Managed Health Care Demonstration Fails, Pt. I

Minnesota has a long history of managed health care. Some people refer to Minnesota as the “birthplace of managed care.” However true this may be, “Minnesota’s managed care programs have historically excluded people with disabilities under age 65,” according to Kathleen Schuler, Minnesota Disabilities Health Options coordinator at the Minnesota Department of Human Services (DHS). For the past five-plus years, the state of Minnesota has been trying to develop a program of managed care for people with disabilities. After countless meetings in various counties around the state and hundreds of thousands of dollars spent, the attempt has now been abandoned as unworkable. For now, the great majority of people with disabilities are served by Medical Assistance or Medicare, with a few people enrolled in a voluntary integrated care program. What happened?

On June 14th , 2000, the DHS held a meeting to discuss the attempt at managed care, and to look at the current state of health care options for people with disabilities in Minnesota. Here is the Access Press report on that meeting.

Recent History

A large majority of people with disabilities rely on public financing to pay for the costs of their health care. Many are eligible for Medicare, many rely on Medical Assistance (Medicaid), and some are eligible for both programs. Since 1985, the State of Minnesota has had in place a program called PMAP, or “Prepaid Medical Assistance Program,” which enrolls people on Medical Assistance (MA) or General Assistance Medical Care (GAMC) in a Health Maintenance Organization (HMO) or a Community Integrated Service Network (CISN). At the beginning of the PMAP program, people with disabilities in three counties – Hennepin, Dakota, and Itasca – were included in the program, but after one year, Blue Cross Blue Shield Minnesota, the program’s HMO, dropped out of the project when they found they were losing money. After 1985, the only publicly-financed health care option for people with disabilities in Minnesota was for people to arrange their own care with independent providers and have it paid for by Medical Assistance or Medicare. The rising cost of health care under this model, known as “fee for service,” or FFS, led the State of Minnesota in the early 1990s to begin thinking about alternatives.

To understand the motivation for the search for alternatives, it’s important to understand some of the numbers involved. While the Department of Human Services manages many programs throughout the state – from child support to food stamps to refugee assistance – Medical Assistance, the largest of the state’s three health care programs, accounts for a full 61 percent of the DHS budget. Currently, 8 percent of Minnesota’s population, or 366,000 people, are enrolled in the Medical Assistance program. While only 19 percent (68,000) of those enrolled are people with disabilities, this group represents 43 percent of the program’s expenditures.

In the early ’90s, as health care expenditures were escalating rapidly, the State revisited the idea of enrolling people with disabilities in managed care programs as a way of controlling costs. In 1994, planning began for what would be called the “Demonstration Project for People with Disabilities,” or DPPD. The idea was that, by enrolling people with disabilities in a few counties (called “implementation sites”) a model of a more efficient and functional “disability delivery system” would be demonstrated. So the DPPD began, with input from the State, from the counties involved, and from the people with disabilities who would be using the services.

What Went Wrong?

The two implementation sites included Olmsted county and Blue Earth, Sibley, and Freeborn counties conjoined together for another site. In late 1999 Olmsted County dropped out of the project. In March 2000 the remaining counties announced that they, too, were dropping out.

The June 14th DHS meeting, entitled “Integrated Care for People With Disabilities: Lessons Learned, Planning for the Future,” produced a myriad of theories as to the ultimate failure of the Demonstration Project for People with Disabilities. Some people mentioned a lack of clarity about the real goals of the project. During the course of the project, as potential problems were discussed or discovered, the goals and objectives of the project would be modified, leading some participants to think that the project did not have clear direction. One consumer who had been involved from the beginning stated that “People kept coming to meetings saying, ‘Why are we doing this? Why are we doing this?'”

Some community members who participated in the DPPD process had the impression that they were advising on a project that would end up being “the only game in town.” They believed that, although it was being called a “demonstration project,” it might end up actually being the prototype for the mandatory, universal program of the future. One advocate said, in explaining her reluctant participation in the consumers’ advisory group, that her thinking at the time was, “Maybe I want to do this so they don’t do it to us.” The widely-shared suspicion that the project was really a pilot that would eventually be extended to the whole state made the stakes considerably higher and the level of acceptable risk considerably lower. As one county worker said, “The idea of a mandatory managed care program scared the dickens out of some of our stakeholders!”

Suspicions that the process was intended to be more global than stated worked to highlight the sense of difference in needs and capacities between urban and rural counties. As one worker in a rural Southern Minnesota county plaintively stated, “We are not Hennepin County, and we will never be Hennepin County.”

State workers spoke of their responsibility for the overall provision of health care on the state-wide level. Counties spoke of their need for the autonomy that would free them to experiment in creative ways. These two needs seemed to many to be another source of conflict.

The areas of expertise of the county workers and the representatives of the managed care organizations were very different, which caused some communication failures when they would sit down together. “We have been managing care for years and years,” county workers would say, wondering if their experience was being valued and respected. HMO representatives wondered if the county workers had sufficient business experience to design a plan that could survive in the marketplace. They, too, wondered if their particular skills were being appreciated.

Several people pointed out that they thought the project may have been too ambitious. Some thought that the project was trying to anticipate every potential problem that might ever occur, which made the planning process “a very, very long road,” according to one participant. This suspicion was reinforced by Jim Verdier, policy analyst for Center for Health Care Strategies at Princeton University, who pointed out that other states have run into trouble by trying to “over-engineer” the development of similar projects. “Those systems,” says Verdier, “have met a ‘death by a thousand plans.'”

In addition to the lack of clearly-understood goals, rural/urban tensions, state/county tensions, differing areas and levels of expertise, and overly ambitious goals, some participants in the process wondered if there was something wrong with the very premise upon which the project was based. They questioned the whole idea of “managed care” for people with disabilities.

Why Managed Care?

According to Verdier, “Back in 1995-96-97, there was a burst of enthusiasm for risk-based managed care. The idea was that money could be saved.” During the late ’80s and early ’90s, promises of cost savings had already prompted the government to move millions of senior citizens from the traditional fee-for-service Medicare program into Medicare managed care systems.

Those earlier promises of cost savings now appear to have been overly optimistic, as indicated by last month’s announcement by the HMO industry that nearly 1 million, or almost one-sixth of the total, of elderly and disabled Medicare HMO enrollees are being dropped from their managed care plans and forced back into the traditional fee-for-service system. Karen M. Ignagni, president of the American Association of Health Plans, says that HMOs are pulling out of Medicare because they are “underpaid” by the federal government. Critics say that the plans’ early promises were unrealistic to begin with. For whatever reason, the promised cost savings are not as great as hoped, leading to disenchantment and finger pointing by both the government and the health plans. And the problem is not limited to Medicare HMOs. Verdier, who has done extensive research on managed care for people with disabilities throughout the United States, points out that, in recent years,”Commercial managed care organizations appear to be losing interest in Medicaid.”

“Let’s face it: ‘Managed care’ still has a bad name,” says Anne Henry of the Minnesota Disability Law Project. And it was clear in the course of the meeting that the bad reputation that health maintenance, or “managed care,” organizations have acquired over the years was a complicating factor in the DPPD process. Even Kathy Lamp of UCare Minnesota, a managed care organization which has been involved in the DPPD process, admitted that “[In the beginning] managed care was seen as part of the problem, not necessarily part of the solution.” But what became clear as the June 14th meeting went on is that different people have very different things in mind when they use the term “managed care.” As Pam Parker, Integrated Demonstrations coordinator at the Department of Human Services, put it, “There’s a whole spectrum of things that people mean when they say ‘managed care.'” The importance of this point was borne out in numerous subsequent interviews carried out by ACCESS PRESS.

The negative response to the term “managed care” likely comes from the widely-circulated stories in recent years telling about hard-hearted HMOs and their attempts to save money by depriving their members of needed health care. True or not, the public perception of the managed care system has declined as a result of the beating it has taken in the local and national media.

When many state and county officials use the term “managed care,” however, they are referring to something different entirely. They use the term in a more literal way, to designate a system in which all of the different components of “care” received by an individual are “managed” so as to be more efficient and effective. Their primary intention in using the term “managed care” is to contrast this new vision with the traditional confusing and fragmented fee-for-service health care system, which might be called “un-managed care” or “poorly-managed care.” In making this distinction, Verdier observes that “‘Care coordination’ may be a better term than ‘managed care.’ For most people, fee-for-service is very hard to navigate and coordinate, and that is the main benefit that managed care offers: care coordination.”

In addition to the classic capitated, risk-based, corporate HMO that has the (deserved or not) bad reputation among many citizens, there are other approaches to providing needed care coordination. One approach is a public Primary Care Case Management (PCCM) model, in which a physician or other agent agrees to “manage” the care being provided. Alternatively, a county or other public entity could simply agree to provide strong case management to enrolled beneficiaries. Minnesota also has a small number of self-determination (sometimes called “cash and counseling”) projects in place, in which an individual receives a pre-arranged sum of money from the government and is assisted in coordinating their own care package. All of these approaches could be referred to as “managed care,” although the differences among them are obvious.

Although the DPPD itself did not result in putting any programs in place, there were many positive comments about the June 14th meeting itself. Joel Ulland of the Multiple Sclerosis Society echoed the comments of many when he said “It was refreshing to have a meeting like that, with everyone in the room. I did come away thinking that it was handled pretty well.”

Now that the idea of a mandatory managed care approach to providing health care for people with disabilities in Minnesota has been set aside, at least for now, many advocates are wondering, “What’s next?” In next month’s Access Press we will look at the positive aspects of the DPPD experiment, some of the issues that are facing us, and prospects for the future.

Jeff Nygaard publishes a free weekly newsletter called Nygaard Notes. If you have comments on this article, or wish to subscribe to Nygaard Notes, contact Jeff at (E-Mail) or P.O. Box 14354, Minneapolis, MN 55414 (regular mail).