Escalating health care costs have Minnesota lawmakers considering a punitive approach if hospitals and clinics can’t get their spending under control.
The state Senate and House proposals call for a new health care accessibility council that would set spending growth targets and require remediation plans if medical providers exceed them. Fines of up to $500,000 could result if vendors fail to create or adopt cost-cutting solutions.
“There are some real bites in there,” said Duluth health economist Jennifer Schultz, who proposed the idea last year during her final session as a state representative. Minnesota.
An oversight board would be a throwback to a five-year experiment in the 1990s, when a state commission tried to cut medical spending growth in Minnesota by 10% a year. Spending growth slowed, but possibly due to other economic or health care factors, as the commission never took action against expensive providers.
Recent efforts have targeted the underlying reasons for the growth. State grants have funded recreational trails, farmers’ markets and quit smoking efforts to keep people from getting sick in the first place. Health plans have shifted from paying providers per procedure to rewarding those who keep patients healthier.
Nonprofit MN Community Measurement publicly benchmarks medical provider costs and outcomes to drive improvements.
Despite efforts, growth in medical costs has outpaced inflation and wage growth, in part due to aging baby boomers and their medical needs. A state analysis showed that healthcare spending has risen from $39 billion in 2011 to $60 billion in 2020 and could reach $106 billion by 2030.
Minnesotans paid the price by increasing insurance premiums and copayments.
Nine states have created affordability councils, including Massachusetts – Minnesota’s model legislation.
The Massachusetts Cost Commission has taken years to set spending targets and compel medical providers to meet them. It was created in 2012, but its first regulatory action came in 2022 in response to years of high costs at Mass General Brigham, the state’s largest employer and healthcare system.
Growth there has slowed since 2012 — even though Massachusetts health care spending was still $13,319 per person in 2020, according to a federal assessment. Minnesota’s per capita total that year was $10,864 and the national average was $10,191.
Other state boards lacked enforcement powers at first but received them later, said Natasha Murphy, director of health policy at the Center for American Progress in Washington, D.C., who analyzed whether state boards accessibility worked.
“They all seem to agree that it’s really important for the body to have some type of enforcement authority,” she said. “Without that, it becomes more of a reporting exercise.”
DFL leaders were ambitious in pursuing health care reforms while controlling the legislative and executive branches of Minnesota government.
A health budget bill approved by the Senate on Wednesday included funding and timelines for the accessibility council. It would also require nurses to be involved in hospital staffing, fund a study of single-payer health care in Minnesota, and make the MinnesotaCare health plan for low-income residents a public option for everyone, regardless of their income.
Republicans attempted to remove the accessibility advice from the bill. Government spending targets could prompt hospitals to deny admission to high-cost patients, said State Sen. Glenn Gruenhagen, R-Glencoe.
“In order to control costs, they will ration health care based on your height, weight, age and health status,” he predicted.
The board, by design, would require all members to have no employment or corporate connection to health care, which could be a problem if it lacks expertise, said Lucas Nesse, CEO of the Minnesota Council of Health Plans.
The legislation also sets out some conflicting assignments: that council efforts cannot interfere with union contracts or providers’ use of competitive wages to address labor shortages. The council would also set up a consumer protection office to help patients struggling to access care.
“The board currently under consideration needs more discussion on how it will operate…and how it would actually achieve its goals given the lack of results from previous similar boards,” Nesse said.
Setting spending goals could be difficult, although Minnesota benefits from the experiences of other states and a claims database to compare spending among medical providers. Economists at the Minnesota Department of Health this year abandoned efforts to account for health care spending attributable to chronic disease and smoking due to claims data limitations.
The Mayo Clinic would present an additional dilemma because it is nationally acclaimed for its efficiency in daily care, but is by far Minnesota’s costliest provider in community measurement studies of total costs. Leaders of the state’s largest employer have justified Mayo’s higher costs as a destination for some of the most complex medical cases in the world.
The Minnesota Hospital Association has urged lawmakers to create an affordability board without giving it “punitive regulatory power and stiff civil penalties.” The trade group also questioned spending targets when hospitals may experience unexpected surges in RSV, influenza or trauma cases.
Schultz envisioned a state board on affordability that uses penalties as a last resort and instead encourages hospitals to cooperate to reduce costs, just as they cooperate to prevent publicly reported medical errors.
“I think they can learn a lot from each other,” she said.
