In 2023, the Minnesota legislature directed the Department of Human Services Health Care Finance commissioner to develop an implementation plan for the state’s Medicaid program, Medical Assistance, and Basic Health Plan, MinnesotaCare, for a direct provider payment model. The state has run a Medicaid managed care model for some populations since the 1980s. The commissioner must complete the implementation plan by early 2026.
The text of the law changed in 2024 to explore multiple care delivery and funding models, including public options like county-based purchasing plans and county-owned HMOs.
Minnesota Today
Implementing a direct payment model would significantly reverse both Minnesota’s Medicaid model and national trends. Minnesota today contracts with nine managed care organizations (MCO) – Hennepin Health, Itasca Medical Care, PrimeWest Health, South Country Health Alliance, Blue Cross Blue Shield, HealthPartners, Medica, UCare, and UnitedHealthcare Community Plan. All but UnitedHealthcare Community Plan are non-profits, though the state recently moved to disallow for-profit MCOs.
Initially, Medicaid operated on a fee-for-service model. States developed the managed care model to reduce costs, improve budget predictability, and eliminate some state risks. However, states also aimed to manage utilization and coordinate care because the fee-for-service model delivered a fragmented, uncoordinated care experience. Plus, states expected improved outcomes because they could build quality goals into the contract frameworks.
The transition to an MCO model is nearly complete. Nationally, 41 states and the District of Columbia leverage MCOs for some or all of the Medicaid population. Overall, MCOs manage 72% of Medicaid enrollees.
Why the Exploration?
Specific reasons the state has requested an implementation plan – not just a feasibility study – are scarce. The text of the bill may offer some clues:
- Costs – The legislature wants to explore the projected costs of each model. The state likely believes alternate models may prove to be more cost-effective.
- MCO Performance – Though not explicitly mentioned, the assumption is the state may be unhappy with the performance of its MCOs.
- More Oversight – The state may want more control over provider payments than in the managed care model.
- Improve Health Outcomes – One explicit reason for developing the implementation plan is to achieve better health outcomes.
The Implementation Plan
The law stipulates several items the commissioner must include in the implementation plan, including:
- A timeline for each payment model, sunsetting existing contracts, and for new county procurements when establishing a county-based purchasing plan or HMO;
- How enrollees transition to the new model to ensure care continuity;
- How the state measures the quality of healthcare delivery;
- What impact the model will have on provider payment rates;
- How care coordination will be orchestrated, especially among vulnerable populations;
- If the model requires additional funding for outreach and care coordination for patients unlikely to obtain needed care;
- The impact the transition will have on hospitals;
- The statutory changes for each model;
- A financial analysis to include the projected costs of each model compared to the existing managed care system, cost trends for the alternative model for county-based purchasing plans and HMOs, and the impact on revenue;
- Consider allowing individuals to opt out of managed care as an alternative approach;
- Assess any care gaps in the current programs;
- Evaluate other state’s approaches to care coordination under a fee-for-service model.
Will a Minnesota Medicaid Fee-for-Service Model Return?
The commissioner must submit the implementation plans to chairs and ranking minority members of the legislative committees with jurisdiction over healthcare finance and policy by January 15, 2026. In the interim, the commissioner will contract with entities for technical assistance in completing the request and related studies and analyses. They will also consult with the commissioners of health and commerce and the contractor(s) analyzing the Minnesota Health Plan.
Will the state go back to the future and return to a Minnesota Medicaid fee-for-service model? Time will tell, but the state is exploring that possibility.
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