Omnibus health bills fall short

The House and the Senate have now passed separate omnibus health and human services bills that attempt to increase the number of Minnesotans with health insurance and restrain escalating health care costs.  Regrettably, their efforts will fail on both counts.  This is because the bills rely on an already broken Medicaid system to insure the uninsured and depend on the dubious ability of state bureaucrats to pick cost-saving measures in the health care marketplace.

The bills offer a laundry list of Medicaid eligibility expansions intended to insure more Minnesotans.  For example, the Senate bill increases income eligibility for single adults from 175 percent to 215 percent of the poverty level, and the House bill removes premiums and any other cost sharing for children in families with incomes up to 225 percent of the poverty level.

Yet Minnesota’s present Medicaid program, one of the most expansive in the nation, is laden with various problems.  Expanding it further would only increase those problems.

The problems begin with rapid cost growth in MinnesotaCare — the Medicaid program for less-needy populations — which averaged about 14 percent annual increases per enrollee over the past nine years.  Rising costs can in part be attributed to the fact that Medicaid requires little to no cost sharing when enrollees receive medical care.  Consequently, enrollees have no reason to think prudently about health care costs or usage.

Another problem is that Medicaid pays providers low reimbursement rates — at times less than half the private-payer rate — which forces providers into inflating private payer rates if they expect to stay in business.  This, in turn, stirs up other serious problems.  Inflated private payer rates makes insurance less affordable to those not quite qualified for Medicaid.  Also, inflated private-payer rates essentially constitute a hidden tax and, being hidden, unscrupulously avoids accountability from the state budgeting process.

On top of inflating private payer rates, low reimbursement can compromise Medicaid enrollees’ access to healthcare.  Numerous studies conclude that low reimbursement discourages doctors from serving Medicaid patients and can result in longer wait times to see a doctor.

Further, generous Medicaid programs crowd out private coverage.  Economists at M.I.T and Cornell University recently found that 60 percent of children newly enrolled in Medicaid programs  previously had private coverage.  A shift from private to public coverage encourages dependence and all the social and mental pathologies that follow from it.

Multiplying these problems by expanding Medicaid in its present form would be a poor strategy for reducing the number of uninsured in Minnesota.

As for cost containment, both bills include a number of measures designed to push and, in some cases, force private markets to implement very specific business practices.  For instance, the Senate bill establishes a program to divert people who show up at emergency rooms with non-emergency conditions to a “medical home,” a place where physicians can coordinate care more appropriately and less expensively.  Other measures push evidence-based care, team-based care, pay-for-performance, and wellness promotion programs.

These reforms borrow from promising efficiency-driven ideas already developing in the marketplace, but why on earth should the state become involved in such operational minutiae?  It’s one thing, and maybe a good thing, to implement these ideas in public healthcare programs administered by the government and quite another to push them on the private market.  It’s like recognizing that robots can deliver efficiency to car assembly lines, and then having the government mandate how, when, and where Ford must use robots so we can buy a cheaper Taurus.  Obviously, Ford engineers know better than government bureaucrats how to implement robots; similarly, health insurers and healthcare providers know best how to implement medical homes and such.

By meddling with the operational details of clinics and hospitals, the legislature is essentially treating the symptoms and not the underlying structural problems driving costs within the healthcare marketplace.  Someone showing up at the emergency room with a non-emergency is a symptom of a dysfunctional marketplace where consumers don’t care about costs.   State legislators must start answering tough structural questions, like “Why don’t people care about the cost of their care?”  Until they do, unrestrained cost growth will continue in Minnesota.  While it might be too late in the session to address such questions, conferees for the health bill should work to pare down its counterproductive Medicaid expansions and intrusive marketplace “reforms.”

Peter J. Nelson is a policy fellow with Center of the American Experiment in Minneapolis