Minnesota: Substantial Health Reforms

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Minnesota passed a historic health care reform bill (Senate File 3780) in May at the end of its 2008 legislative session. The law is broad in scope and includes major provisions that address improved health care coverage and affordability, payment reform and price/quality transparency, chronic care management, administrative efficiency, and public health.[i] Given that the state has one of the nation’s lowest uninsurance rates and a history of collaboration and innovation in health care delivery, Minnesota enters the current phase of health reform on strong footing. However, like every other state in the nation, it recognizes that its rising health care costs are unsustainable. The state is particularly focused on remedying misaligned incentives that reward the overuse, underuse, and misuse of care services. In addition, Minnesota is seeking to improve quality relative to funds spent (value) and to reduce variation of quality relative to geography.[ii]

To improve health care coverage and affordability, the law addresses several aspects of health reform:
  • Expand Eligibility for Adults—MinnesotaCare expands eligibility for adults without children to 250 percent FPL, thereby increasing access to health care for an additional 12,000 residents. It also reduces the MinnesotaCare sliding-scale premium to increase affordability.
  • Section 125 Plans—Employers who employ 11 or more full-time-equivalent workers and do not offer group health insurance must establish and maintain a Section 125 plan to allow employees to purchase health insurance with pre-tax dollars. The law provides $1 million in funding for grants to cover certain employers’ cost of establishing Section 125 plans.
  • Value-based Benefit Redesign—A workgroup is charged with making recommendations on the design of an “essential benefit set” that provides coverage for a broad range of services and technologies. The benefit set must be based on scientific evidence of clinical effectiveness and cost-effectiveness and must require lower enrollee cost-sharing for certain services.
  • Affordable Access—The law calls for a proposal to promote affordable access to employer-sponsored health insurance through the use of direct subsidies and/or tax credits and deductions.
  • Administrative Streamlining—The law intends to make it easier for people both to obtain information and applications for state public health care programs and to renew their enrollment. It also provides for more seamless transitions between programs and requires further study of ways to improve coordination between state health care programs and other programs such as the Women, Infant, and Children Nutrition Program (WIC).[iii]
To promote payment reform and price/quality transparency, the law calls for the following:
  • Quality Transparency—Increased transparency and the development of a single statewide system of quality-based incentive payments for use by public and private health care purchasers to encourage quality improvement through:
    • Public reporting of risk-adjusted quality measures based on health outcomes, processes, and other measures such as care infrastructure and patient satisfaction.
    • The inclusion of quality measures for primary care related to preventive services, coronary artery and heart disease, diabetes, asthma, and depression.
    • Adjustments of quality incentive payments to providers for variations in providers’ patient populations, based on a comparison of provider performance against specified targets and improvement over time.
  • Quality Measurement Tools—A powerful set of tools to allow consumers and health care purchasers to compare providers in terms of overall cost and quality of care. The tools will support the creation of incentives that: 1) motivate health care providers to deliver innovative, high-quality/low-cost health care; and 2) motivate health care consumers to patronize high-quality/low-cost providers. The tools will be based on encounter-level claims data and information on contracted prices, with the Commissioner of Health developing both a method for calculating providers’ relative cost and quality of care and a combined measure incorporating risk-adjusted cost and quality of care. The information will be disseminated to health care providers and the public. 
  • Means of Comparison—The establishment of “baskets” or episodes of health care services promotes transparency and accountability, allowing consumers to make relatively easy comparisons of cost and quality of care across providers while motivating provider innovation on cost and quality. In particular, providers will set their own prices for “baskets” of care to encourage greater transparency and price competition.[iv]
To promote chronic care management, the law requires:
  • Coordination of Activities—Health care must be coordinated for people with complex or chronic conditions, and standards must be established for state certification of health care (medical) homes. Health care homes will receive care coordination payments from public and private health care purchasers.
To promote administrative efficiency, the law focuses on:
  • Electronic Records—Electronic health records must be consistent with federal standards for interoperability, and all prescriptions should be ordered electronically by 2011.
  • Uniform Claims Processing—A mandated study and report will address how uniform methods of processing claims can reduce claim adjudication costs for health care providers and health plans.
To advance public health, the law requires a:
  • Statewide Health Improvement Plan—A total of $47 million is appropriated for FY 2010 and 2011 to establish and fund a statewide health improvement program in order to reduce the percentage of Minnesotans who are obese or overweight and to reduce tobacco use.
The reform requires health care cost savings to be measured against projected costs in the absence of reform. Estimates suggest that the reform measures will yield a possible cost savings of about 12 percent by 2015, representing a potential savings of about $6.9 billion compared to baseline projections.[v]


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[i] Minnesota Senate File 3780, available at https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=S3780.1.html&session=ls85; “Minnesota Legislature Passes Historic Health Reform Legislation,” St@teside, State Coverage Initiatives, May 2008, available at www.statecoverage.org.
[ii] Sonier, J. “Minnesota’s 2008 Health Reforms: Payment Reform and Transparency Initiatives,” National Academy for State Health Policy, Annual Conference, October 2008.
[iii] Minnesota Senate File 3780, available at https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=S3780.1.html&session=ls85; “Minnesota Legislature Passes Historic Health Reform Legislation,” St@teside, State Coverage Initiatives, May 2008, available at www.statecoverage.org.
[iv] Ibid.
[v] Ibid.