Democracy Under Assault
Minnesota’s experience is testament to the near impossibility of regulating private insurances, which ultimately gain control of the regulatory process. Some insurers have used "creative bookkeeping" to funnel excessive money to their reserves and executive profits. Note the following recent account by a member of the Greater Minnesota Health Care Coalition. It should raise red flags among those of us considering health care reform in Colorado.
Minnesota requires HMOs to be not-for-profit, and has a statute outlining the public purpose that would justify the non-profit, tax-exempt status. It includes things like providing better access and quality than would otherwise be available, and having reasonable expenses and reserves.
However, in many ways this is a sham. You could even say that insurance rates keep going up in Minnesota precisely because the HMOs are "non-profit" in name only, and do not pursue a public purpose mission. In other words, they act essentially like for-profit HMOs (with the exception of directly shelling out dividends to private investors.)
Some points are:
1) The HMOs have become expert at feeding at the public trough: They have most of the state's low income health care program enrollments, and these privatized programs waste about $170 million a year in excessive overhead, about half of which is pure net revenue (i.e. profit). They also have huge executive salaries. They make more profit off of the public programs than they do off of the commercial products which they sell to the public.
2) Enrollees of the public programs suffer poor access in some ways -- especially dentists, since the HMOs pay dentists too little to get many to participate. Health care providers in general are not treated well, in the usual manner of managed care micro-managing and resisting/refusing/delaying approvals and payments.
3) One of the largest HMOs, Medica, actually contracts out most of its administrative work to its former parent company, United Health (the huge for-profit insurance corporation, also based in Minnesota)-- on a no-bid sweetheart deal at twice what it should cost. So, public dollars are being funneled over to true private profit.
4) The HMOs claim to have low administrative cost -- about 10%, and even as low as 5% for the public programs. But, this is the result of Enron-style bookkeeping, in which many administrative expenses are simply labeled as direct medical care instead. The state Attorney General did some audits, and found that the true admin expense of Medica is 19%. The HMOs vilified the results, and the legislature and media did not take these audit results seriously.
5) The fiction of efficiency, however, is maintained by the fact that the state regulatory agencies have a cozy relationship with the HMOs, and rubber-stamp the information that the HMOs give them. Our organization has made progress in challenging this, and we won approval for a Legislative Auditor investigation, now underway, to examine the problem of the state agencies not doing their proper financial oversight. The state Health Dept. also has the duty of seeing to it that the HMOs live up to their non-profit mission, but it is deliberately asleep at the switch on this.
6) The legislature had a cap on how large an HMOs' financial reserves can be before it must return premiums and/or pay for more benefits. In 2004, the HMOs quietly got this upper limit completely removed. That means that they can take in their capitated, flat-amount-per-person payments; pay out as little as they can for actual care; and keep the rest for their coffers. A large reason to do so is to build war chests to buy out other plans, and to directly purchase clinics and hospitals, and expand their empires and their power. The Attorney General's audit on Blue Cross showed that the financial reserves are much larger than what Blue Cross reports to the state. The AG said that this violates the statutory non-profit requirement to have "reasonable" reserves, and called for re-instating the upper limit.
7) GMHCC's efforts for single-payer are closely tied to our efforts to remove the HMOs from running the state's low income programs, and our efforts to expose the HMOs' true wastefulness and financial inefficiency -- despite the supposed "protection" of their being officially not-for-profit.
We oppose a California-style "single payer" bill that would allow HMOs to still exist as intermediaries between the state and the payment of health care providers, since this would simply expand the wasteful, private-revenue, anti-public purpose role that the HMOs currently play in Minnesota in regard to the low income programs.
All of this speaks to the question of how to achieve meaningful health care reform, in light of the fact that two of the largest monied lobbies - insurance and pharmaceutical - wield so much influence with legislators, and are writing policy to benefit their bottom lines with billions of dollars of profit and subsidies, as occurred with Medicare prescription drug reform in 2003. The only redress to the overhead costs and administrative waste of the current fragmented multi-private insurance system is the single payer health insurance proposal.