Fixing Minnesota’s Healthcare Starts with Giving Insurers Flexibility
This piece originally appeared in the Winona Daily News on January 26, 2016.
Rising health care costs pose a serious challenge to Minnesota, especially to those living in the southeast region of the state.
State Sen. Matt Schmit, a Democrat, recently discussed this challenge on these pages (Daily News, Jan. 13) and highlighted how higher and higher health insurance premiums crowd out household investments in education, new purchases, and savings for retirement. He also highlighted how higher costs present a competitive disadvantage to businesses across the southeast region.
All of this is true and it speaks to how critical it is to contain health care costs.
For solutions, Sen. Schmit put hope in the Health Care Financing Task Force, a task force formed by the Minnesota Legislature and Governor Dayton in 2015.
I served as a member of that task force and, unfortunately, I can now report we did not offer any meaningful solutions to contain health care costs. Instead, the recommendations closely hew to a partisan Democrat agenda to expand Minnesota’s already generous public health care programs.
Among the more expensive program expansions, the task force proposed expanding MinnesotaCare—the state’s health program for low-income households—to people with incomes up to 275 percent of the federal poverty guideline; giving health coverage to undocumented immigrants at the same cost and benefit level as citizens; and providing 12-month continuous coverage to people on public health care programs regardless of income changes.
These expansions would burden the state budget with higher spending and, something very few recognize, increase the cost of private health insurance premiums. Public health care programs never pay the full cost of care. Providers would go bankrupt if everyone paid the same low rates paid by Medicaid and MinnesotaCare. To cover losses from pubic programs, providers must charge higher rates to people who are privately insured. Milliman, the actuaries contracted to model the financial impacts of the task force recommendations, estimates privately insured rates are 50 percent higher than public rates.
This is like giving low-income households both an electronic benefit transfer (EBT) card and a coupon for 33 percent off everything they buy at the grocery store with their free EBT card. Every additional person with an EBT card paying $2 for a $3 gallon of milk would mean higher milk prices for everyone else if the grocer wants to stay in business. Because this is exactly how public health care programs are financed, expanding these programs will raise private insurance premiums.
To the extent the task force addressed costs, it simply recommended enhancing government-driven payment reforms that hope to contain costs. To date, these reforms have not proven themselves.
This partisan result is not too surprising.
The task force was stacked with people appointed by Democrats. The Governor chose eleven and Democrats in the Senate and House chose seven. Republicans in the Senate and House only got to choose seven, rounding out the twenty-nine member task force.
Considering this lopsided membership, the partisan task force recommendations are exactly the reforms people should expect from Democrats in the legislature in 2016.
Setting partisanship aside, there are limits to what Minnesota can do to contain costs because so many cost drivers are fueled by federal policies—such as tax incentives and Medicare pricing rules. But there are still levers the state can pull.
Looking to the 2016 session, an easy place to start is giving insurers flexibility to offer a more affordable level of benefits. Minnesota has long mandated more benefits than nearly every state and the state should have flexibility to reduce those mandates to match the benefits mandated in other states.
The harder but necessary path to cost containment requires introducing reforms that increase competition among providers and insurers. Southeast Minnesota now knows all too well what it means to have just one major hospital system and only two insurers.
To that end, it’s time to start identifying and removing those barriers that stop potential competitors from entering the market. Not only is this path necessary, it also happens to offer the most potential for gaining bipartisan support as it does not necessarily stir the same level of controversy as reducing benefits or expanding public programs.
Peter J. Nelson is the director of public policy for the Golden Valley, Minn.-based Center of the American Experiment