Why is health care a critical issue?

Minnesota is a national leader in health care. We have the lowest rate of uninsured
individuals, a high rate of employers offering insurance, and we have been rated
the first or second healthiest state in the nation the past four years by the
United Health Foundation. However, we are not insulated from staggering health
care costs and need to find solutions to this issue. Premiums continue to increase
at rates 3-4 times inflation, forcing employers to make significant changes to plan
design that shift more cost onto employees. The market is beginning to see some
companies dropping their health care programs altogether. This trend is occurring
disproportionately with small employers.

Government programs are experiencing the same cost pressures as the private
market, which puts additional pressure on taxpayers as the state struggles with
how to fund these programs with existing revenues. For example, in 2007 the
Legislature increased the state’s general fund by 9.6 percent for the 2008-2009
biennium. However, Health and Human Services, the portion of the general fund
that pays for Medical Assistance, received a 17.6 percent increase, little more
than keeping up with medical inflation. These data point to the fact that our current
health care system is unsustainable for everyone: employers, individuals, and
the state’s public safety net programs. Growth in Health and Human Services
spending, if left unchecked, will surpass K-12 as the largest part of the state
budget in fewer than five years. These costs are already crowding out
investments in other needed areas, including education and transportation.

While reform is critical, we must ensure that it fosters increased competition
and relies on private-market forces, rather than increasing our reliance on
state subsidized health care programs or moving toward a nationalized single
payer system. Businesses, public sector employers, and individuals need to
be able to purchase health insurance in a private, competitive and
well-informed marketplace, where insurance companies and providers
are incented to compete for consumer dollars.

What are Minnesota’s health care challenges?

Rising costs

Rising costs are making it increasingly difficult for both business owners and
employees and their families to afford health insurance. According to the
Minnesota Department of Health, total health spending in Minnesota in 2005
rose to $29.4 billion – up 18.5 percent in only two years. Health insurance
premiums rose by over 60 percent cumulatively from 1999 and 2005. Growth
in health care costs per person that are paid for by private insurance is still two
to three times higher than growth in per capita income and wages, and
over 5.5 times higher than inflation. This led to 7.6 percent growth in private
health insurance premiums in 2006. In addition, enrollee out-of-pocket costs
such as deductibles and co-payments accounted for an additional $562 per
person in 2006, a 15 percent increase over 2005. These out-of-pocket costs
as a share of total spending were 14.0 percent in 2006, up from 10.1
percent in 2000.

Aging population

As the baby boom generation ages, the age distribution of Minnesota’s population
is shifting upward. Between 2000 and 2030, Minnesota’s population age 60 or
older will more than double, accounting for more than one quarter (26 percent) of
the population in 2030. As people get older, their use of health care services
increases. According to the Minnesota Department of Health, hospitalization rates
increase dramatically beginning around age 55, while those 65 and older have
about twice as many physician visits per year than the population as a whole.

Transparency challenges

Most Minnesota households pay less than a third of the cost of health care directly
from their own pockets. The rest is paid by employers and government through
the use of tax dollars for public health programs, depressed increases in wages
or other benefits, and generally higher prices for products and services. In addition,
health care decisions are made by people who do not pay for those services. This
disconnect results in higher prices for everyone because the individual making the
choices has no idea how much a service costs, and therefore no incentive or ability
to choose cost-effective services.

Payment System Incentives

The health care system rewards quantity of services over quality of services with
economic disincentives to improve care, and with no accountability for results.
Providers are simply paid based on the number of procedures performed, not
on any outcome or improvement in health. In fact, bad outcomes often result in
increased revenue for providers. Investment is improperly concentrated on
high-margin procedures even as primary care capacity deteriorates.

What health care solutions does TwinWest advocate?

Reward Value, Not Volume

• Support plans and benefit designs that realign payment incentives to reward
  optimal  care, management of chronic conditions, and overall better health.

• Encourage health plans to contract with providers based on results and outcome
  measurements, and not just negotiated discounts.

Increase competition

• Eliminate policies that create disincentives for competition and innovation.

• Establish a private/public collaborative organization to review new technologies
  and report publicly on their relative value. This same process should be used to
  review all current and proposed state mandates, in order to ensure the
  examination is based on scientific evidence and overall balance of costs and
  benefits, and not on emotional anecdotes.

• Make available to consumers useful information on cost and quality related to
  specific health care services so they can make more informed decisions
  based on value. All stakeholders; providers, insurers, employers and the state
  should promote consumer use of this information.

• Remove regulatory barriers that add costs for all insurance companies and
  providers. These barriers make Minnesota unique relative to other states and
  make it difficult for smaller, national and new entrant insurance companies
  and providers to compete in Minnesota.

Control state imposed costs

• Any health care taxes should only be used for health care purposes.

• Existing state health care taxes that fall disproportionately on small employers,
  such as the MCHA assessment, premium tax, and the MA surcharge, should
  be reviewed and a more broad-based health care tax should be considered.
  The state should reevaluate the Minnesota Small Employer Health Benefit Act
  and continue to identify any improvements which will aid small businesses
  in making health care more affordable.

• Develop options to address catastrophic claims for small businesses.

• TwinWest opposes the expansion of state-subsidized health care systems
  such as the proposed statewide insurance and benefit purchasing pool for
  school employees

Improve Health Information Technology

• Support efforts for better use of technology to increase quality, including
  implementation of electronic medical records, and cooperative approaches
  to investing in new technology.

• Develop and implement a statewide IT protocol for computerized information
  sharing.

• Make personal health records portable and available for all Minnesotans.

Give more Information, Responsibility, and Choice to Consumers

• Reengage consumers in health care decision-making and give them the tools
  and choices to share both in the rewards of making healthy, cost effective choices
  and the risks and responsibilities for making unwise health care decisions.

• Expand product flexibility by allowing more options in co-payments, deductibles,
  cost sharing and rating, including consumer directed health plans such as health
  savings accounts and health reimbursement accounts.

• Support public and private market-based initiatives to provide performance-based
  information on price and quality to consumers and purchasers.

• Support product models that inform and incent employees to participate more
  actively in health care buying decisions.