1. Health Care Reform:
Minnesota and the Nation
Julie Sonier
Director, Health Economics Program
Minnesota Department of Health
September 22, 2009

2. Objectives
How are health reforms in Minnesota
similar to and different from national
efforts?
Describe Minnesota’s recent reform
activities and goals

3. 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)

4. 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

5. 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

6. 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
Billions
Source: Minnesota Department of Health, Health Economics Program

7. 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
Cumulativepercentchange
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

8. 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

9. 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.

10. Misaligned Incentives: Higher Payment for
Lower Quality

11. 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

12. 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 Uninsured
Source: Minnesota Health Access Surveys, 2001 and 2007

13. 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

14. 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

15. 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 American
Indian
Asian Hispanic/Latino All
2001 2004 2007
Source: Minnesota Health Access Surveys, 2001 to 2007

16. 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

17. Obesity Trends* Among U.S. Adults
BRFSS, 1990
No Data <10% 10%–14%
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

18. Obesity Trends* Among U.S. Adults
BRFSS, 1994
No Data <10% 10%–14% 15%–19%
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

19. Obesity Trends* Among U.S. Adults
BRFSS, 1998
No Data <10% 10%–14% 15%–19% ≥20
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

20. Obesity Trends* Among U.S. Adults
BRFSS, 2004
No Data <10% 10%–14% 15%–19% 20%–24% ≥25%
(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

21. 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.

22. 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?

23. 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

24. 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

25. Overview of Health Reform Bill Key
Elements
Public health improvement
Health care coverage/affordability
Chronic care management
Payment reform and price/quality
transparency
Administrative efficiency
Health care cost measurement

26. 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

27. 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

28. 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

29. 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

30. 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”

31. 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

32. Concluding Thoughts
Expanding coverage:
– Relatively easy to explain why this is important
– Given political will (and money), path is fairly
straightforward
Quality/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

33. Contact Information:
Julie Sonier
julie.sonier@state.mn.us
(651) 201-3561
Health Reform Website:
www.health.state.mn.us/healthreform