There is a debate going on in Minnesota over the statewide implementation of the Prepaid Medical Assistance Program or PMAP, the state’s name for its managed-care Medicaid program.
Working with bipartisan support from the state legislature earlier this year, counties in Minnesota hoped to delay expansion of PMAP for one year in each of the state’s 87 counties, because of concerns over cost-shifting and other issues.
Sixteen of Minnesota’s 87 counties already participate in PMAP, for the population eligible for financial assistance under the Aid to Families With Dependent Children (AFDC). They are: Hennepin, Ramsey, Dakota, Anoka, Washington, Carver, Scott, Itasca, St. Louis, Carlton, Cook, Lake, Koochiching, Sherburne, Benton and Stearns.
Other counties wanted to delay implementing managed care so they could have time to work with consumers, the state and providers to design a local solution to ensure availability of health services. Counties say there has not been adequate time to develop local care systems or provider networks.
After a veto by Republican Governor Arne Carlson, the legislature modified the Omnibus Health and Human Services bill that now allows implementation of PMAP to continue across the state. Carlson has said a delay would only cost the state “millions of dollars.”
But the Association of Minnesota Counties (AMC) is concerned that statewide implementation now could only cost counties more. “Minnesota counties are concerned that county government will be faced with increasing costs and demands for services if a health plan does not provide needed services,” said Lois McCarron, policy analyst for the AMC.
In the 16 counties that operate under the PMAP program, costs have been reduced by about 10 percent over traditional fee-for-service health care costs, according to the state Department of Human Services and the Minnesota HMO Council.
But that figure is disputed by counties and others.
The equation is skewed because hard-to-measure items such as cost-shifting and quality of service are not figured into the equation, McCarron said.
Although Hennepin, Dakota and Itasca counties have been involved in managed care since the early 1980s, McCarron said AMC did not begin to notice the effect of cost-shifting in the program until 1993, when Ramsey County came on board.
That was due, she said, to the trend in recent years to expand coverage by Medical Assistance (Medicaid) for certain social services, such as community-based mental health services and government functions such as advocacy.
Another aspect of the just-passed legislation would partially address the cost-shifting issue. County public health and social services administrative costs funded by the Medical Assistance fee-for-service reimbursement would be identified for exclusion from the prepaid plan capitation rates, which are now paid to health plans (or managed care organizations).
Cost-shifting is one of the reasons why the AMC tried earlier this year to delay an expansion of the program to the rest of the state’s counties.
“We are concerned about cost-shifting to county government under the current PMAP,” McCarron said.
The potential for and impact of cost-shifting is hard to define. For example, Medical Assistance may have paid for 10 home-care or mental health visits, but if a health plan determines only two visits could be paid for — who pays for additional services that may still be necessary?
The counties say under PMAP, “there is evidence that costs are being shifted to local property taxes. There is also an increasing concentration of the marketplace and a great need and interest in the development of local provider networks.”
Other concerns with the program, according to the AMC, include statewide, centralized control of the provider networks, an uncertain short-term savings and long-term financial impact.
Minnesota counties currently purchase various health and human services with county property tax revenues, contributing one-third or more of the public funding for some of the target populations and programs.
As an agent of the state, Minnesota counties also purchase health and human services on behalf of the state and federal government.
But the AMC says that some state purchasing is resulting in “centralized decisions and contracts with a limited number of statewide health plans.” The association says this purchasing approach “diminishes competition, consumer choice and responsiveness to our local communities and will lead to increased costs.”
“Decisions about our health system affect our local economies and our quality of life,” said Hennepin County Board Chair Peter McLaughlin, who is also first vice president of AMC. “It is essential that consumers and taxpayers participate locally in making these decisions.”
Counties in Minnesota want to establish county-based joint purchasing projects.
McCarron said counties would like to try some demonstration projects that would combine state and county purchasing efforts and use competition at the local level to get the best deals.
The state, on the other hand, is concerned that further delays in expanding the managed-care program now will end up costing more money later.
The AMC is trying to get the word out to counties that, under the recently passed legislation, they have the option to work with the state on developing a mutually agreed timetable that would give the county the opportunity to promote the development of local provider networks. A county can propose a county-based joint purchasing plan or a demonstration project, including the option for direct contracting.
Carlson has said he vetoed the bill because it locked in inefficiencies and higher costs and because it delayed the state’s move into a total managed-care system. “The costs of reversing these reforms could well approach the hundreds of millions of dollars, lost over the next several years,” he told a local newspaper.
This statement was disputed on the House floor since there was no fiscal note to support these figures.
Carlson said the state can get the best deals by pooling recipients from every county, prompting price competition from health-care providers. “We cannot give a blank check to local governments to run our public health care system and expect efficiency,” he said.
That statement was also disputed. An AMC proposal would have limited county-based purchasing to the same capitated amount that the state would have spent. Recommendations for intergovernmental risk and accountability were required as recommendations for the next legislative session in 1997.
The governor wasn’t the only one to oppose delaying implementation of managed care. The Minnesota HMO Council did as well.
“We don’t think the counties are going to be able to manage the money as well as the health plans,” a spokesman for the group said. “The private sector has been highly successful.”
Meanwhile, counties in Minnesota are regrouping, planning for next year’s legislative session. Their goals include facilitating development of local provider networks and continuing development of county-based purchasing models.
David Rooney, community services director for Dakota County, said a seven-county metro group is studying “the role, risks, benefits, and downsides” of counties as contract purchasers of health care.
“We have no problem with managed care,” he said. “What we’re against is the state as purchaser .... The state scenario was true when there was a lot of competition.”
Rooney pointed out that it’s even more important for rural areas to develop local provider networks. “When health care organizations take over, that can cause people to travel 30 or 60 miles away,” he said.
That can lead to a “Wal-Martization” of a community. When local providers lose those patients, he noted, they might shut down their businesses. Other local businesses might suffer if the patient decides to shop for goods outside of the area, endangering the economic livelihood of the area, he said. “This is the equivalent of the loss of family farms.”
The AMC is forging ahead. “County officials are disappointed that the governor vetoed the legislation,” said Kevin Kelleher, president of the AMC. “But Minnesota counties are committed to continuing the efforts to develop long-term solutions for health system reform. We will continue to work with state government, the legislature, providers, consumers, unions and businesses to achieve our shared goals.”