History of Minnesota Cost Containment Efforts

1. History of Minnesota Cost Containment Efforts • Certificate of need and hospital moratorium • MinnesotaCare reforms and initiatives

2. Certificate of Need • In effect from 1971 to 1984 • System of review and approval of capital expenditures for construction projects • Purpose: control growth of system capacity in order to control cost • CON was criticized as failing to adequately control cost growth

3. Hospital Moratorium • In 1984, CON was repealed and was replaced by a moratorium on licensing new hospital beds • Moratorium is still in effect, but 23 exceptions have been enacted into law over time • 2004: Public interest review process enacted • Maple Grove hospital debate • 2006: Public interest review process was revised to account for competing proposals

4. 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.”

5. 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.”

6. 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

7. 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

8. Other 1992 MinnesotaCare Act Provisions • Small employer group insurance market reform (2 to 29, later 2 to 50) • Individual market insurance reform • MinnesotaCare subsidized health insurance program • Rural health initiatives • MEIP – voluntary small employer group purchasing pool • Financing initiatives

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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 pools • Health Care Administrative Simplification Act

15. 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

16. 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