enrollment and eligibility for people was actually a pretty large piece of this bill as well," said Scott Leitz, assistant commissioner for Health Care Administration at the Minnesota Department of Human Services.

Republicans don't view the Medicaid expansion as a reform for the health care system, and would instead tap the private insurance market as a more efficient use of health care dollars.

The GOP also passed a provision that moves about 8,000 childless adults who earn more than $22,000 annually off of MinnesotaCare. Instead, those program recipients will receive a contribution from the state that they can use to purchase private health insurance.

Some Democrats downplayed the significance of that provision, and said this voucher system won't sufficient for good coverage. Critics said the program will likely go away in a couple of years when states and the federal government health insurance exchanges are operating.

Insurers, however, welcome the change.

"I would say that that is definitely a reform of one of the public programs in Minnesota," said Julie Brunner, executive director of the Minnesota Council of Health Plans.

Brunner said Minnesota HMOs generally back reforms that encourage participants to make wiser health care decisions. Moving some MinnesotaCare recipients into the private insurance market will likely change the way those recipients access care, particularly if they have high deductibles - something they don't have on MinnesotaCare now.

Health plans are concerned the change will limit their ability to transform the health care system. In addition to requiring competitive bidding among the health plans, lawmakers capped their future rate increases.

HMOs will be pressured to control costs if rates are capped. But how will they transfer that pressure to program participants who have no obvious incentive not to use the hospital emergency room?

Locked out of the final budget discussions, Democrats said the extensive reach of the health and human services cuts will hold back the success of any of the legislation's reforms.

Reforms that pay providers less than they already make will likely force providers to recoup their unpaid costs elsewhere in the system, Said DFL Representative Tom Huntley of Duluth.

"You pay providers less, the MA costs will go down. The state budget will look good. But what happens to the providers?" Huntley said. "They either lose money or they have to raise their rates to everybody else. So, we've just transferred a state problem to the general cost of health care for everybody else."

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