End-of-session-still-no-single-payer-blues

by JOEL ALBERS

So ends the 2008 legislative session and in the absence of any real progress in HC legislation, further damage to the health of Minnesotans will ensue as the crisis will only worsen. It will worsen by the governor/Legislature choosing to balance the (artificially induced, highly underestimated) budget deficit of $935 million (excludes inflation), on the backs of low-income people on public HC programs: specifically $355 million in cuts to social programs, half or $175 million of which will cut health care and human services. The remaining balance consists of $500 million (of $653 million) in state reserves, and closing loopholes on $140 million in tax credits Minnesota businesses that located abroad enjoyed—only the latter makes any sense. The specifics have not been spelled out, but there are four ways Pawlenty can ax people’s health care for medical assistance, general assistance, MNCare, which would be much like the $200 million in cuts from 2003 that persist today: increase co-pays, premiums; reduce eligibility (cut people off), decrease practitioner reimbursements, and (what should be illegal) lifting funds from the MNCare HC Access Fund (HCAF). I believe the HC Access Fund was spared, but the trade-off, as described above, is huge. 

A better way to balance the budget should be taking funds out of the huge HMO reserves, which was touched on briefly this session. For example, Blue Cross Blue Shield (BCBS) is sitting on $1 billion in reserves (much higher than required by law), and the other HMOs are similarly flush in reserves. The reason is HMOs have been very profitable businesses (see Office of Legislative auditor report, Feb 2008, Financial Mgmnt of HC Programs). 

The budget deficit notwithstanding, HMOs as nonprofits get huge tax breaks, and there needs to be an investigation similar to the attorney general investigation of HMOs from 2003 (which focused on CEO salaries, perks and consultant fees).

Shouldn’t HMOs as nonprofits return most of their profits to the state of MN? The HMO profit rate was on average 6 percent per year between 1997 and 2001 (Dept of HHS audit, Nov 2003), and between .7 percent and 4.9 percent since then (Office of Legislative Auditor). 

This translates to tens of millions of dollars each year and this net income holds even after subtracting administrative costs. What’s further deplorable is that when Metro. Health Plan HMO (MHP, the smallest HMO, with only 30,000 enrollees which Hennepin County contracts with for public HC programs) went below its reserve requirements, the taxpayers had to bail it out at a cost of $6 million. In other words, it’s OK to plunder public program reserves like the MNCare HCAF (or threaten to every year) that by law do not have reserve requirements, but when a private HMO (albeit funded by a county) goes slightly below the “legal” reserve requirements, the public has to bail it out. The reserve requirements are set artificially high as a barrier entry to the “market” so as to allow only the big oligopoly players to maintain itself.

Excessive HMO profits and reserves, mainly deriving from lucrative public programs, while these same programs will be cut by tens of millions of dollars and jeopardize the health of human beings, are an injustice. The health care crisis is not as visible to the public as a bridge collapse, yet its impact on morbidity and mortality is far greater. Further debate should focus squarely on HMO profits and reserves in addition to our usual focus on administrative costs of an imploding health care arrangement. Single-payer would solve all of this, but in the meantime tackling HMO profits and reserves and taking back Minnesota’s health care will reap progress along the way.