Testimony of Peter J. Nelson, J.D.
Policy Fellow, Center of the American Experiment

Health Care and Human Services Finance Division
RE: HF 1865, The Healthy Minnesota Plan
April 30, 2009

Mr. Chair, members of the committee, good morning and thank you for the opportunity to testify today.  My name is Peter Nelson and I am a Policy Fellow with Center of the American Experiment. 

This legislative session offers a unique opportunity to set Minnesota on a more sustainable fiscal path.   Long-term budget trends and a $4.6 billion deficit send a clear message: Business as usual cannot continue.  Minnesota cannot expect to offer the same level of programs and services in the future without adopting substantial reforms that contain cost growth.  Nowhere is this more apparent than with the state’s public health care programs.

I am here today to testify on behalf of HF 1865, a bill that would chart a new and more sustainable course for Minnesota’s public health care programs.   There are two main components to HF 1865: a premium subsidy for a private high-deductible health plan and a reimbursement arrangement to help cover a large portion of the deductible.

Over the past few years I have studied public health care programs across the country and have come to the conclusion that a premium subsidy program offers the best solution for low-income working adults. 

Compared to traditional Medicaid programs, a premium subsidy offers a number of advantages.  

• A subsidy provides more portable coverage.  With a subsidy, the individual owns the coverage and no longer needs to switch coverage when their Medicaid eligibility changes.
• A subsidy supports more continuous care.  Portability translates into provider continuity—meaning enrollees can see the same doctor—which studies show leads to higher quality care.
• A subsidy creates the opportunity for individuals, employers, and the government to share in the responsibility for funding premiums.
• A subsidy provides incentives for insurers to innovate and add value for low-income enrollees because insurers will need to compete for this new market of customers.
• Maybe most important, a subsidy pays providers at private payer reimbursement rates, which cures a host of problems.  Paying private payer rates will expand access to providers, reduce cost shifting, reduce administrative complexities, increase transparency in the program budget, and eliminate any incentive for doctors to provide second-class care.

The second component to HF 1865—the reimbursement arrangement—also offers advantages.  This reimbursement arrangement puts enrollees in more control of their health care dollars and should mitigate some of the overuse and quality issues related to first-dollar health care coverage.  When people have more control over their health care dollars they become more engaged in the decision-making process which leads to better outcomes. 

Over the years, MinnesotaCare has been an important health care resource for low-income children and adults.  However, we’ve long known that the program has its limitations, most notably its low reimbursement rates and skimpy hospitalization coverage.  HF 1865 provides an opportunity to begin curing these problems while at the same time reducing the program’s overall cost.