History of Minnesota Cost Containment Efforts

Certificate of need and hospital moratorium

MinnesotaCare reforms and initiatives

Certificate of Need

In effect from 1971 to 1984System of review and approval of capital

expenditures for construction projectsPurpose: control growth of system capacity

in order to control costCON was criticized as failing to adequately

control cost growth

Hospital Moratorium

In 1984, CON was repealed and was replaced by a moratorium on licensing new hospital beds– Moratorium is still in effect, but 23 exceptions

have been enacted into law over time2004: Public interest review process enacted

– Maple Grove hospital debate2006: Public interest review process was

revised to account for competing proposals

1992 MinnesotaCare Act(Minnesota Statutes 62J.015)

“The Legislature finds that the staggering growth in health care costs is having a devastating effect on the health and cost of living of Minnesota residents. The legislature further finds that the number of uninsured and underinsured residents is growing each year and that the cost of health coverage for our insured residents is increasing annually at a rate that far exceeds the state’s overall rate of inflation.”

1992 MinnesotaCare Act(Minnesota Statutes 62J.015)

“The Legislature further finds it must enact immediate and intensive cost containment measures to limit the growth of health care expenditures, reform insurance practices, and finance a plan that offers access to affordable health care for our permanent residents by capturing dollars now lost to inefficiencies in Minnesota’s health care system.”

1992 MinnesotaCare Act Cost Containment Initiatives

Establishment of Minnesota Health Care Commission– Charged with developing a plan to slow the rate of growth

of health spending by 10% per year for 5 years beginning in 1993

Practice parameters to reduce variation in care (unnecessary and ineffective treatment)

Capital expenditure reporting– Retrospective review of capital expenditures in excess of

$500,000– Providers who failed retrospective review would be placed

on prospective review

1992 MinnesotaCare Act Cost Containment Initiatives (continued)

Antitrust exceptions– Allow MDH to sanction agreements

between providers or purchasers that might otherwise be construed as violations of state or federal antitrust laws, if Commissioner determines agreement will reduce cost, improve quality or enhance access

Other 1992 MinnesotaCare Act Provisions

Small employer group insurance market reform (2 to 29, later 2 to 50)

Individual market insurance reformMinnesotaCare subsidized health insurance

programRural health initiativesMEIP – voluntary small employer group

purchasing poolFinancing initiatives

Current Status of 1992 MinnesotaCare Act Cost Containment Initiatives

MN Health Care Commission– Repealed in 1997

Practice Parameters– Repealed in 1995

Capital Expenditure Reporting– Remains in effect

Antitrust Exceptions– Repealed in 1997

1993 MinnesotaCare Act Cost Containment Initiatives

Integrated Service Networks (ISNs)– Nonprofit plans responsible for providing a standard

set of “appropriate and necessary” services for a fixed price

– Participation voluntary– Competition among ISNs envisioned

• Mandatory disclosure of price and quality information and standardization of health benefits

• Antitrust law intended, in part, to help foster development of ISNs in rural Minnesota

– Required to be in compliance with expenditure growth limits

1993 MinnesotaCare Act Cost Containment Initiatives

Regulated All-Payer Option (RAPO)– Intended to manage cost of services not provided

through an ISN– Uniform fee schedule for physicians and

hospitals– Plans must participate in either an ISN or RAPO– Providers may participate in either or both– Required to meet expenditure growth limits

1993 MinnesotaCare Act Cost Containment Initiatives

Expenditure Growth Limits– Statewide global limits– Derived annually, reduce the rate of growth of health

spending by 10% per year for following five years– 1994 initial year of implementation– Reductions in future payments to ISNs and RAPO for

entities exceeding the growth limits– Regional limits with regional coordinating boards advising

Commissioner of Health– Until ISNs and RAPO implemented, transitional limits

apply to health plans and providers, with payback for overspending

Status of Major 1993 MinnesotaCare Cost Containment Initiatives

ISNs– Rules never promulgated; repealed in 1997

RAPO– Repealed in 1997

Expenditure growth limits– Revised to “cost containment goals” in 1997, with

tax incentive for health plans meeting the goals– Expired after 1998

1994 MinnesotaCare Act Initiatives

CISNs– Prepaid services to 50,000 or fewer enrollees– Lower financial requirements than ISNs

Universal Standard Benefit Set (USBS)– As of 1/1/96, must offer standard benefit set in

addition to other benefit sets– By 7/1/97, can only offer standard benefit set

Voluntary purchasing poolsHealth Care Administrative Simplification Act

1994 MinnesotaCare Act Initiatives

Risk adjustment system for both private and public sector by 7/1/97

MinnesotaCare eligibility expanded to include single adults or childless couples to 125% FPG

Contingent on action by 1995 legislature:– Universal coverage by 7/1/97– Guaranteed issue in individual market by 7/1/97– Individual mandate

Status of 1994 MinnesotaCare Initiatives

CISNs– Implemented, although none currently exist

USBS– Repealed in 1995

Voluntary purchasing pools– Implemented

Risk adjustment– Scaled back: repealed for private sector, public sector implemented

starting in 2000 Universal coverage

– Redefined as 4% uninsured Individual mandate, guaranteed issue

– Repealed