How a Minnesota County Solved the Medicaid Expansion Problem

A pilot program in Hennepin County, Minn., is providing better and cheaper care to low-income childless adults.
by , | December 4, 2012 AT 1:00 PM

Earlier this year, officials in Hennepin County, Minnesota, became aware of a transient adult man who had visited a local emergency room 11 times over a 30-day period for minor aches and pains. He was a living, breathing manifestation of what often happens when low-income adults don’t have health coverage: they head to the hospital because they don’t know where else to go, using the most expensive type of care for what are really non-emergency health issues.

It’s a problem that has plagued the American health-care system for decades. But now, Hennepin County had a plan.

As part of a pilot project started in January 2012, the county sent out a case worker to meet with the man while he was still in the hospital. First, they got him enrolled in Medicaid, as his annual income was well below the $9,000 threshold to qualify for the pilot project, called Hennepin Health. Then they assigned him to a case manager, who took responsibility for connecting him with a primary-care doctor who could treat him for the minor health problems that had spurred his trips to the emergency room, as well as other public programs related to housing, mental health and employment that could help him. In the months since he was enrolled in the Hennepin Health plan, the man hasn’t returned to the emergency room once.

The man went along with the county’s plan with a shrug, saying he never knew that anyone cared where he got his health care. But they do. The Rand Corporation estimated in 2010 that hospital emergency rooms perform up to $4.4 billion in routine, non-emergency care every year. Overall uncompensated care sought at hospitals by the uninsured is estimated to approach $40 billion annually—and those costs are then passed onto taxpayers and consumers through bigger state payments to hospitals and higher insurance premiums.

So insuring more people and making sure they get care from primary-care providers when they can are seen as some of the most important avenues for reducing health-care costs in the United States. The Affordable Care Act’s 2014 Medicaid expansion, which will cover a whole new segment of low-income childless adults, solves the first half of that equation. But what about the second half? After all, these new enrollees are more likely to have chronic health problems and might need assistance to effectively navigate a health-care system that they’ve never been a part of.

Well, that’s exactly what Hennepin County is trying to address with its pilot program.

“I think there's enough money in the health-care system. That makes a lot of people here cringe,” says Jennifer DeCubellis, area director of the Hennepin County Human Services and Public Health Department, which is overseeing the project. “The problem is that we're not working well together, and we're not motivated to meet those cost goals.”

So here’s how Hennepin Health motivates everyone to keep costs down. Childless adults with incomes below 75 percent of the federal poverty line are eligible to participate. The program started with 5,000 participants and has grown to 10,000. Once they are enrolled, the Minnesota Medicaid office pays the county a per-member, per-month flat rate between $800 and $1,000, depending on age and health conditions. The county is then responsible for coordinating with health-care providers and social services programs (housing, mental health, etc.) to care for each person’s needs.

If the patient’s care for the month costs less than the state paid for it, the county and providers share in those savings. If the care costs more, the county and providers both have to absorb those costs. That way, everybody is motivated, as DeCubellis describes it, to provide the most cost-efficient care possible.

It’s almost identical to the accountable care organization (ACO) model that the Obama administration endorsed as part of the ACA. If everyone has something to gain (or lose) when it comes to quality—as opposed to the traditional fee-for-service model that rewards only quantity—you’ll see better coordination between providers and public entities and, hopefully, better outcomes for the patients. All for a lower cost. When Oregon policymakers were developing their landmark coordinated care reforms—which Gov. John Kitzhaber says will save the state $11 billion over 10 years and bear many similarities to ACO’s—they consulted DeCubellis and her team. The Commonwealth Fund, a private foundation focused on high-quality health care, highlighted the Hennepin Health experiment in a November report on what ACO’s could do for Medicaid as a whole.

The results are significant. For the costliest participants (the top 5 percent, which utilize 64 percent of the program’s funding), the county has reduced costs between 40 percent and 95 percent per individual through its case management. Using a model that anticipates 24 clinical visits plus monthly medications for the program’s population (which is more likely to have chemical dependencies, mental health needs and chronic pain), Hennepin County projects it will spend $3,571 per enrollee per year—compared to $138,000 if patients always sought care at the emergency room, as many had been.

Thanks to its savings from the first year of the two-year program, Hennepin County is establishing a new sobering center for the chemically dependent in 2013, as well as hiring more workers for hospital interventions and purchasing transitional housing units for the program’s homeless population.

That’s the idealistic vision of what Hennepin Health could become: a virtuous cycle in which savings from one year lead to investments (like the sobering center) that address the more fundamental problems—homelessness, unemployment, mental health, addiction, etc.—that contribute to higher health-care costs. Those investments could then lead to further savings and so on.

“The crisis we were seeing was these were folks whose lives were in crisis. No matter what we did to provide health care, we still needed to address basic needs,” DeCubellis says. “Now we can do that. It’s about getting upstream of problems and connecting with people. That is what we need to do to change the system.”

Saving money and improving care quality already make the program of interest to policymakers elsewhere. But as the debate about the ACA’s Medicaid expansion sharpens and states ask whether they can afford to do it, Hennepin Health could prove especially instructive. The population that the county is serving with the pilot (low-income childless adults) is what the bulk of the 20 million projected new Medicaid enrollees will look like. State policymakers are already looking for ways to take the program to other areas of the state as they gear up for the 2014 expansion. A 12-county consortium in southwest Minnesota is currently working on a joint-power agreement to implement a program based on the Hennepin Health model.

And the biggest argument against the Medicaid expansion is that the Medicaid system is already broken. As an official from Texas Gov. Rick Perry’s office, which underfunded its Medicaid program by $5 billion last year, told Governing in this month’s feature on the issue: “It’s like putting a thousand more people on the Titanic when you know it’s going to sink.”

But Minnesota officials hope that the Hennepin County experiment demonstrates that the system can be fixed. That’s why the state is onboard with the expansion at the same time it’s trying to take Hennepin Health statewide. An official analysis projected that Minnesota would save more than $110 million in the first three years if the ACO model was implemented more widely. To put that in perspective, the state is expected to spend $421 million in the next 10 years on the Medicaid expansion.

“Everybody agrees that we need to make the Medicaid program more cost-effective and get better health outcomes,” says Scott Leitz, Minnesota’s Medicaid director. “And this model recognizes that we need to move beyond acute care and toward integration. Regardless of where states are at in terms of moving forward on the expansion, things that actually improve the underlying system are things that every state should want to take a look at."