This year, however, instead of trumpets it would be violins playing for state reform. Universal coverage by 1997 no longer is part of the Minnesota plan. The standard benefit package, once considered essential to a low-cost, high-quality system, is but a dream.
"Health reform had become politically incorrect," said Michael Scandrett, former director of the Minnesota Health Care Commission and now an attorney with Popham, Haik in Minneapolis. "It was associated with liberal Democrats and spending lots of money. The failure of national reform took a lot of wind out of our sails."
In the absence of federal reform, the vanguard of state healthcare reform is retreating. Massachusetts, Oregon, Washington state and others have joined Minnesota in backpedaling from the most ambitious of their plans.
Massachusetts probably will subsidize coverage for the uninsured instead of making employers pay for it (May 1, p. 20). Oregon won't mandate employer coverage, either. And Washington state, so ambitious in its Health Services Act of 1993, nixed its employer mandate and standard benefits package, then stripped its health commission of rulemaking power (May 1, p. 18).
Without federal reform, states say, they can't enforce standard benefits because the federal Employee Retirement Income Security Act shelters self-insured companies from such controls. Without federal reform, states say, they will lose employers to less-regulated neighbors if they push ahead.
A national lesson.
Despite the scaling back, Minnesota claims much success in its reform efforts. Its hits and misses hold a lesson for the nation. So do its questions about the vigor of competition ahead, given the market control of a handful of providers and health plans.
Three healthcare systems dominate the Twin Cities. Three giant HMOs cover 69% of the state's total private-insured population, according to Minnesota Citizens Organized Acting Together, a citizens group known as Minnesota COACT. In urban areas, indemnity insurance is almost extinct.
In other states, providers and payers say their markets will look like Minnesota's someday.
Debate the numbers-many people do-but the status of Minnesota healthcare is enviable.
The mean premium in Minneapolis falls 21% below the rest of the nation, according to Milliman & Robertson, an actuarial consulting firm based in Radnor, Pa. While the number of uninsured rose unchecked in most of the nation (June 19, p. 88), Minnesota held its uninsured rate to about 8.9% of its population from 1990 to 1994.
Part of the explanation for that success is that from 1992 to 1994, the state wrote laws to transform its patchwork of payers and providers into managed competition. Adopting the model that dominated national debate, Minnesota decided "integrated service networks" would vie to provide standard benefits at capitated rates. It planned to slow growth in total healthcare spending by 10% annually, if necessary regulating prices for care outside ISNs under an "all-payer option."
No longer would insurers deny coverage to ailing residents. No longer would small businesses struggle against high premiums. By 1997, the state proclaimed, no Minnesota resident would be without insurance.
Live and learn. Voters turned many statehouses, including Minnesota's, over to a more conservative batch of lawmakers in late 1994. Carlson, worried about federal Medicaid cuts proposed in 1995, threatened to veto any expansion of MinnesotaCare, the state-subsidized insurance program. Legislators listened.
Inching, not jumping, ahead.
They negotiated a narrow, and optional, expansion of the program. The eligibility restrictions for single, childless adults may inch up 10 percentage points to 135% of the federal poverty level by Oct. 1. Legislation once authorized vaulting eligibility to 275% of the poverty level. The former mandate of universal coverage was scaled back to a goal of 4% uninsured-and delayed until the year 2000 (May 29, p. 14).
"Many of us saw that as an unfortunate step backward," said Jan Malcolm, vice president for community affairs at Minneapolis-based Allina Health System. "But you have to understand it in context of what happened-or didn't-at the federal level."
Universal coverage won't happen without federal reform because ERISA blocks premium taxes in the vast self-insured market. Thus, no financing. Full community rating of insurance premiums is gone from the Minnesota plan because universal coverage is gone. The regulated all-payer option is also out of the plan. So are other rules providers, payers and even businesses considered burdensome, intrusive and dangerous.
"It was a mid-course adjustment," said Duane Benson, state Senate minority leader in 1992 and now executive director of the Minnesota Business Partnership. "Most of MinnesotaCare is in place and going forward. I think you can conclude that, by and large, it's working."
MinnesotaCare now covers primary care and limited inpatient care for 88,000 people. The program has helped Minnesota keep its uninsured rate steady at 8.9%, although employer-based coverage there and elsewhere has dropped.
Spending on rise.
Those numbers are seen as good but not perfect. And they come at a price. From 1990 to 1994, Minnesota added 200,000 people to three public healthcare programs, including MinnesotaCare, its human services department said. During that time, state spending for those programs climbed 63% to $1.1 billion.
"Clearly, (Minnesota) has been successful in providing some primary and preventive care to people who didn't have it before," said Phil Griffin, vice president for public policy of PreferredOne, a Minneapolis-based PPO. "(But MinnesotaCare has) held out some false hope to people. (Minnesota) is also, in my impression, stretching members," he added, meaning that many of the newly insured don't have full health coverage.
But there is widespread praise for reforms meant to help small businesses buy health insurance. Since they took effect July 1993, Blue Cross and Blue Shield of Minnesota has sold more than 3,100 small-group policies. Competition for the once-shunned business is so fierce that the Minnesota Blues cut its small-group rates by 5% this month, it said.
Meanwhile, Minnesota is well ahead of Goal No. 1: slowing growth in healthcare expenditures by 10% annually from 1993 to 1998. In its latest estimates, the health department says that public and private healthcare spending grew about 8% in 1993 to $14.1 billion, well ahead of its goal rate of 9.4%.
The market is cooperating so well that Minnesota backed away from the regulated all-payer option, its legislative stick. HMO premiums rose 4.9% in 1994, compared with 8.6% in 1993, the Minnesota Council of HMOs said. Premiums for the state employees group grew 3% in 1994 and will actually drop 1.7% in 1995.
Such progress is more than good behavior in the face of threats, said Anne Barry, commissioner of the Minnesota Health Department. "If the state Legislature hadn't laid out a framework, I don't think you would have seen as many changes," she said.
Minnesota COACT plans to release a report this week that charges the Minnesota "healthcare oligopoly" with keeping healthcare costs higher and quality lower than they could be. The group supports a single-payer system. "We think the whole process has been a disaster," said Kip Sullivan, its research director.
Three plans-Allina, the Minnesota Blues and Health Partners-provided 69% of the state's healthcare coverage in 1994, up from about 57% in 1992, COACT said. Providers also are consolidating. Encouraged by state statutes, Minnesota hospitals are developing 23 networks, the hospital association said.
"Whether we have enough competitors long term to keep the market competitive, we're not sure," said Steve Wetzell, executive director of the Business Health Care Action Group in Minneapolis.
The group's first worry is providers' accountability to the public. Hospitals and physicians hide behind health plans because they really don't compete for the public's business, Wetzell said. That's going to change. His group has told providers to get ready for direct contracting in 1997 (July 3, p. 28).
Don't get Wetzell wrong. Minnesota has done all right with the instruments available, but it can't play a symphony.
"Any state that's realistic acknowledges that it needs federal reform to really solve the problem," he said, "but at least (Minnesota officials) have been reinforcing to the public that managed care is an option."