Minnesota counties, facing the statewide expansion of Medicaid managed care, want to do in the public sector what a leading group of employers in the state, the Buyers Health Care Action Group (BHCAG), is doing in the private market: direct-contract with local provider groups. BHCAG has been shaking up the Minnesota marketplace with its strategy of direct-contracting with integrated provider groups to provide coverage to employees. Counties believe that, while the populations they serve are very different from the employees of Fortune 500 companies served by BHCAG, the direct-contracting model offers some solutions to quandaries they face under expanding Medicaid managed care. Among these concerns are reducing cost-shifting, ensuring quality, increasing flexibility in funding services and having more local control. "For those who see the BHCAG strategy as a bid to dis-integrate’ HMOs, this initiative is seen as a public sector variation on the theme," says Allan Baumgarten, a consultant who publishes an annual managed care review on Minnesota. Counties will be going to legislators in the upcoming session to win the right to direct-contract with providers or do county-based purchasing of health services for their medical assistance and general assistance populations. Last year, after heated debate, the legislature approved a proposal by the counties to direct-contract with providers, but the bill was vetoed by the governor. The Association of Minnesota Counties has since hammered out an agreement on the issue with the Minnesota Department of Human Services and the Minnesota Department of Health. The agreement not only provides for county-based purchasing, but, also, for greater participation by counties in the state’s purchasing process. Jim Chase, director of purchasing and service delivery with the state Department of Human Services, says that counties, as the providers of last resort, are very concerned that if the state doesn’t manage its program well, cost-shifting problems will result in higher property taxes for them. If a county wants to assume the risk, all the money for its population will be passed over to it, but the state will need to ensure that the risk-bearing by the provider network meets legal requirements and that the arrangements do not jeopardize the infrastructure in other areas of the state, Mr. Chase says. HMOs would not be interested in covering 500 people in one area of the state, for example, if the whole surrounding area was covered by a provider network set up by a county, Mr. Chase explains. For those counties that do not want to do county-based purchasing, "we’ve agreed they should have an enhanced role in the current purchasing process," Mr. Chase says. One official says counties would have more authority in deciding which health plans get contracts. If the state does not follow a county’s recommendation, it would have to explain its reasons for doing so. There also is a mechanism for dispute resolution between the state and counties. Mr. Chase believes that, ultimately, the state and counties may develop one model of purchasing that will work statewide. Lois McCarron, policy analyst for the Association of Minnesota Counties, estimates that about half of the counties are considering county-based purchasing. She and other county officials have been in close contact with the employer group BHCAG to learn more about its experience with direct-contracting. Some counties are considering joining the group, she adds. (The state’s Department of Employee Relations joined the group more than a year ago.) To what extent counties exercise their option for county-based purchasing would depend on what rates the state pays and what money is available for disproportionate share payments, Ms. McCarron says. While many issues remain about the capacity of counties to assume risk for covering their populations, Ms. McCarron notes that counties in the state Medicaid managed care program are at risk anyway because of problems with cost-shifting by managed care plans. Reinsurance arrangements could help counties safely assume that risk, she says. Daniel McLaughlin, director of health policy for Hennepin County, says one feature of the BHCAG model that appeals to counties is the "clear accountability." (In the interest of better accountability and enhanced health care competition, BHCAG requires that providers join only one of the provider networks offering coverage to BHCAG employees.) Mr. McLaughlin says counties want accountability for population-based health measures such as immunization, violence, school readiness, etc. which is difficult when there are "overlapping HMO networks." With counties getting all the dollars for public programs, they would have more flexibility in how they provided substance abuse, mental health and home health services, he says. The biggest risk for counties, says Mr. McLaughlin, is actually the state’s rate-setting process for managed care. The state has appointed a task force that is now examining rate-setting for managed care and will be making recommendations. Mr. McLaughlin says counties support an independent rate-setting commission to take the process "out of the black box." Rob Fulton, director of public health for Ramsey County, says his county is "studying like mad" the proposals for direct-contracting and county-based purchasing. But, he says greater leverage for counties in the state purchasing process may work to address concerns. Falling between the cracks While Mr. Fulton believes managed care often works well in Minnesota for the public assistance population, he has some concerns. Those concerns include tuberculosis treatment under managed care and the lack of coverage for services that are not viewed as medically necessary, such as parenting programs for families at high risk for child abuse as well as public health home visits. Children’s mental health services also often fall between the cracks he says. Since counties are essentially at risk for their disabled populations in a managed care environment, Mr. Fulton says they are looking at delivering services for the non-disabled population as well to get "the whole pot of dollars and spread the risk." If the proposed legislation is passed, counties that want to do county-based purchasing would have to submit a preliminary proposal to the state by September 1997. Final proposals must be submitted by July 1998, and enrollment must begin no later than January 1999. The state has about 182,000 general assistance and medical assistance recipients in managed care. Over the next three years, the state hopes to have 325,000 people enrolled in managed care, according to Mr. Chase. When the disabled are brought in, the total would reach 479,000. Contact Mr. McLaughlin at 612-348-5856; Mr. Chase 612-215-0125; Ms. McCarron 612-224-3344; or Mr. Baumgarten 612-925-9121.