Gov. Tim Pawlenty and the Legislature face a monumental task in balancing the state budget. The job will not get done unless spending is curtailed, especially in health and human services.
The Legislature passed exhaustive health care reforms in 2008 intended to slow the skyrocketing costs and improve quality. Ensuring those measures are carried out is among the Minnesota Chamber of Commerce's priorities for 2010.
Recent headlines under-score the severity of the prob-lem. More than 100,000 Min-nesotans lost their health in-surance between 2007 and 2009 as unemployment and the recession made deep in-roads into medical coverage, the state Department of Health reported. The percentage of the population with coverage through an employer especially declined. In addition, a survey of 180 employers commissioned by HealthPartners identified health care costs for employees as the most common obstacle to business expansion.
Health care costs, if left uncontrolled, threaten to consume the state's general fund. A major factor is that Minnesota is in the midst of a years-long trend of changing demographics -- a collision course between an older population requiring more government services and a shrinking pool of workers to pay taxes to support those public programs.
The short-term predicament in the state's general fund is challenging enough given the economic downturn. The state faces a projected shortfall of $1.2 billion for the current biennium, and it's worse for 2012-13. But even in a strong economy, health care will raise havoc with the budget unless programs and services are restructured.
According to a 2009 analysis by the State Budget Trends Commission, the annual growth in state revenues will slow from an average of 6.8 percent in 2001 to 3.9 percent in 2033. At the same time, health care costs are project-ed to increase 8.5 percent annually from 2008 to 2033. If these trends materialize, Min-nesota is headed for a crash landing. Even if the state lived within the 3.9-percent growth in revenues, all other spending -- including education -- would be limited to 2 percent growth.
Costs must be contained. The alternative is to regularly raise taxes -- a proposition that is neither realistic nor sustainable given Minnesota's already high business and personal tax burdens.
Policy-makers must scrut-inize each and every expend-iture. Here are some under-lying principles to consider as they tackle the delivery of health and human services:
- Focus on quality vs. quantity of procedures: Health care practitioners today are largely reimbursed based on their number of procedures vs. the quality of their outcomes. In similar vein, Minnesota's Bottom Line Report -- compiled by the Public Strategies Group and five of the state's largest foundations -- suggests a savings of $3.7 billion by spending state dollars on health outcomes vs. fee for services. As one example, MinnesotaCare health plans could be redesigned to provide incentives (less cost-sharing) for patients who use the highest quality providers and disincentives (higher cost-sharing) for those who use other providers.
- Restructure public assistance programs: Restructure General Assistance Medical Care, MinnesotaCare and Medical Assistance so they are financially sustainable and deliver more effective care. Most of the legislative debate over GAMC has focused on short-term financing. Equal or greater attention should be spent on restructuring all three programs. For example, limit GAMC enrollees to those individuals who do not qualify for other programs. The recommendations from Public Strategies Group mentioned above and the experience of the state's health plan for its employees -- the Minnesota Advantage Health Plan -- are good starting points. Minnesota Advantage provides incentives for individuals to go to high quality and lower-cost providers and has resulted in savings for the state. This strategy might not work for every program, but it should be explored.
- Reform long-term care: Too many people have the ability to finance their long-term care, but use the state's medical assistance programs instead. Individuals must be-gin to plan for their long-term needs. To assist, the state and federal governments need to provide more mechanisms and change incentives in the Medicaid system to allow this to occur.
- Restructure public em-ployee benefits -- State and local governments should take a cue from private busi-nesses and restructure health insurance and retirement plans to make them more af-fordable and stable. Exam-ples include health savings accounts and tiered health insurance plans; retirement plans should be changed from defined benefits to defined contributions.
This list is just a beginning. The challenges are enormous. Recommendations must alter the status quo with a commitment to steady and incremental change. The alternative - a drumbeat of tax increases to keep up with existing cost pressures - cannot not be sustained by businesses or individuals.
Mike Bromelkamp is a princi-pal with Olsen Thielen & Co. Ltd. and chairman of the Min-nesota Chamber of Commerce Health Policy Committee.