New report critical of HMO public health care contracting

August 22, 2012

Posted by Matt Ehling

The Greater Minnesota Health Care Coalition (GMHCC) has just released a white paper on HMO health care contracting entitled “Who Was Minding the Store?” The group will present its findings to the public during a Capitol press conference on August 23rd. GMHCC is a consumer advocacy organization that focuses on health care and other policy issues.

The GMHCC report examines the contracting and rate-setting practices used by the State of Minnesota to assign blocks of public funds to non-profit HMOs, with the expectation that those funds will be used to pay for public health care programs.

HMOs have administered these programs since the mid-1990s, when the State moved away from the “fee-for- service” model of directly reimbursing health care providers who served public program enrollees. Currently, HMOs reimburse providers out of the “capitated” blocks of money they receive through contracts with the Minnesota Department of Human Services (DHS). This contracting process had been routinized over the past two decades, but has recently undergone a series of changes in response to legislative and public pressure.

The GMHCC report criticizes past HMO contracting practices on several fronts. It alleges that for many years, HMOs were allowed to artificially inflate their rates, and were also allowed to retain too large a percentage of their capitated payments, due to the fact that their programs were not sufficiently audited. The GMHCC white paper raises pointed questions about whether HMOs were allowed to submit inaccurate reports, and whether a lack of detailed program oversight was intentional.

GMHCC believes that retroactive audits will be critical to answering such questions, and its report expressly calls for State agencies to use existing statutory powers to conduct such audits.

On a related note, DHS recently solicited proposals from actuarial vendors to conduct a retrospective review of health plan rate-setting, but the scope of the proposed review has been criticized by the Legislative Auditor, Senator John Marty, and others for being too narrow.

We will post the entire GMHCC report soon.