Health Care Reform: Minnesota and the Nation

Julie SonierDirector, Health Economics ProgramMinnesota Department of Health

September 22, 2009

Objectives

How are health reforms in Minnesota similar to and different from national efforts?

Describe Minnesota’s recent reform activities and goals

Minnesota starts from a reasonably good place

Insurance coverage:– Among the nation’s lowest uninsurance rates

• Strong employer base– MinnesotaCare subsidized insurance program

(since 1992, pre-SCHIP)• Subsidized coverage for parents and kids

to 275% FPG• Single adults and childless couples to

250% FPG (effective July 2009)

Minnesota starts from a reasonably good place

Consistently ranked as one of the healthiest states

History of collaboration and innovation to improve health care– Largely non-profit environment– Collaboration around best practices,

quality measurement

The Context for Health Reform Discussions in Minnesota

In spite of our relatively good starting point:– Rising health care costs in the state are

unsustainable– Our health care system has misaligned

incentives• Large variations in quality – inversely related to cost• We pay for volume, not value

– Private insurance has eroded, and the number of uninsured has increased

– Unhealthy behaviors have created high and rising costs of preventable disease

Similar problems exist at the national level

Total health care spending in Minnesota up nearly 70% between 2000 and 2007

$19.2$21.0

$23.1$25.8 $26.9

$28.7$30.7

$32.5

$0

$5

$10

$15

$20

$25

$30

$35

2000 2001 2002 2003 2004 2005 2006 2007

Bill

ion

s

Source: Minnesota Department of Health, Health Economics Program

Health insurance cost growth far exceeds growth in incomes and wages

0%10%20%30%40%50%60%70%80%90%

100%

2000 2001 2002 2003 2004 2005 2006 2007

Cum

ulat

ive

perc

ent

chan

ge

Health care cost MN Economy Per capita income Inflation Wages

Note: Health care cost is MN privately insured spending on health care services per person, and does not include enrollee out of pocket spending for deductibles, copayments/coinsurance, and services not covered by insurance..

Sources: Minnesota Department of Health, Health Economics Program; U.S. Department of Commerce, Bureau of Economic Analysis; U.S. Bureau of Labor Statistics, Minnesota Department of Employment and Economic Development

Historical Perspective: Health Care Spending Growth is Not a New Problem

Average annual growth in U.S. health care spending, adjusted for inflation

7.6%

5.6%6.4%

4.4% 4.7%

5.8%

3.3%2.3%

3.3%3.2%3.2%4.2%

0%1%2%3%4%5%6%7%8%

1960-1970 1970-1980 1980-1990 1990-2000 2000-2007 1960-2007

Health care GDP

U.S. Health Care Spending as a Share of Gross Domestic Product

5.2%7.2%

9.1%

12.3%13.8%

16.2%18.2%

20.3%

0%

5%

10%

15%

20%

25%

1960 1970 1980 1990 2000 2007 2013* 2018*

*Projected. Source: Centers for Medicare and Medicaid Services. Historical spending estimates as of January 2009; projections as of February 2009.

Misaligned Incentives: Higher Payment for Lower Quality

Minnesota Diabetes Care:Improving but only 1 in 7 receive optimal care

Source: MN Community Measurement Health Care Quality Report

Percent of diabetics receiving optimal diabetes care

4% 6% 10% 14%

0%

10%

20%

30%

40%50%

60%

70%

80%

90%

100%

2004 2005 2006 2007

Sources of Insurance Coverage in Minnesota, 2001 and 2007

62.5%*68.0%

5.1%4.8%

25.2%*21.1%

7.2%*6.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2007

Group Individual Public UninsuredSource: Minnesota Health Access Surveys, 2001 and 2007

Minnesota Uninsurance Rates by Income

15.2%13.6%

7.2%

3.6%

2.0%

6.1%

20.0%

9.3%

4.8%

7.7%

12.6%

4.1%

2.2%2.0%

14.1%

12.6%

7.2%

17.9%

0%

5%

10%

15%

20%

25%

<100% 101 to 200% 201 to 300% 301 to 400% >400% All incomes

Income as % of Federal Poverty Guidelines

2001 2004 2007

Source: Minnesota Health Access Surveys, 2001 to 2007

Minnesota Uninsurance Rates by Age

4.2%

14.5%

10.4%

5.9%

2.8%

6.1%7.0%

4.6%

13.2%

0.3%

6.6%

19.0%

6.6%

4.1%

7.2%

0.6%

4.9%

7.7%

4.3%

7.3%

19.8%

0.1%

11.5%

4.8%

0%

5%

10%

15%

20%

25%

0 to 5 6 to 17 18 to 24 25 to 34 35 to 54 55 to 64 65+ All ages

2001 2004 2007

Source: Minnesota Health Access Surveys, 2001 to 2007

Minnesota Uninsurance Rates by Race and Ethnicity

5.0%

17.0%

6.1%

22.0%

10.1%

31.0%

23.8%

7.8%

18.7%

7.7%

14.0%

6.2% 7.2%

19.0%

6.3%

16.0%14.7%

6.4%

0%

5%

10%

15%

20%

25%

30%

35%

White Black AmericanIndian

Asian Hispanic/Latino All

2001 2004 2007

Source: Minnesota Health Access Surveys, 2001 to 2007

Trends in Overweight/Obesity in Minnesota

0%

10%

20%

30%

40%

50%

60%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Normal Weight

Overweight

Obese

Source: Behavioral Risk Factor Surveillance Survey

Obesity Trends* Among U.S. AdultsBRFSS, 1990

No Data <10% 10%–14%

(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

Obesity Trends* Among U.S. AdultsBRFSS, 1994

No Data <10% 10%–14% 15%–19%

(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

Obesity Trends* Among U.S. AdultsBRFSS, 1998

No Data <10% 10%–14% 15%–19% ≥20

(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

Obesity Trends* Among U.S. AdultsBRFSS, 2004

No Data <10% 10%–14% 15%–19% 20%–24% ≥25%

(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

Impact of Rising Obesity on Health Care Costs

Increasing prevalence Widening gap between health care spending for

obese vs normal weight population One national study found that obesity-related health

spending accounted for 27% of inflation-adjusted per capita health spending increases from 1987 to 2001– 41% of the rise in heart disease spending– 38% of the rise in diabetes-related spending

Source: Thorpe et al., “The Impact of Obesity on Rising Medical Spending,” Health Affairs, October 2004.

Public and Private Cost Pressures

Cost of private coverage rising faster than incomes, inflation– Likely a contributing factor to recent erosion in private

insurance coverage Public programs face dual sources of cost pressure:

– Rising enrollment– Rising cost per person

So, in addition to cost and access problems, we have a sustainability problem

Which problem to address first?

Approaches to Health Reform

Massachusetts approach: address coverage first, cost later

Minnesota: expanded coverage too, but greater focus on reforms that improve quality/cost to ensure sustainability

National debate: mostly focusing on coverage

2007-2008 Minnesota Health Reform Plans

Health Care Transformation Task Force (Governor appointed)– Charge from legislature included reducing health

care expenditures by 20% Health Care Access Commission

(Legislative)Both reports included recommendations for

comprehensive reform, with much common ground

Overview of Health Reform Bill Key Elements

Public health improvementHealth care coverage/affordabilityChronic care management Payment reform and price/quality

transparency Administrative efficiencyHealth care cost measurement

Public Health Improvement

Invests in community-based efforts to reduce rates of obesity and tobacco use

Builds on current CDC-funded pilots Total of $47 million in grants to

communities

Health Care Coverage and Affordability

Expanded eligibility for MinnesotaCare for adults without children to 250% of the poverty level– Outreach efforts, streamlined enrollment

Tax credits for uninsured to purchase private coverage

Employers with more than 10 employees required to establish “section 125” plans if they don’t offer health insurance coverage to employees

Payment Reform: Why Is It Needed?

Current system: based on individual services– Few incentives for prevention, care

coordination/management, quality improvement, innovation, or value

– Few consumer incentives to choose provider based on quality or cost

– Limited information on price and quality of care– Provider incentives to invest in profitable services

and to avoid unprofitable services

Payment Reform: Chronic Care Management

Promotes use of “health care homes” to coordinate care for people with complex/chronic conditions

MDH and DHS to develop standards of certification for health care homes

Care coordination payments to health care homes– Public and private purchasers, beginning

July 2010

Other Payment Reforms and Price/Quality Transparency

Establish a set of common quality measures and incentive payments for quality

“Peer grouping” of providers on relative cost, quality, and resource use– Public and private purchasers will use this

tool to strengthen member incentives to use high-quality, low-cost providers

Promotes transparency and innovation by establishing bundled pricing for 7 commonly defined “baskets of care”

Administrative Simplification

Health care providers must have electronic health records by 2015, and they must be interoperable

Electronic prescribing by 2011 Study of ways to reducing claims

adjudication costs for health plans and providers

Concluding Thoughts

Expanding coverage:– Relatively easy to explain why this is important– Given political will (and money), path is fairly

straightforwardQuality/cost/value:

– Much more complex – difficult to engage policymakers and the public

– No magic answers to the problem, but some promising ideas

All of these issues must be addressed to make the system more equitable and sustainable

Contact Information:

Julie Sonierjulie.sonier@state.mn.us(651) 201-3561

Health Reform Website:

www.health.state.mn.us/healthreform