Minnesota Leaps Ahead in Health Care Reform

    

Minnesota’s newly enacted health care reform legislation, expected to save 12 percent of the state’s health costs while covering 12,000 more people, sets some important precedents that could influence other states and that should echo loudly in the halls of Congress when it takes up the issue next year.

     The culmination of 15 months of work by two bipartisan commissions, the reform measure was trimmed considerably to meet objections from Republican Governor Tim Pawlenty, who had appointed one of the panels. The biggest change made in the bill, after the governor vetoed an earlier version of it, is that the final version reduces the number of uninsured who would receive state-subsidized coverage.

      Still, the legislation promises to transform Minnesota health care in ways that could greatly improve preventive and chronic care. Among other things, the measure encourages the creation of primary-care-based “medical homes” to coordinate care for patients with chronic diseases, and it requires both the state and private insurers to pay care coordination fees to physicians. Today, in Minnesota and across most of the nation, primary-care doctors have little incentive to coordinate care, because they’re reimbursed only for office visits.

     Equally important, the Minnesota legislation enables physician groups to set their own prices for “baskets of care” for such chronic conditions as coronary artery and heart disease, diabetes, asthma, and depression. These prices have to be the same for all health plans and individuals. To prevent discrimination against sicker patients, the overall payments will be “risk-adjusted” to account for differences in the disease burden of each group’s patient population.

      Using published cost and quality data, consumers will now be able to choose among physician groups, rather than just insurance companies. This competitive approach is expected to encourage physicians to take better care of chronic-disease patients, who generate about 75 percent of health care spending.

     “There will be much more consumer involvement in choosing providers, based both on cost and quality, when they have a chronic disease,” notes State Senator Linda Berglin (DFL-Minneapolis), one of the bill’s sponsors. “So we think that the transparency piece will provide an incentive for providers to do a good job of taking care of people with these diseases. Because when they do, they can reduce their price,” thereby attracting more patients.

     The January 2008 report of Pawlenty’s Health Care Transformation Task Force, on which the legislation was based, recommended even broader changes. Aiming to cut Minnesota’s uninsured rate in half while reducing its health spending by 20 percent, the task force proposed that “provider groups and care systems…compete for patients by submitting bids on the total cost of care for a given population.” Insurance companies would still take overall financial risk, but wouldn’t negotiate prices or manage care.

     Despite the radical sound of this proposal, business, insurance, and medical leaders were all represented on the commission, and the medical establishment supported the resultant legislation.

    Gov. Pawlenty said he vetoed the initial bill partly because it required too much state money to expand coverage for the working poor. Earlier in the legislative process, he wanted to use some of the state’s Health Care Access Fund—which was to provide part of the money for the reforms—to close a $965 million budget gap. Derived from a tax on doctors and hospitals that Minnesota has levied since 1992, this money was supposed to be used to cover the uninsured. In the end, the governor settled for a $50 million loan from the Health Access Fund that is to be repaid out of the projected savings from the reform program.

     What the passage of this bill—and its approval by Gov. Pawlenty, who’s on the short list for Republican vice presidential candidates—shows is that the two parties can work together and make progress on health care reform. But, as Berglin notes, it was the business community that made Minnesota’s reform legislation possible. So, for this kind of reform to occur on a national level, business and consumer groups must put their shoulders to the wheel. If they do, no special interest will be able to stop the momentum of reform.

 

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