Health Care Math

Mark Dayton announced this morning that four major health care providers that receive state contracts would refund 2011 profits that exceed 1%. Sounds good to me, but the percentages don't mean much. What are the absolute dollar amounts?

Total amount of state contracted health care: About $3 billion

2010 profit rate on state contracts: 3.8%

2010 profit on state contracts, including investment income: About $150 million

Compared to a cap of 1% profit, about $30 million, this would be an $120 million refund assuming that 2011 profits are at the same rate. However, since 2010 was an up year for HMO's, the real savings may be smaller. Especially now that they've agreed to a cap in the next year, I'd guess. But if you were to project $120 million a year in refunds over the next biennium, this would represent over 4% of the total deficit.

UCare has already returned $30 million in profit and reserves to the state. The total amount held in reserve by Minnesota's non-profit health plans exceeds $2.5 billion, the highest it has been in years. In an environment where schools are asked to borrow against future revenue this cushion is not politically sustainable.

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