State Solutions in an Era of Federal Control

On October 1, 2014, Center of the American Experiment released the eighth chapter of The Minnesota Policy Blueprint: Prescription for Prosperity, a package of innovative policy recommendations that emphasize personal initiative, free enterprise and a limited, frugal government. This eighth chapter asserts that Minnesota’s policy-makers can avert damage by focusing on increasing competition and affordability in the health insurance market, enhancing patients’ control over their own health care, and guaranteeing an environment that promotes the next great innovations in health care. The Minnesota Policy Blueprint, in its entirety, will be released later this fall.


The Problem

Minnesota’s health care system struggles with many of the same problems as the rest of the country. In particular, high and rising health care costs have long been a top challenge facing Minnesota and the nation. Though it faces similar challenges, the state consistently leads the country in delivering broader access to higher quality care.

The primary explanation for rising health care costs lies in how health care is financed. As third party payers, private insurers and public health care programs insulate patients from the true cost of care. And because employers and the government fund the large majority of health insurance premiums, most people are also insulated from the cost of health insurance. As such, people do not weigh medical treatment costs or health insurance premium costs against their benefits or other spending priorities. Thus, there’s very little consumer pressure to reduce health care costs.

In 2010, Congress passed the Affordable Care Act (ACA), also known as Obamacare. Unfortunately, the ACA puts Minnesota’s health care system at serious risk. The federal law tends to double down on everything that’s currently driving dysfunction in our health care system. It continues insulating people from health care costs by expanding the broken, expensive Medicaid program and mandating traditional employer-sponsored insurance. It also greatly expands costly regulatory burdens on insurers and providers. Thus, the ACA tends to aggravate problems, not solve them.

Beyond cost, the ACA, in combination with other health care trends, is diminishing patient control over their own health care, including their relationship with their doctor, their health records, and their privacy.

All the while, the federal law took problem-solving flexibility away from states—states like Minnesota that were doing many things right—by transferring control over the most important health care regulation from state governments to the federal government.

Looking forward, the passage of the ACA makes the future of health care in Minnesota much more uncertain and challenging. Still, despite entering a new age of federal control over health care, states are not entirely powerless. The following recommendations offer state solutions to address risks posed by the ACA and to improve health care in Minnesota.

Increase competition and affordability in the health insurance market

1. Reduce barriers to employer-based defined contribution health plans

2. Convert MinnesotaCare into a premium subsidy program that empowers enrollees to afford individual health insurance.

3. Offer state employees a defined contribution health plan option.

4. Expand the insurance market from a state market to a regional market through an interstate health insurance compact.

Promote the next great innovations in health care

5. Apply for an ACA Section 1332 waiver to redesign insurance regulation and insurance premium subsidies to free insurance companies to innovate.

6. Establish a task force to develop strategies to work toward market-based pricing of provider services.

7. Pursue innovative strategies to redesign Medicaid long-term care to control spending growth through a broad waiver.

Enhance patient control over their own health care

8. Empower and engage consumers to manage and control their health care and health data better through personal health records.

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