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Let’s discuss the very serious reasons for replacing MinnesotaCare with subsidies for private health insurance

Peter Nelson
Peter Nelson

Doug Grow did his best on Wednesday to add some spice to an otherwise bland, but very important policy debate taking place at the Legislature. The headline to his article reads: “Surprise amendment stuns Senate during debate over health care costs.”  

They were stunned?  Wow!  I couldn’t wait to dig into the article and read about all the high drama I missed.

But, instead of high drama, Grow simply recounted the standard fare found on the House and Senate floor: A legislator, looking to play gotcha politics, offers a floor amendment knowing full well it stands no chance of passing.

These floor amendments are almost always a distracting waste of precious time and almost never illuminate the public policy being debated. Even for people who like political theater, these amendments are usually a waste of time.

So it was with Sen. Barb Goodwin’s proposed amendment.

Bill would remove about 15, 000 from MinnesotaCare
The specific bill being debated would transfer about 15,000 childless adults from MinnesotaCare — a state health plan — to a state subsidized individually owned private health plan. Goodwin proposed an amendment to require legislators to try out the program for two years before imposing it on low-income Minnesotans.

Of course, it’s a silly amendment. Legislators don’t test out food-stamp, rental-assistance or criminal-rehabilitation programs before implementation. Sen. Gretchen Hoffman was right to call it “political tomfoolery.”

Admittedly, I didn’t witness the debate firsthand, but, being such a silly amendment, I’m guessing lawmakers were more befuddled into silence than stunned.

It’s unfortunate that the floor debate and the subsequent reporting focused on such silliness when this is such an important policy matter.

Must avoid future deficits
Not only must lawmakers balance a $5 billion deficit for the next biennium, they must work to avoid deficits in future biennia. Even if they find $5 billion today, state spending is projected to outpace revenue collections for decades to come. The Minnesota Budget Trends Study Commission [PDF] projects that spending will annually grow by 5.4 percent between 2008 and 2033 while revenues will grow by only 3.9 percent.

Guess where all the spending growth takes place?  Yep, health care. Health-care spending is projected to annually grow by 8.5 percent.

Obviously that’s not sustainable, and that’s why Republicans in the House and Senate are moving a number of legislative provisions to fundamentally redesign state health care programs.

Replacing MinnesotaCare with a state subsidy for individually owned private health plans is one of the key parts of the effort to redesign how the state provides health care to the poor. As Grow noted, this can save $100 million on childless adults and up to $600 million if everyone is included.

Multiple benefits of premium subsidies
The beauty of premium subsidies is that their benefits extend well beyond budget savings.

• A premium subsidy provides more portable and continuous insurance coverage. With a subsidy, the individual owns the coverage and no longer needs to switch coverage when his or her  Medicaid eligibility changes. Medicaid managed-care programs like MinnesotaCare do not promote continuous coverage.

• A premium subsidy provides more continuous access to care. Coverage continuity translates to provider continuity, which studies show leads to higher quality care.

• A premium 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.

• A premium subsidy empowers parents to choose one plan for their whole family with one network of doctors.

• A premium subsidy provides more financial protection because private insurance policies are not subject to MinnesotaCare’s $10,000 cap on in-patient hospital payments.

• Maybe most important, a subsidy pays providers at private payer reimbursement rates, which cures a host of problems. Paying private payer rates will (1) expand access to providers, (2) reduce cost shifting, (3) reduce administrative complexities, (4) increase transparency in the program budget, and (5) eliminate any incentive for doctors to provide second-class care.

It’s about redesigning, not eliminating
Above all, understand that this is a conversation about redesigning a government program, not eliminating it.

Frankly, some Republicans must be wondering why there wasn’t more talk about eliminating the whole program for childless adults. The fact is, most states don’t have a health-care program for childless adults. Of those that do, six are closed to new entrants and only five expand income eligibility as high as or higher than Minnesota does.

No doubt some folks will quibble with these points. OK. Then we should discuss those differences. We shouldn’t be celebrating the silly political theater that sidetracks that discussion.

Peter J. Nelson is a policy fellow at Center of the American Experiment in Minneapolis.

Comments (9)

  1. Submitted by L.A. Krahn on 05/13/2011 - 08:54 am.

    It’s called MinnesotaCare for a reason, because it gets health CARE to the people that need it. Ditto Medical Assistance (MA)…

    Replacing either with Insurance is a hollow promise, when the financial barriers (deductibles, provider networks, steep copayments) exceed the financial capacity of the poor. What a swindle!

    Despite shiny marketing to the contrary, Health Insurance does not equal Health CARE.

  2. Submitted by Joe Williams on 05/13/2011 - 09:40 am.

    It really is difficult to buy into your argument for a private subsidy when those that can afford insurance are seeing their rates climb so dramatically, right in step with insurance company profits.

    Perhaps the biggest issue for me is that I do not see how a market can be ultimately expected to improve the health of the disadvantaged.

  3. Submitted by myles spicer on 05/13/2011 - 10:03 am.

    This entire debate has been hashed over so often it is almost unworthy of comment — but here goes, because conservatives who propose to turn over our precious health care to private insurers has “been there done that”. It is almost as though they have a lobotomy-like rememberance of the effects.

    Very simply, overpriced premiums; culling of undesirable risks; millions without adequate (or any) coverage; insurers enriched at by extraoridnary administration costs; and a nation whose health care deteriorated well below that of most industrialized nations. WHY WOULD WE REPEAT SUCH DUMB MISTAKES AGAIN WITH OUR STATE’S HEALTH CARE SYSTEM?

    To paraphrase the comment of a well known conservative: “Thanks, but no thanks”.

  4. Submitted by Craig Huber on 05/13/2011 - 10:35 am.

    For starters, let’s get some background here: from the Minnesota DHS web site…

    http://www.dhs.state.mn.us/main/idcplg?IdcService=GET_DYNAMIC_CONVERSION&RevisionSelectionMethod=LatestReleased&dDocName=id_006255

    “MinnesotaCare is funded by a state tax on Minnesota hospitals and health care providers, federal Medicaid matching funds and enrollee premiums.”

    That doesn’t really tell the entire story any more, however. Gov. Pawlenty’s cutting of the GAMC program just moved the problem…

    http://minnesotabudgetbites.org/2010/01/05/states-health-care-access-fund-faces-a-deficit-too/

    Basics on the coverage provided by MinnesotaCare is described here…

    http://www.dhs.state.mn.us/main/idcplg?IdcService=GET_DYNAMIC_CONVERSION&RevisionSelectionMethod=LatestReleased&dDocName=id_006926

    Highlights: in case you weren’t aware, there are already co-pays and premiums in this program. This isn’t a “freebie”.

    The $10000 per year in-patient limit does not apply to pregnant adults or children.

    [quote]
    Some non-pregnant adults (based on income) have a:

    • $10,000 yearly limit on inpatient hospital stays
    • 10 percent copay on inpatient stay, up to $1,000 per year per adult.
    • Enrollees are responsible for the copay and any costs over $10,000

    The $10,000 yearly limit and 10 percent copay also apply to the treatment portion of residentially licensed alcohol and drug abuse programs.
    [/quote]

    -=-

    At the heart of this for me is this simple question: why do we want to give private insurers the opportunity to waste/steal 25%+ of this money?

    We know from last year’s federal health care efforts that private insurers spend at least 25% of the premiums they collect on “administration”. (The cries of agony being heard from the insurers last year when that benchmark was being looked at as a goal leads me to believe that they actually perform even worse.)

    Note that this is what the “competitive” marketplace has produced so far. Much more “innovation” like this, we may as well just shut it down.

    My preference, if we really must cut benefits to save money, is to simply cut benefits. Increase the premiums and co-pays. Whatever… just _don’t_ hand the cash to a middleman who adds nothing of value to the equation so they can take a cut off the top.

    -=-

    As someone who has worked in EHR/EMR implementation at several care providers over the past few years, I have seen first hand the less-than-stellar nature of the private insurance companies and HMOs when dealing with the actual care providers.

    As a small business owner, I’ve seen my premiums go rocketing up and my employee’s benefits go spiralling downward, dealing with those same companies from the other side.

    Record profits, higher prices, poorer service… that’s the private insurance carrier report card over the past 20 years. And we want to put _more_ people in their hands?

    Personally, I have no faith in private carriers to do more than skim massive amounts off the top to pad their own pocketbooks. I certainly don’t see them as a part of the solution, as opposed to their current role as a primary part of the problem.

  5. Submitted by Michael Friedman on 05/13/2011 - 11:45 am.

    “A premium 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.”

    This is a big lie, an example of ideology creating its own facts. The competition in health insurance has always been and will continue to be competing NOT to insure people who actually require ongoing health care services. Free market concepts simply do not work when the incentive is not to sell more but to avoid providing the product!

  6. Submitted by Dan Hintz on 05/13/2011 - 01:41 pm.

    The amendment may have been political theater, but Grow’s point remains true – no one is going to want this if they have a choice. Nelson’s piece is sheer nonsense. Its ideological fantasy masquerading as policy, and it has no relevance in the real world. None of the things he is claiming actually work out that way – private insurance, and our private insurance based system, is incredibly inefficient. You may save some money doing this, but that is only because a lot of people will be left without healthcare.

  7. Submitted by Bernice Vetsch on 05/13/2011 - 03:50 pm.

    The “Healthy Minnesota Contribution Plan” (hah!!) doesn’t save any money — it just transfers that much expense from the state’s providers and their patients to the patients — all of whom are low-income workers on MinnCare or Medicaid recipients.

    The state’s “contribution” will cover 80% of the cost of premiums. Except for preventive care, copays ranging from $10 to $200 will be charged to patients. Families with children will have to buy a separate policy for each family member and set a maximum out-of-pocket expenditure (their deductible) of $3000, $6000, $9000 or $12,000. After a deductible is met, insurance will cover more of a patient’s expenses.

    Tens of thousands of low-income Minnesotans will not be able to afford these expenses, state “contribution or not, and will be priced out of the health insurance market altogether.

    The plan is a fiscal crime against the poor and a fiscal gift to the insurance companies.

  8. Submitted by will lynott on 05/15/2011 - 05:07 pm.

    Actually, I thought Goodwin’s point was excellent, and the effect on the republicans was hilarious–gawping like fish on the bottom of the boat, “Harrumph! We’re CITIZEN LEGISLATORS! (why does that matter?), OUR INDECENT PROPOSAL ONLY APPLIES TO POOR PEOPLE! Harrumph harrumph!”

    I haven’t laughed that hard in a long time.

    It stunned them all right. Goodwin, you go girlfriend!

  9. Submitted by will lynott on 05/16/2011 - 08:51 am.

    BTW, if Nelson is so annoyed by legislative time wasting, perhaps he should instead scold legislative republicans who, instead of “focusing like a laser” on the budget, have spent most of their time recently pursuing radical social legislation that they know Dayton won’t sign and that they specifically stated at the start of the session they would not pursue–because they were “focused like a laser” on the deficit. Or, perhaps, Steve Drazkowski, who, with a tin ear for political realities, was actually planning to put the Dayton budget up for a vote in the middle of budget negotiations.

    The republicans could teach the DFL plenty about wasting time when they’re supposed to be doing the people’s business.

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