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Minnesota Health ReformMaster Plan.

Summaries and Progress Reportsfor All MinnesotaCare Programs

Minnesota Health Care CommissionJune 1994

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Components of MinnesotaCare

Table of Contents

Introduction

Health Care Reform in Minnesota 1

Health Reform Goals 2

MinnesotaCare Programs Summariesand Progress Reports

Universal Coverage 4

The MinnesotaCare Health Plan 8

Insurance Reform 10

Data Initiatives 14

Health Care Information 18

Growth Limits 20

ISN/RAPO System 24

Regional Coordinating Boards . . . . . 28

Public Health 30

State Health Programs 32

Prevention . . . . . . . . . . . . . . . . . . . . . . . 36

Uniform Billing and Claims Forms 38

Practice Parameters 40

Technology Evaluations 42

Antitrust Exceptions 44

Merger Moratorium 46

Major Expenditures 48

Rural Health Programs 50

Market Reform/Purchasing Pools . . . . . . . . . 52

Education and Research 54

Malpractice Costs 56

Provider Conflict of Interest Restrictions 58

Medicare Balance Billing Restrictions 60

Prescription Drug Costs . . . . . . . . . . . . . . . 62

Generic Drug Substitution 64

Restrictions on Drug CompanyGifts to Practitioners 66

Progress Report Summary 69

Missing Pieces

Missing Pieces 74

Health Care Reformin Minnesota

INTRODUCTION

Minnesota is entering its third year of health care refonn. In1992, the HealthRight Act was enacted as a result of anhistoric bipartisan agreement between legislators of both partiesand the Governor. The HealthRight Act was a comprehensiveapproach to health care refonn designed to improve access,quality, and affordability of health care. The Act included anew program to provide subsidized health coverage for theuninsured, data collection programs, programs to improve ruralhealth care, a purchasing pool for small employers, strategiesto control costs, insurance refonns to make private healthcoverage more available and more affordable, and otherprovisions. A second major health care refonn act was passedduring the 1993 session. The 1993 Act enhanced and refinedexisting refonn programs and established a comprehensive costcontainment plan based on the plan developed by theMinnesota Health Care Commission. The 1994 Act continuedthe state's progress toward implementing quality and costcontainment programs and placed in statute a comprehensiveplan developed by the commission for achieving universalcoverage by 1997. Minnesota's health care refonn effort isnow known as "MinnesotaCare."

-_:.-_::::---------- "=--= =~~~-

1

Master plan. This master plan brings together, in onedocument, descriptions and progress reports for all of themajor components of MinnesotaCare. Programs and activitiesthat require further legislative action are identified. Areaswhere progress is not being made are· also identified.

Minnesota Health Care Commission. The Minnesota HealthCare Commission is a 27-member commission that was createdby the 1992 HealthRight Act to advise the Legislature and theGovernor on health refonn policy. The commission'smembers represent consumers, employers, health careproviders, health plan companies, labor unions, and stategovernment.

HEALTH REFORM GOAI.JS

The three goals of Minnesota's health reform programs arequality, access, and affordability. Every component ofMinnesotaCare addresses one or more of these goals. Thegoals are, of course, interrelated. For example, affordabilityof health care affects access to care. The primary strategiesfor each goal are:

Quality

• Improved data and information about quality, outcomes,and consumer satisfaction

• Incentives to improve quality• Practice parameters• Technology assessments

Access

• Subsidized health coverage for low-income uninsuredpersons

• Insurance reforms to make private health coveragemore accessible and affordable

• A requirement that all Minnesotans maintain healthcoverage

• Rural health programs to improve access to services inrural communities

• Public health programs

2

••

••

•••••••••

Market reform to improve access and purchasing powerfor individuals and small groupsStrategies to address non-financial barriers to access toservices and coverage

Affordability

Growth limits to control the rate of increase of healthcare costsDelivery system restructuring: the Integrated ServiceNetwork (ISN) system and the Regulated All-PayerOption (RAPO)Insurance reformPromoting competition between health plan companiesPractice parameters .Technology evaluationsPreventionMarket reformUniform billing forms and proceduresAntitrust protection for cooperative activities thatimprove access, quality, and affordabilityMajor expenditure reporting and review

Universal coverage: Minnesota's commitment to cover theuninsured

••.... 0,

Minnesota made progress toward improving the availability andaffordability of health coverage as a result of the 1992 and1993 MinnesotaCare Acts. The MinnesotaCare program offerssubsidized coverage to the uninsured. Insurance reforms haveimproved the availability of affordable private coverage.These programs are described in other sections of this report.

The 1994 MinnesotaCare Act contains a legislative expressionof the state's commitment to achieve universal health coveragefor all Minnesotans by July 1, 1997, and places in statute theprinciples and strategies for the state's universal coverage plan.The universal coverage plan was developed by the MinnesotaHealth Care Commission, and is designed to achieve thefollowing broad goals:

• A comprehensive and affordable health plan must beavailable to all Minnesotans.

The universal coverage plan contains the following majorstrategies: insurance reform to ensure that affordable privatecoverage is available to persons who have the means topurchase it on their own, subsidized coverage for persons whocannot afford to pay the entire cost of coverage, andpurchasing pools to provide individuals and small groups anopportunity to purchase coverage as part of a large group. Toassure that state programs are affordable and have adequatefunding, the universal coverage plan calls for major financingreform to be enacted in 1995 based on a report to be submitte~

by the Minnesota Health Care Commission.

Insurance reform (effective July 1, 1997)

The major strategies of the universal coverage plan have thefollowing features:

•

•

•

Every Minnesotan will have health coverage and willcontribute to the costs of coverage based on ability topay;

No Minnesotan may be denied coverage or forced topay more because of health status;

Quality health services must be accessible to allMinnesotans;

• Guaranteed issuance: all private health plancompanies will be required to issue coveragewithout regard to health status or preexistingconditions

• All health care purchasers must be placed on an equalfooting in the health care marketplace; and,

4

Insurance reform (continued)

• Community rating: health plan companies willbe required to charge everyone the samepremium for the same health coverage, ratherthan charging higher premiums for persons whorepresent a higher risk because of their healthstatus or the existence of preexisting healthconditions

Purchasing pools

• Consolidation of state programs: A goal ofMinnesotaCare is that all of the state ofMinnesota's health coverage programs will becombined into one streamlined program, andeventually combined with health programs forstate employees.

All Minnesotans will have opportunities topurchase health coverage as part of largegroups, either through state-administeredpurchasing pools or through private purchasingpools

•No underwriting: health plan companies willbe prohibited from charging higher premiums orrestricting coverage for persons because of theirhealth status or the existence of preexistinghealth conditions

•

Financing reform• No preexisting condition exclusions: health

plan companies will be prohibited fromexcluding coverage of preexisting healthconditions

• The state's goal is to achieve universal coveragewithout a net increase in public and privatespending in health care.

Subsidized coverage

• Portability of coverage: persons will be ableto change jobs or switch health plan companieswithout facing the risk that they will lose healthcoverage or be charged unaffordable premiums

•

•

Methods will be developed to identify andrecapture savings from universal coverage tooffset the costs of covering all Minnesotans.

Perverse incentives in the existing financing andtaxation systems will be eliminated

• MinnesotaCare subsidy program: TheMinnesotaCare subsidy program will continueits phase-in to provide basic health coverage foruninsured Minnesotans

5

The state's universal coverage commitment and generalstrategy is now spelled out in state law. However, mostcomponents of the universal coverage plan will require furtherlegislative action. Financing reform is likely to be a majorissue during the 1995 legislative session because revenues fromexisting provider and premium taxes are expected to beinadequate to fully fund the MinnesotaCare Program throughthe state's 1996-1997 fiscal biennium.

Under the 1994 Act, a number of insurance reforms andrequirements become effective in 1997. An individual mandatewill require all Minnesotans to obtain and maintain qualifyingcoverage. Insurers will be required to renew or sell policiesto anyone seeking to purchase coverage. Only very limitedpremium rate variations will be allowed among insurers.Insurance reforms are described in more detail in a latersection of this report.

···.Care(Jommis~jetii~e Goalg'

Percentage of Minnesotians with Health Insurance

98%

94%

96%

100%

Minnesotu_···Unive

During 1994, the Minnesota Health Care Commission willobtain updated data on the number and characteristics of theuninsured, and will complete a financing study by January1995 with recommendations to the Legislature on a stable, longterm funding system for universal coverage. The Commissionwill also study and make recommendations to the 1995Legislature on further market reforms, possible elimination orstandardization of pre-existing condition limitations, health careaffordability, and desirability of requiring all health plans tooffer individual health policies.

1993 1994 1995 1996 1997

6

Universal coverage

1992 1993

,'J-'

1

[Z] Planning

2

1994

3 4

~ Transition

1995

5 6

1996

\'~~-';

• Full Implementation

Key Dates

(Also see the progress reports for the MinnesotaCare subsidyprogram and insurance reform.)

1 May 1992. The 1992 MinnesotaCare Act establishesthe MinnesotaCare program to provide subsidizedcoverage to the uninsured. The Act also containsinsurance reforms and other strategies for improvingaccess to health coverage. The Act represents asignificant step to improve access but is not designedto achieve universal coverage.

* Requires further legislative action.

2

3

May 1993. The 1993 MinnesotaCare Act directs theMinnesota Health Care Commission (MHCC) todevelop a comprehensive plan to achieve universalcoverage by 1997.

February 1994. The MHCC submits its universalcoverage plan to the legislature and the governor.

7

4

5

6*

7*

May 1994. The 1994 MinnesotaCare Act, includingthe MHCC's universal coverage plan, is signed intolaw. The legislation contains a commitment toachieve universal coverage by 1997, and spells outthe state's universal coverage strategies.

January 1995. The MHCC's recommendations onfinancing universal coverage will be submitted to thelegislature and the governor.

May 1995. Anticipated date of enactment offinancing reform, including stable, long-termfinancing for universal coverage.

July 1997. The target date for achieving universalcoverage.

MinnesotaCare Health Plan: subsidized health coverage forlow-income uninsured Minnesotans

Minnesota's refonn strategy includes insurance refonns andcost containment measures that are designed to increase theavailability and affordability of private health coverage. Thesestrategies are described in later sections. Even with fullimplementation of these refonns, however, many low-incomeMinnesotans will be unable to afford to pay the entire cost ofprivate health coverage. The MinnesotaCare Health Plan wascreated in the 1992 HealthRight Act to provide state-subsidizedhealth coverage to low-income, uninsured Minnesotans.

The MinnesotaCare Program began providing subsidized healthcoverage for low-income, uninsured Minnesotans in October1992. Initially, the program covered only families withchildren. The program is scheduled to expand to includesingle adults and couples with no children on October 1, 1994.Over 91,000 individuals have enrolled in the program sinceOctober 1992. Over 70,000 individuals are currently enrolled.

To be eligible, applicants must have been without insurancecoverage for at least four months and must not have had accessto employer-subsidized coverage for at least 18 months (withsome exceptions). Families with children with incomes up toapproximately 275 % of the federal poverty guideline areeligible for coverage. (The income cutoff for a family of threeis $32,640 a year.) Single adults and couples without childrenare eligible if their income does not exceed 125 % of federalpoverty guideline. This amount will increase to approximately

8

275% of the federal poverty guideline on October 1, 1995.

Enrolled individuals and families pay a premium that is basedon their ability to pay.

The MinnesotaCare Health Plan covers a comprehensive arrayof services, including primary and preventive care as well asacute care and inpatient services. Inpatient hospital coveragefor adults is limited to $10,000 per year, in order to preventerosion of the private insurance market and to facilitate themovement of individuals with catastrophic conditions to thefederally subsidized Medical Assistance program.

The MinnesotaCare Health Plan is only one of several statehealth care programs. Refonn goals and strategies for thestate's health care programs are described in a later section.

MinnesotaCare Health Plan

1992

1 2 3

1993

'A. •.~If"

~i'X~

"""""

4 5

1994 1995

6

1996

m Planning

Key dates

~ Transition • Full Implementation

1

2

3

4

May 1987. The Children's Health Plan, theprecursor to the MinnesotaCare Health Plan, wasenacted to provide limited health coverage touninsured children. Enrollment began July "1, 1988.

April 1992. The 1992 HealthRight Act authorizedthe MinnesotaCare Program.

October 1992. Enrollment began for families ofchildren who were already enrolled in the Children'sHealth Plan.

January 1993. Enrollment was expanded to includeall eligible families with children, with incomes up to275% of the federal poverty guideline.

9

5

6

7

8

July 1993. Coverage expanded to include inpatienthospital services.

October 1994. Eligibility expands to include adultswith no children, with incomes up to 125% of thefederal poverty guideline.

October 1995. Eligibility for adults withoutdependent children expands to 275 % of the federalpoverty guideline.

July 1997. Proposed date for full implementation ofa reformed state subsidy program for all low-incomeMinnesotans, with a permanent, stable revenue base.

Insurance reform: improving access and affordability in theprivate insurance market

In the current private insurance market, many individuals,families, and employer groups are unable to obtain affordablecoverage because health care plans consider them a poor riskdue to their health history, age, occupation, or othercharacteristics. MinnesotaCare's insurance reforms aredesigned to make private health coverage more accessible andaffordable, particularly for those who have existing healthconditions or are considered higher risk. The two major goalsof insurance reform are:

Guaranteed issuance: to require insurers to issue andrenew coverage to anyone who desires it, regardless oftheir health status or risk

Community rating: to spread the costs and risk ofhealth coverage more evenly across large populations.

Other insurance reform goals include portability of coverageand elimination of underwriting for pre-existing conditions.

Most of Minnesota's insurance reforms apply only to smallgroup and individual health insurance policies. FederalEmployee Retirement Income Security Act (ERISA) laws limitthe ability of Minnesota and other states to regulate employeehealth benefit plans provided by "self-insured" employers.

10

Minnesota's insurance reforms are being phased-in over time,for two reasons. First, implementing insurance reforms tooquickly would result in sizeable premium increases for healthy,low-risk individuals and groups, as higher cost persolls reenterthe market and premiums are evened out, creating the risk thatinsured persons will drop coverage. Second, the final stepstoward guaranteed issuance and community rating must betimed to coincide with universal coverage and a fully fundedsubsidy program. Otherwise healthy individuals and groupswould be able to choose not to obtain coverage until they needit, at which time insurers would be obligated to issue coverage,thereby driving up the cost of coverage for everyone.

Insurance reform

1992

1

1993

2 3

1994 1995

4

1996

5

1997

6

o Planning

Key dates


1

2

3

April 1992. Insurance refonns enacted in the 1992HealthRight Act.

January 1993. Effective date of provision allowing100% deduction from state income for premiums forself-employed persons.

July 1993. Effective date for HealthRight smallgroup and individual insurance refonns, includingunisex rating, rate bands of ± 25% for certainfactors and ± 50% for age, portability of coveragefrom group to individual coverage within the same

11

carrier, guaranteed issue in the small group market,guaranteed renewal in small group and individualmarkets, a new minimum benefit package for thesmall group market, restrictions on pre-existingconditions limitations, increasing loss ratios in smallgroup and individual markets, rate approval for smallgroup and individual markets, prohibition of carvingout higher risk employees.

(Numbers 4-6 are on next page)

Insurance reform (continued)

1992

1

1993

2 3

1994 1995

4

1996

5

1997

6

rn Planning

Key Dates (continued)


4 July 1995. Size of employer groups eligible tobenefit from guaranteed issuance and renewal,restricted rate bands, unique small group benefitpackages and other projections for small groupschanges from groups 2-29 eligible employees to 2-49eligible employees. Rate bands for individual andsmall group narrows to ±12.5% for certain factorsand 25% for age. Portability of coverage to anygroup or individual health plan will be guaranteed toindividuals who maintain continuous coverage andwhose preceding coverage was medical assistance,general assistance medical care or MinnesotaCare.

5

6*

July 1996. Rate bands for individual and smallgroup narrows to ±7.5% for certain factors and±15% for age.

July 1997. Proposed effective date for requiring allMinnesotans to have health coverage, and for fullimplementation of the following insurance reforms inall markets over which the state has regulatoryauthority: unconditional guaranteed issue andrenewability, portability of coverage across allmarkets, elimination of underwriting and preexistingcondition limitations, full community rating.

13


Data initiatives: collecting and disseminating useful informationon health care costs, quality, and outcomes

The success of MinnesotaCare's quality, access andaffordability programs depends on having better data on cost,quality and outcomes. An essential component ofMinnesotaCare is the development of a data system. Data isneeded for four important purposes:

• to monitor the broad effects of health care reform onquality, access, and affordability;

• to set and enforce growth limits (systemwide, and forindividual health carriers and providers);

••••••

access, utilization, and benefit structures;Hospital quality reports;Information on outcomes and consumer satisfaction;Data on administrative costs;Studies of regional and county differences in healthstatus and access;Data on major capital expenditures (more than$500,000).Data from "action plans" that must be submittedannually by all health plan companies to the statebeginning July 1, 1994.

• Comparative information on health plan costs, quality,

• to help consumers and purchasers compare health plansand providers on the basis of quality, access and cost.

Some of the specific types of information that will be availablebecause of the data collection program are:

• Statewide information on health care spending,revenues, prices and risk factors;

• Data to monitor the short-term reduction in spending;

Minnesota Health Data Institute

The Minnesota Health Data Institute is a public-privatemechanism for coordinating data collection activities. TheInstitute is a partnership between the Commissioner of Healthand a Board of Directors. The Institute and the Commissionerwill work together to establish a centralized cost and qualitydata system that will be used by both public and private"customers." The goal is to create an integrated data systemthat will provide clear, usable information on the cost, qualityand structure of health care services in the state of Minnesotain a publicly accountable manner. The data system will bestructured to utilize "electronic data interchange" (EDI)mechanisms.

to make health plans and providers publicly accountablefor quality, access, and costs;

•

14

The Data Institute is governed by a 20-member Board ofDirectors. The board is appointed by a variety oforganizations, as specified in statute, and represents hospitals,HMOs, Blue Cross and Blue Shield, insurers, consumers,purchasers, physicians, teaching institutions, nurses, and stateagencies.

Analysis and development of reports

The data collected through the Data Institute, together withdata from aggregate surveys and other sources, will be used bythe Department of Health to develop reports and otherinformation for a variety of audiences.

Reports on Quality and Outcomes of CareThe Data Analysis Program in the Department ofHealth will develop health plan report cards, reports onoutcomes of care for specific health conditions,provider profiling reports, and other reports on qualityof care for consumers, policymakers, purchasers,providers and health plans. Hospital quality reportswill also be developed.

Economic studiesThe Health Economics Program in the Department ofHealth will develop economic analyses forpolicymakers, and use the data for monitoring andenforcing the limits on the rate of growth in health careexpenditures in the state.

15

Dissemination of Reports

Information will be provided to consumers, providers, insurers,employers, and others through the Health InformationClearinghouse. This information will help consumers andpurchasers make more informed decisions about purchasinghealth coverage and using health care providers and serviceseffectively. It will also help providers and health plansevaluate and improve their quality and cost-effectiveness.

Data initiatives1992

1

1993

2

1994

34 5 6 7

1995

8

m Planning

Key dates


1

2

3

4

5

·6

April 1992. 1992 HealthRight Act establishes the DataAnalysis Program in the Department of Health and theData Collection Advisory Committee.

May 1993. The Data Institute is created by statute.

September 1993. The Data Institute holds its firstmeeting.

October 1993. Commissioner of Health submits DataCollection Plan to the Legislature.

December 1993. Emergency data collection rules areadopted requiring providers, insurance companies, andgroup purchasers to submit data.

May 1994. Legislature requires the Department ofHealth to develop hospital quality measures and toconduct a pilot study on provider perspective on access

17

and quality. Legislature authorizes the Data Institute todevelop a standard patient satisfaction survey.

7 . June 1994. Target date for the development of astandard patient satisfaction survey by the DataInstitute.

8 December 1994. Anticipated date for development offirst health plan report cards.

9 December 1995. Anticipated date for completion ofreports on outcomes and practice patterns associatedwith the first three health conditions. Quality indicatorsare expanded and reported for all health insurancecompanies.

10 December 1996. Target date for full implementationof data collection plan and electronic data interchangestandards.

Health care information: providing information on health carecosts and quality

• Assist enrollees in understanding their rights;• Explain and assist in the use of all available complaint

systems, including internal complaint systems withinhealth carriers, community integrated service networks,integrated service networks, and the departments ofhealth and commerce;

• Provide information on coverage options in eachregional coordinating board's region of the state.

• Provide information on the availability of purchasingpools and enrollee subsidies; and

• Help consumers use the health care system to obtaincoverage.

within the Health Information Clearinghouse. The office wascreated to assist health plan company enrollees and to serve asa resource center for enrollees. As mandated by the 1994 Actthe office will:

18

During the 1994 Minnesota legislative session, the Legislatureauthorized the creation of an Office of Consumer Information

• Report cards for ISNs and other health carriers• Practice parameters• Technology assessments• Information on health reform programs• Information about purchasing pools• Quality and outcomes information• Hospital quality data• Information on health plan companies by geographical

areas

The Clearinghouse will provide information to diverseaudiences, including providers, health insurance administrators,hospital administrators, health policy analysts, managed careprofessionals, legislative staff, employers, and the generalpublic. Among the types of information that will be distributedby the Clearinghouse are:

A recurring theme in many of MinnesotaCare's programs isproviding better information about health care costs andquality. The Health Information Clearinghouse was establishedin the 1993 MinnesotaCare Act to provide easy access to healthinformation for consumers, employers, providers, healthcarriers, and the public.

Health care information

1992 1993

1 2

1994

3 45

1995

6

1996 1997

m Planning

Key dates


3 January 1994. The Clearinghouse released its firsthealth reform newsletter.

1

2

January 1993. The MHCC recommends creating aninformation clearinghouse.

April 1993. The MinnesotaCare Act authorized thecreation of the Information Clearinghouse.

5

6

May 1994. Minnesota Legislature authorized thecreation of the Office of Consumer Information.

December 1994. Release of first health plan reportcard. Release of practice parameters and patientguides for first three condition areas.

4 April 1994. The Clearinghouse makes availablenumerous Minnesota health reform publications.

19

Growth limits: limiting the annual rate of increase in public andprivate health care costs

The Commissioner of Health is responsible for enforcing annual limitson the rate of increase in total public and private health care spendingin Minnesota. The growth limits are designed to reduce the rate ofgrowth by at least ten percent each year for the next five years.Growth limits will be enforced through overall global limits onIntegrated Service Networks (lSNs), and through the regulated allpayer option (RAPO) which will control price and utilization for allservices that are not covered by an ISN. (The ISN/RAPO system isdescribed in more detail in the next section.) Interim growth limitswill control increases in health plan spending and provider revenuesuntil the ISN/RAPO system is in place.

Growth limits: on health care spending1994 - 1998

1994 - 9.4%*

1995 - 8.3%**

1996 - 7.4%**

1997 - 6.7%**

1998 - 6.0%**

* Actual** Projected

20

In addition, the Commissioners of Health and Commerce willmonitor health plan company reserves and net worth for the companyeach commissioner respectively regulates to ensure that savings fromexpenditure limits are passed on to consumers in the form of lowerpremium rates. Health plan companies with reserves less than therequired minimum or greater than the allowed maximum at the endof the year will submit a plan of corrective action to the appropriatecommissioner. The plan of correction must show how the healthplan company will come into compliance, and a timetable forachieving compliance.

Minnesota Health (are Spending 1994-2000Dollars inBillions

.Lj".-.--.-,-""",,---.-.--.-.---r.--,..-----.,35

30

25

20

1510

5

o1994 1995 1996 1997 1998 1999 2000

Yoor

Growth limits

1992

1

1993

2 3 4

1994

5 67

1995

8 9

1996

10

1997

m Planning

Key dates


1

2

3

April 1992. The 1992 HealthRight Act establishesgrowth limit targets to reduce the rate of growth inpublic and private health care spending by at least tenpercent a year. The Minnesota Health CareCommission is assigned the task of developing a planto implement the growth limits.

November 1992. Interim data collection iscommenced to collect data on rates of growth in healthcare spending.

April 1993. The Commissioner of Health establishesthe 1991 baseline growth trend at 10.8%; estimates1994 health care spending at 10.2%; and develops amethodology to set growth limits.

21

4

5

6

May 1993. The 1993 MinnesotaCare Act is passed.It includes annual growth limits for the next fiveyears and establishes a methodology to implementinterim growth limits for 1994 and 1995.

April 1994. Baseline data for 1993 submitted bypayer and providers.

May 1994. The 1994 MinnesotaCare Act is passed.It extends the interim growth limits for 1996 and1997 until the ISN and RAPO systems are fullydeveloped.


Growth limits (continued)

1992

1

1993

2 3 4

1994

5 67

1995

8 9

1996

10

1997

m Planning

Key Dates (Continued)

III Transition • Full Implementation

7

8

May 1994. Commissioners of Health and Commercewill monitor health plan company reserves, andrequire plans of correction from health plan companiesoutside of required reserve requirements.

February to July 1995. Data and reports areevaluated and audited to determine compliance withthe first full year under growth limits (over 1993).

23

9

10

July 1995. Names of payers that exceeded thegrowth limit for 1994 are published.

July 1996. Enforcement process begins for payersand providers that exceeded the growth limits basedon two-year aggregate data.

ISN/RAPO system: improving quality, access and affordabilitythrough restructuring the health care delivery system

Expanding health care coverage to the uninsured, whilemaintaining or improving quality, requires systemwide changesto contain health care costs and to get more value from eachhealth care dollar already being spent.

A dual system of Integrated Service Networks (ISNs) and aRegulated All-Payer Option (RAPO) will contain health carecosts and improve access and quality. ISNs are a new kind ofhealth plan that will be accountable for the cost and quality ofhealth care services provided to its members and communitiesserved. Under the ISN system, providers and insurers will haveincentives to prevent illness, improve quality, and control costs.Competition between ISNs will be encouraged and facilitated."RAPO" is the name for the cost containment and qualityregulations that will govern all health care services that are notcovered by ISNs. RAPO will include a uniform fee scheduleand standardized payment and utilization review systems.RAPO requirements will be managed to ensure that the rate ofgrowth of health care costs in the non-ISN sector will remainunder the annual growth limits. The ISN/RAPO concept wasdeveloped by the Minnesota Health Care Commission, and hadthe support of all the major stakeholder groups through theirappointed representatives on the Commission.

24

The ISN/RAPO system approved by the 1993 Legislature, wasfurther refined in the 1994 MinnesotaCare Act, and will bephased in between 1994 and 1997.

The plan for phasing in ISNs and the RAPO was developed bythe Minnesota Department of Health in consultation with theMinnesota Health Care Commission. The planning processalso incorporated extensive research of issues and options, andmany opportunities for public and stakeholder group input,including six public hearings around the state, and widedissemination of two discussion drafts.

The transition to the ISNlRAPO system will begin July 1,1994, with requirements for fuller disclosure to consumers,purchasers, and communities of the characteristics andperformance of existing health plan companies such as HMOs,Blue Cross and Blue Shield of Minnesota, and traditionalindemnity insurers. Standard billing and utilization reviewprocesses will also be instituted to reduce paperwork and costlyadministration. Small, locally governed "Community ISNs"will be allowed to form in January 1994. Rules will bedeveloped in 1995 and 1996 to further describe the details ofthe ISNlRAPO system. Beginning July 1, 1997, health plancompanies will operate under regulations governing ISNs, orunder regulations governing the RAPO.

Serving high risk and special needs populations throughrisk adjustment

Also by July 1, 1997, the state will develop and implement arisk adjustment system. Risk adjustment is needed to removecurrent disincentives to insure and serve high risk and specialneeds populations, and to help assure the viability of all healthplan companies by promoting fair competition on the basis ofefficiently providing services rather than on the health status ofa plan's insurance pool.

Action plans: improving accountability of health plancompanies

Beginning July 1, 1994, all health plan companies will berequired to begin submitting annual "action plans" to the stateas a condition of doing business in Minnesota. The purpose ofthe action plan requirement is to achieve fuller disclosure ofhealth plan company practices and operations that will promotesound, well-informed decisions by consumers, purchasers, andgovernment. The action plans must include the health plancompany's policies and practices regarding its: selection, use,and availability of health care providers; enrollment of high riskand special needs populations; use of quality data to monitorand improve quality; and planned or existing efforts to offercoverage in rural and other communities it currently does notserve.

25

Action plans are required solely to provide information, andcopies of the plans will be available to a large variety ofpotential end-users through the state's health care InformationClearinghouse: Health plan companies with fewer than 50,000members must submit action plans, if they have no plans orpolicies with regard to categories above, they have only toreport this on their submission.

~

ISNIRAPO system

January 1993. The Minnesota Health Care Commissionunanimously passes a cost containment plan containing theISN/RAPO concept.

1997

109

1996

May 1994. Enactment of ISN/RAPO revisions andimplementation timeline. Some new requirements for allexisting health plan companies take effect.


July 1994. Effective date of legislation which allowsformation of new, small, community-based ISNs.Additional new requirements for all existing health plancompanies take effect.

July 1994. II Action plans II must be submitted to the stateby all health plan companies describing whether and howthe company addresses or plans to address issues of:provider selection, use, and availability; enrolling highrisk and special needs populations; and initiatives toimprove quality and serve communities it current does notserve.


5

7

6

26

8

1995

4 5 67

~ Transition

1994

321

1993

February 1994. The Commissioner of Health'simplementation plan is submitted to the Legislature.

August 1993 through January 1994. Development ofimplementation plan, including public hearings around thestate, wide dissemination of discussion drafts for reviewand comment, and numerous public meetings anddiscussions.

May 1993. The ISN/RAPO system is enacted into law,and the Commissioner of Health is assigned the task ofdeveloping an implementation plan and proposedlegislation, in consultation with the Commission.

m Planning

4

3

2

Key dates

1

1992

Key Dates (continued)


8

9

January 1995. Community ISNs may begin provingcoverage. Due date for ISN/RAPO transition plan from theMinnesota Department of Health (MDH) and MHCC.Effective date for standard billing and utilization reviewprocess and first stage of risk adjustment implementation.

January 1996. ISN and RAPO rules and laws must beenacted or adopted. Phase-in of RAPO begins.

27

10

11*

July 1996. Voluntary formation of ISNs may begin.

July 1997. Anticipated date for full implementation of theISN/RAPO system, including recodification and reform ofall laws regulating health carriers. Anticipated date forfull implementation of a risk adjustment mechanism.

Regional coordinating boards: assuring regional involvementand advice on health care issues

1

Six Regional Coordinating Boards (RCBs) advise theCommissioner of Health on issues relating to access, quality,and affordability of health care in each region. The boards alsofunction as a community forum to bring together representativesof consumers, providers, insurers, employers, and other majorstakeholders to discuss ways of improving the effectiveness ofthe regional health care system.

Each RCB has 17 members representing consumers, employers,health care providers, health plan companies, labor unions,county commissioners, and state agencies.

28

1'""'.I "

··I···--~. i .! r·.J._........_.,-1.,

I ,--_.--'T'---1

~=Jt)'--r-j I

i I r._-,-' .L.-!

I

.

~___.J I f\-~i .!. 2' IIi'I '

--4 !I;-.--.

Regional coordinating boards

1992

1

1993

2 3

1994

456

1995 1996 1997

m Planning

Key dates


1

2

3

April 1992. The 1992 HealthRight Act authorizes theformation of Regional Coordinating Boards.

January 1993. RCB members are appointed and theboards begin to meet.

June 1993. RCBs submit their work plans to theCommissioner of Health.

29

4

5

6

November/December 1993. RCBs host publichearings on ISN/RAPO drafts.

January 1994. RCBs submit Interim Report to theCommissioner of Health.

January 1994. Pilot project initiated to determine aprocess for adopting regional public health goals.

Public health: strengthening and supporting the public healthsystemOur present health system is composed of two subsystems--thepublic health subsystem and the health care delivery subsystem.In Minnesota, the public health subsystem is anchored in thestate's Community Health Services system, a partnershipbetween the Minnesota Department of Health and the 49 localCommunity Health Boards around the state. The public healthsystem will continue to play an important role in Minnesota'sreformed health care system.

The primary goal of public health is to fulfill the community'sinterest in assuring the conditions in which members of thecommunity can be healthy. Achieving the goal of public healthis a shared responsibility of our citizens, their communities, andtheir elected officials. Under the state's health care deliverysubsystem reforms, private sector providers and health plancompanies will have stronger incentives and obligations toimprove not only the health of their own patients and enrollees,but also the health of the entire community. As a result, thepublic health community will be better able to pool resourceswith its new partners to help achieve public health goals.

To most effectively and efficiently achieve these public healthgoals, health plan companies will work in tandem with publichealth agencies and others in the community on planning anddeveloping innovative strategies to achieve the joint goals. Thepublic health subsystem will have a continued responsibility toroutinely assess the health status of the community and bring

30

people together to plan and implement strategies to improvecommunity health. It will also continue to work to assure thatsystems and services are organized efficiently to maintain andpromote the health status of Minnesotans and preventunnecessary disease and disability.

The health care delivery and public health subsystems areinterdependent. Both systems do, and must, complement andinteract with each other. Health care delivery subsystemreform will change the service mix provided by the publichealth system, as universal coverage is achieved and privatesector providers and health plan companies become moreeffective in serving the needs of high-risk and special needspopulations.

For overall health reform to be successful, health care deliverysubsystem reform must be paralleled by reform of the publichealth subsystem, including definition of core function andagreement on priorities. Careful planning is needed tocoordinate the two subsystems. Funding systems must also bereformed and restructured to make sure the public healthsystem is supported and to assure that all Minnesotans receivequality services. Planning for public health subsystem reformis currently underway at the county and state levels.Implementation of public health subsystem reform will takeplace in coordination with health care delivery subsystemreform.

Public health

4 5

1992 1993

1

1994

2 3

1995 1996 1997

m Planning

Key dates


1

2

May 1993. The 1993 MinnesotaCare Act is enacted,including provisions requiring ISNs to cooperate withcommunitywide efforts to improve the health ofcommunities and requiring them to serve high-risk andspecial needs populations.

September 1993. The Commissioner of Healthreleases a discussion paper on the health reformimpact on the public health system, and asks the StateCommunity Health Service Advisory Committee toprovide advise on this issue.

31

3

4

5

July 1994. First draft of statewide and regionalpublic health goals are published. Final approval bythe Commissioner of Health scheduled in November1994.

February 1995. Proposed date for theCommissioner of Health to release recommendationsfor core public health functions and stable fundingsource.

1997. Proposed date for implementing a new fundingstructure for the public health system.

State health programs: simplifying and improving state healthcare programs

Minnesota has a complicated, fragmented system of programsto provide health care to low-income individuals and individualswith special needs. Health-related programs are administeredby the departments of Human Services, Health, EmployeeRelations, Labor and Industry, Education, and other agencies.Each program has its own eligibility requirements, forms,procedures and administrative structure.

Under MinnesotaCare health reform, the Medical Assistance,General Assistance Medical Care, and MinnesotaCare programswill be integrated and delivered through managed care healthplans. Another goal of MinnesotaCare is to eventuallycoordinate all of the state's health care, purchasing programs,including workers' compensation and state employee healthplans. An overhaul of the tax and financing system is neededto produce a rational, stable financing system for all governmentprograms.

32

State health programs

1992

12

1993

3

1994

45

1995

6

1996

7

1997

8

fl] Planning

Key dates


1

2

3

1976. Department of Human Services begancontracting with managed care plans for MA, GAMCclients who voluntarily choose. to enroll in HMOs.

July 1985. The Medicaid Prepayment DemonstrationProject began contracting with managed care healthplans for services to Medical Assistance and GeneralAssistance Medical Care clients who are required toenroll in their choice of plans.

May 1992. The HealthRight Act required a plan forconsolidating state health care purchasing.

33

4

5

March 1994. Plan describing state agency healthcare activities and proposal to consolidate purchasingis sent to Legislature.

May 1994. Legislation is enacted authorizing stateagencies to proceed further with plans to consolidatestate programs and to seek federal approval of theconsolidation. MinnesotaCare Legislation authorizedDepartment of Human Services to begin combiningadministrative functions with the Department ofEmployee Relations to purchase health services.


State health programs (continued)

1992 1993

m Planning

1994

~ Transition

1995 1996


Key dates (continued)

6

7*

January 1995. Proposed date for MHCC to submitrecommendations to the Legislature on financingreform and revenue sources for fully funded statehealth care programs.

July 1996. Proposed date for combining theMinnesotaCare and general assistance medical careprograms.

8** July 1997. Proposed date for full implementation ofa state program to provide comprehensive healthcoverage to all low-income uninsured persons.Proposed date for combining Medical Assistance andMinnesotaCare Program.

** Requires further legislative action and federal waivers.


35

Prevention: preventing illness and injury and improving thehealth of communities

To achieve Minnesota's cost containment goals, preventionactivities must be expanded and improved. ISNs and growthlimits will increase the incentives for health plans and providersto prevent illness. However, communitywide support forpreventive services that have been proven to reduce health carecosts must be expanded. Unhealthy lifestyles which contributeto high health care costs must also be discouraged. In its 1993report, the Minnesota Health Care Commission recommendeda package of prevention programs that were designed to producesignificant cost savings through the prevention of illness andinjury. Most of the prevention strategies proposed by thecommission were not enacted. Enhanced statewide and regionalprevention programs remain a missing piece in Minnesota'sotherwise comprehensive reform strategy.

MHCC recommendations.

In February 1994, the Minnesota Health Care Commissionissued another report with new recommendations for prevention.These recommendations include:

• Tobacco and alcohol tax increases to prevent smokingand excessive alcohol use

• Violence prevention programs

36

••

••

Make non-use of vehicle restraints a primary offense

Require use of helmets on motorcycles, snowmobilesand all-terrain vehicles

Worksite wellness and health promotion

Programs to improve birth outcomes

Prevention

1992 1993

1 2

1994

3

1995 1996 1997

m Planning

Key dates

~ Transition • Full Impiementation

1 January 1993. The Minnesota Health CareCommission submitted its recommendations forprevention initiatives.

3 February 1994. The commission submits newprevention recommendations.

2 May 1993. The fine for not using automobile childrestraints was raised to $50 effective August 1, 1993.

37

Uniform billing and claims forms: reducing administrative costby standardizing billing and payment forms

Health care providers, third-party payers, and purchaserscurrently use hundreds of different billing and payment formsand procedures. The 1992 MinnesotaCare legislation directs theCommissioner of Health to develop uniform billing forms,uniform electronic billing procedures, and other uniform claimsprocedures. The Commissioner and the MHCC recognized theAdministrative Uniformity Committee (AUC) as the majorvehicle to develop these recommendations. The AUC is astatewide, voluntary group representing public and privatepayers, hospitals, physicians, and other health care providers.Its purpose is to develop consensus regarding uniform billingand other administrative policies and procedures that will reducecosts and improve the quality of health plan and provideradministrative functions. The AUC has developedrecommendations on the· designation and use of standard claimsforms (the UB92 for institutions, the HCFA 1500 for providers,and the ADA form for dental services), electronic datainterchange, uniform patient and provider identifiers, andstandardization of patient ID cards. The AUC is also involvedin national Workgroup on Electronic Data Interchange (WEDI)committees and discussions to stay informed on national effortsin this area, and also to influence these national efforts.Recommendations developed by the AUC were implementedthrough legislation in 1994, with full implementation in 1997.

38

Uniform billing and claims forms

1 2 3 4 5 6

1997

,.:..",\'>!

19961995

."'-'1"

,y"

199419931992

m Planning ~ Transition • Full Implementation

Key dates

1 1991. Administrative Uniformity Committee (AUC) isformed to develop recommendations on uniform billingforms and procedures.

UB92, HCFA 1500 and ADA billing forms, definitions,and specifications begins. Phase in of standard patient andprovider identifiers begins.

2 December 1992. The AUC presents preliminaryrecommendations to the MHCC and Commissioner ofHealth.

5 December 1994. Anticipated date for dissemination ofinformation on rules covering uniform definitions forclaims forms, standard ID cards, and additionaldocumentation.

3

4

December 1993. AUC finalizes recommendations onstandard billing forms, definitions and specifications.

May 1994. The Administration Simplification Act isenacted requiring use of UB92, HCFA 1500 and ADAforms by all payers and providers, mandating the use of astandard patient, provider, and group purchaser identifierconsistent with WEDI recommendations, and requiring thephase in of standards for patient ID cards. Phase in of

6 January 1997. Target date for full implementation ofstandard billing forms, definitions', and specifications; andfull implementation of standard patient and provideridentifiers.

39

Practice parameters: developing statements regarding effectivecourses of treatment and providing malpractice protection forproviders who follow them

The practice parameter initiative of the MinnesotaCare healthcare reform program has been established for the purpose ofpromoting the use of the best available knowledge about themost cost-effective courses of health care statewide. Practiceparameters are statements designed to guide the clinicaldecision-making of health care providers and patients that aresupported by outcomes research, or approved by the federalAgency for Health Care Policy and Research or national healthcare associations. Practice parameters are approved by theCommissioner of Health, based on the advice andrecommendations of the Minnesota Health Care Commissionand the Practice Parameter Advisory Committee. Practiceparameters are not compulsory. Compliance with a practiceparameter approved by the Commissioner of Health is anabsolute defense against an allegation that a provider did notcomply with accepted standards of practice in the community.Comparisons of individual practice to such practice parametersare admissible only by the defense in malpractice proceedings.

40

1

Practice parameters

1992 1993

:;- (:, ,I

1 2 3

1994

4 5

1995 1996 1997

m Planning

Key dates


1

2

April 1992. The 1992 HealthRight Act created thepractice parameters program and the PracticeParameter Advisory Committee (PPAC).

April 1993. The PPAC adopts criteria for assessingand approving practice parameters.

4

5

March 1994. Expert review panels appointed.

July 1994. Anticipated date of completion of processof assessing and approving practice parameters forthe first three condition areas.

3 June 1993. Initial health condition areas selected(prenatal care, unstable angina, and low back pain).

41

Technology evaluation: information about the value andeffectiveness of health care technologies

New technologies often add to the cost of health care, but theycan also have the effect of reducing costs. The HealthTechnology Advisory Committee (HTAC) was created by the1992 HealthRight Act to conduct evaluations of technologies inorder to improve the ability of consumers, providers, andinsurers to assess the value and cost-effectiveness of technology."Technology" includes not only high-tech equipment, but alsonew drugs and procedures. The technology evaluations do notinvolve new research, but are based on an assessment ofexisting research. The purpose of conducting the technologyevaluations is not to bar or screen technology, but to providebetter information that will lead to appropriate and cost-effectiveuse of technology.

The 1994 MinnesotaCare Act addressed the distribution oftechnology by permitting the Minnesota Health CareCommission to promote and facilitate an open, voluntary ,nonregulatory, and public process for regional and statewidediscussion regarding the appropriate distribution of health caretechnologies, facilities, and functions. The purpose of theprocess is to facilitate collaboration to achieve health reformgoals. Participation in the forums is voluntary and agreementsor distribution plans that may be developed are not binding onany person or organization.

-

42

HTAC reports to the Minnesota Health Care Commission, andthe commission appoints its members.

Technology evaluation1992

1

1993

2 3 4 5

1994

6 7 8 9

1995 1996 1997

IZZI Planning

Key dates


5 September 1993. HTAC selects its first technologyfor review.

1

2

3

4

April 1992. The 1992 HealthRight Act creates theHealth Planning Advisory Committee to conducttechnology evaluations.

August 1992. The Minnesota Health CareCommission appoints HPAC members..

December 1992. HPAC submits recommendationsfor the process and criteria for selecting technologiesfor review and for conducting the technologyevaluations.

May 1993. The 1993 MinnesotaCare Act renames thecommittee the Health Technology Advisory Committeeand clarifies its functions.

43

6

7

8

9

January 1994. HTAC Use and Distribution Reportis submitted to the MHCC. The report is revisedand approved by the MHCC and sent to theLegislature.

February 1994. Preliminary technology evaluationreport on thrombolytic therapy is completed.

May 1994. HTAC's first technology evaluation iscompleted and approved by the MHCC. Legislationis enacted authorizing the MHCC to convene publicforums on distribution of technologies, facilities andfunctions.

July 1994. HTAC is expected to undertake 6-8technology evaluations per year.

Antitrust exceptions: antitrust safe harbor for beneficialcooperative activities

Competition is an important component of Minnesota's strategy.However, competition can at times lead to inefficientduplication of resources and a counterproductive health care"arms race" between providers or health plans. The 1992HealthRight Act authorized a process to provide antitrustprotection under certain circumstances. The details of theprocess were enacted in the 1993 MinnesotaCare Act. If it canbe demonstrated that a collaborative arrangement is more likelyto control costs or improve quality or access than a competitivemarketplace, the Commissioner of Health may sanction thearrangement to provide protection from state and federalantitrust laws.

44

Antitrust exceptions

1992

1

1993

2 3

1994

4

1995 1996 1997

m Planning

Key dates


1

2

April 1992. The 1992 HealthRight Act creates theantitrust exception process and authorizes theCommissioner of.Health to develop detailedprocedures and criteria.

February 1993. The Commissioner of Health submitsto the legislature proposed criteria and procedures forthe antitrust exception process that was developed inconsultation with an advisory committee.

45

3

4

May 1993. The 1993 MinnesotaCare Act is passed,including the provisions contained in the proposedrule.

September 1993. The first application for antitrustprotection is submitted to the Commissioner ofHealth.

Moratorium on mergers and acquisitions: prohibiting mergersand acquisitions by large health carriers

Competition is a major theme of Minnesota's health care reformstrategy. Competition on the basis of quality and efficiency willbe encouraged. At the same time, MinnesotaCare encouragescooperation and sharing of resources when this approach bestserves consumers. MinnesotaCare' s strategy represents abalancing of competition and collaboration.

During the 1994 legislative session, concerns were raised aboutrecent merger activity involving the state's largest health plancompanies and provider chains. Legislative debate centeredaround the possibility that mergers may lead to anti-competitivemarket domination by a few giant corporations and may putsmall, locally controlled organizations at a competitivedisadvantage. To help alleviate these concerns, the 1994MinnesotaCare Act imposes a temporary moratorium onmergers and acquisitions by large health carriers, includinginsurance companies, nonprofit health service plan corporations(such as Blue Cross Blue Shield), and health maintenanceorganizations (HMOs).

Under the new law, health carriers having more than 5 percentof statewide enrollment or more than 10 percent of the metroarea enrollment are prohibited from merging with, or acquiring,any other health carrier. The moratorium went into effectimmediately and will last until July 1, 1996.

46

Moratorium on mergers and acquisitions

1992 1993 1994

1

1995 1996

2

1997

m Planning

Key Dates


1 May 1994. The 1994 MinnesotaCare Act is passed,including a moratorium on mergers and acquisitionsby health carriers.

2 July 1996. The merger moratorium, as passed by the1994 MinnesotaCare Act, expires July 1, 1996.

47

Major expenditures: promoting appropriate, cost-effectivedecisions about major health-related expenditures

Other: 4"

Hew BuddingPurchase:

11"By ReB Region

Region 1•

"

Region 4·45"

Total expendhures submhted - $371,977,429

Expenditure Reports Submitted forRetrospective Review

By Expenditure CategoryExpandIRemodel-Honmedkal: 10"

Region 5·3"

Equlpmentt/Technology:

20"

(ampuler System!Upgrade: 12"

Health care expenditures greater than $500,000 must bereported to -- and reviewed by -- the Commissioner of Health.Providers and health plans that make major expenditures thatare subsequently determined by the Commissioner to have beeninappropriate may be required to submit proposed future majorexpenditures to the Commissioner of Health for prior approval.

Large investments in buildings and equipment or thedevelopment of new expensive specialties and procedures cancontribute to rising health care costs. The 1992 HealthRightAct and the subsequent 1993 MinnesotaCare Act set in motiona process to restructure the delivery system and the incentivesthat drive health care purchasing decisions. Under a fullyreformed system, both ISNs and RAPO providers and insurerswill have incentives to make appropriate cost-effective decisionsabout major health care expenditures. The Legislatureconcluded that, before full implementation of the new system,providers and health plans may be inclined to make majorexpenditures "under the wire" in anticipation of later controlson such expenditures. For this reason, the 1992 Act created areporting and review process for major health careexpenditures.

48

Major expenditures

m Planning Full Implementation

1992

1 2

1993

3

1994

4

~.'~

5

Transition

1995

•

1996 1997

Key dates

1

2

3

April 1992. The HealthRight Act established theretrospective & prospective review process.

June 1992. The first major expenditure reports aresubmitted to the Commissioner of Health.

January 1993. Review process revised to standardizethe information to be submitted by providers.

49

4

5

December 1993. To date, 118 reports submitted, 51reviewed, 19 review not required, 48 pending review.No reports have failed the cost containmentrequirements to date.

May 1994. The 1994 MinnesotaCare Act is passedproviding the authority for MHCC to hold regionaland statewide public forums on the distribution oftechnologies, facilities and function (see descriptionin the Technology evaluation section).

Rural healtll programs: strengthening the rural health caresystem

Rural health programs include:

MinnesotaCare includes a comprehensive array of strategies tostrengthen the rural health care system. The Office of RuralHealth is responsible for overseeing rural health initiatives andworking to improve access, quality, and affordability of healthcare in rural communities. The Commissioner of Health andthe Office of Rural Health consult with a Rural Health AdvisoryCommittee.

••

•

Rural hospital transition grants

Subsidies for isolated, financially distressed ruralhospitals

A statewide health personnel database

The ISN/RAPO system is also designed to meet the needs ofrural communities. A principle that guided the MinnesotaHealth Care Commission in developing the ISN/RAPO systemis that health care is delivered locally and any cost containmentplan must be flexible and adaptable to the unique needs andconditions of each community. The ISN system will bedesigned to promote the formation of local, community-basedISNs that are responsive to the local community.

In addition, the 1992 MinnesotaCare statute set a goal ofincreasing the number of primary care physicians trained bythe University of Minnesota by 20% over the next eight years.MinnesotaCare also provided the Minnesota Higher EducationCoordinating Board with funding for a grant program toincrease the number of nurse practitioners practicing in ruralareas of the state.

• A program to establish rural community health centers

• Technical assistance regarding federal rural health careprograms

• Loan repayment programs for rural practitioners

• Technical assistance to facilitate the development ofcommunity-based integrated service networks

50

Rural health programs

1992

1

1993

2 3

1994

4 5

1995 1996 1997

m Planning

Key dates


2 January 1993. The Office of Rural Health completesreports on obstetrical access and mid-levelpractitioners.

1 May 1992. The 1992 HealthRight Act establishes acomprehensive array of rural health programs, andcreates the Office of Rural Health and the RuralHealth Advisory Committee.

4

5

1994. Evaluation of Rural Hospital Transition GrantProgram.

June 1994. Anticipated date for awarding grants forRural Health Community Center Program.

t

3 1993-1994. Data collection and data entry for healthpersonnel database.

51

Market reform/purchasing pools: leveling the playing field forpurchasers

In the existing health care market, smaller employers andpersons purchasing individual health coverage often pay higherpremiums due to cost shifting from large purchasers who havemore clout in the marketplace, and because of higheradministrative costs associated with servicing small groups andindividuals. The 1992 HealthRight Act created the MinnesotaEmployees Insurance Program (MEIP) , a state-administeredpurchasing pool for employers who desire to purchase healthcoverage for their employees through a larger pool. Privatesector purchasing pools have also emerged in Minnesota,including pools administered by the Business Health CareAction Group and the Employers Association.

The 1994 Legislature enacted statutory changes to facilitate theformation of more voluntary, private purchasing pools, andauthorized the commission to undertake a study to furtherdevelop the state's policies on market refonn and purchasingpools. The commission believes the state's goal should be tomake it possible for all individuals and groups to join a largepurchasing pool by July 1997.

52

1

Market reform/purchasing pools

1992

1

1993

2

1994

3 4

1995

5

1996 1997

r::z::J Planning

Key dates

~ Transition . • Full Implementation

1

2

3

April 1992. The 1992 HealthRight Act creates theMinnesota Employers Insurance Program (MEIP), astate-administered purchasing pool for privateemployers.

November 1993. The MEIP program beginsproviding health coverage to private employers.

February 1994. The MHCC recommends legislationto make it easier for voluntary, private purchasingpools to form.

4

5

6*

July 1994. Effective date for legislation making iteasier for private pools to form and authorizing theMHCC to develop additional market reformrecommendations.

January 1995. MHCC 1995 market reformrecommendations will be submitted to theLegislature.

July 1997. Proposed date for large purchasing poolsto be available to all individuals and small employers.

53

* MHCC proposal. Requires legislative approval.

Education and research: supporting education and researchsystems that meet the needs of a reformed health care system

As the health care system moves toward greater accountabilityfor its quality and efficiency, health care education and researchprograms must evolve to serve changing needs. The 1992HealthRight Act requested that the University of Minnesotachange its programs to graduate greater proportions of primarycare providers and provide more opportunities for training andresidencies in primary care, and educational programsemphasizing practice in rural communities. The Act alsocreated loan forgiveness programs for providers who agree topractice in rural areas.

Under the new competitive health care delivery system, researchand education institutions may find it increasingly difficult toattract the patients that are needed to maintain their research andeducation programs, particularly if their charges reflect theadded costs of research and education. Financing systems mustbe restructured to ensure that appropriate levels of funding aremaintained for education and research activities. The 1993MinnesotaCare Act directed the Commissioner of Health tostudy research and education financing systems and developrecommendations.

54

A report was issued by the Department of Health outlining keyissues and concerns involving the financing of medicaleducation and research under health care reform. The 1994MinnesotaCare Act directed the Department to convene anadvisory task force and continue its work in this area. Reportson this study will be provided in 1994 and 1995.

Education and research

1992 1993

1 2

1994

3 4 5

1995

6

1996 1997

fl] Planning

Key dates


4 February 1994. First MERC report to thelegislature.

*Requires legislative approval.

1

2

3

May 1992. The HealthRight Act requested that theUniversity of Minnesota adjust its curriculum toincrease emphasis on primary care and rural practice,and established loan forgiveness programs for ruralpractitioners.

May 1993. The MinnesotaCare Act directed theCommissioner of Health to develop recommendationson financing medical education and research.

November 1993. The Medical Education andResearch Costs (MERC) task force was formed toadvise the Commissioner of Health on this project.

55

5

6

7*

May 1994. The 1994 MinnesotaCare Act authorizedthe Commissioner of Health to convene an advisorytask force and continue its work on developingalternatives to financing medical education andresearch.

January 1995. Second MERC report to thelegislature.

July 1995. Estimated effective date for alternativefunding mechanism for medical education andresearch.

Malpractice costs: reducing malpractice costs and defensivehealth care practices

The 1992 HealthRight Act included some relatively minorprovisions to address malpractice costs. Procedural rules formedical malpractice cases were changed to require expertwitness signatures earlier in the legal process, to reduce theincidence of frivolous and groundless lawsuits. Uniforminterrogatories were established to simplify and expedite thediscovery process. Parties to a malpractice lawsuit are alsorequired to consider alternative dispute resolution as analternative to a trial.

These provisions may have a minor impact on malpracticecosts. However, much more can be done to reduce the costsassociated with malpractice lawsuits and judgments. Significanttort reform is a major missing piece of Minnesota's healthreform strategy.

The practice parameters program also has potential for reducingmalpractice risks and reducing defensive medicine. Thisprogram is described in an earlier section.

56

~-_.

Malpractice costs

1992 1993

1

1994 1995 1996 1997

m Planning

Key dates


1 April 1992. Malpractice provisions enacted in theHealthRight Act. The practice parameters program wasalso established (see practice parameters section).

57

""~,~-,----------

Provider conflicts of interest: prohibiting referral relationshipsthat create financial incentives for overutilization

The 1992 HealthRight Act authorized the Commissioner ofHealth to adopt rules restricting financial relationships orpayment arrangements involving health care providers underwhich a provider benefits financially by referring a patient toanother provider. The rules must be compatible with existingMedicare regulations, but cannot be less restrictive than theMedicare regulations. The Act provides that, until the rulesare adopted, the Medicare regulations apply to all health careproviders for all health care services (not just Medicare andMedicaid). The penalty for violation is a fine of $1,000 or110% of the financial benefit resulting from the arrangement,whichever is greater.

58

Provider conflicts of interest

1992 1993

1 2

1994 1995 1996 1997

m Planning

Key Date


1 April 1992. The HealthRight Act expands theMedicare provider conflict of interest restrictions tocover all Minnesota providers and services, andauthorizes rulemaking to establish more restrictiverequirements.

2 July 1992. Effective date of law authorizing fines forviolation.

59

r

Medicare balance billing: limiting the ability of providers tobill medicare patients for the difference between the Medicareapproved payment and the provider's normal charges

The 1992 HealthRight Act restricted the ability of health careproviders to bill Medicare patients for amounts above andbeyond the approved Medicare payment for a service.Beginning January 1, 1996, a provider will not be permitted tobill Medicare patients for any amount beyond the Medicareapproved amount and the applicable patient co-payment. Untilthen, the amount of "balance billing" that is permitted isreduced each year until no balance billing is allowed onJanuary 1, 1996.

60

Medicare balance billing

1997

5

1996

4

1995

3

1994

2

1993

1

1992

m Planning ~ Transition • Full Implementation

Key dates

1 April 1992. The balance billing restrictions areenacted in the HealthRight Act.

4 January 1995. Providers cannot collect more than105% of the Medicare-approved payment amount.

2 January 1993. Providers cannot collect more than115 % of the Medicare-approved payment amount.

5 January 1996. Providers cannot collect more than theMedicare-approved payment amount.

3 January 1994. Providers cannot collect more than110% of the Medicare-approved payment amount.

61

Prescription drug costs: the prescription drug market and costcontainment initiatives

Prescription Drug Study

Prescription drugs make up approximately 8-10% of healthcare spending in the State of Minnesota. There is no questionas to the clinical benefit of early intervention with drugtherapy, or that early intervention may result in significantsavings in health care spending by avoiding or preventing morecostly therapies. However, the rising cost of prescriptiondrugs has been a concern at both the national and state policylevels, particularly for those without insurance or withinsurance that does not include a prescription drug benefit.Those most vulnerable to increasing cost include many seniorcitizens who have insurance coverage through Medicare but nosupplemental coverage for the costs of prescription drugs.(Medicare does not include prescription drugs in its list ofcovered services). Another issue raised by communitypharmacies has been "differential pricing" and the inability ofcommunity pharmacies to purchase drug products frommanufacturers at the same price given to managed careorganizations and mail order pharmacies.

As a result of these concerns, the 1993 MinnesotaCare Actrequired that the Department of Health conduct a study of theprescription drug market and the factors influencing the pricesof prescription drugs. The study was conducted in 1993 andincluded an extensive literature review, interviews with

62

representatives of all components of the prescription drugmarket, and an evaluation of possible reform options. Thestudy concluded that the state should allow private sectorinitiatives, specifically ISNs and CISNs, to develop in the stateand build on past success of managed care to moderateincreases in pharmaceutical drug expenditures. While there isa clear need for assistance for those who currently lack accessto prescription drugs, any new program will require asubstantial financial base. Given that national reform mayinclude a prescription drug benefits in a universal benefitpackage or as a covered benefit under Medicare, the studyrecommended that the state see what happens at the nationallevel before the state begins anew, potentially costly,program.

Prescription drug costs

1992 1993

m Planning

1

1994

2

~ Transition

1996


Key dates

1 May 1993. The 1993 MinnesotaCare Act passed.Included in the Act were provisions for a study onthe prescription drug market and cost containmentstrategies. A generic substitution requirement wasalso included with a delayed effective date.

3 1994-1995. The Department of Health will continueto monitor the prescription drug market and nationalreform efforts to include prescription drugs as acovered benefit under Medicare and/or otheruniversal benefit options.

2 April 1994. The final report and recommendations,"Prescription Drug Study: A Report to the MinnesotaLegislature on the Prescription Drug Study" wasreleased by the Department of Health.

63

Generic drug substitution: requiring pharmacists to substitutelower cost generic drugs in appropriate situations

Brand name drugs are often much more expensive than genericequivalents. The 1993 MinnesotaCare Act requires pharmaciststo substitute the least expensive generic equivalent when fillinga prescription, unless the dispensing health care practitionerspecifically directed that the prescription be filled with aspecified brand. name drug. The pharmacist must inform thepatient of the substitution and must not substitute a genericdrug if the patient objects. Pharmacists are allowed to usetheir professional judgment to determine whether a genericdrug is safely interchangeable.

64

----------:-----------------------------------------------------------------,

Generic drug substitution

li

1992 1993

1

1994

2

1995 1996 1997

m Planning

Key dates


1 May 1993. The 1993 MinnesotaCare Act passes,including the generic substitution requirement with adelayed effective date.

2 January 1994. The generic substitution requirementbecomes effective.

65

Drug company gifts to practitioners: prohibiting drugcompanies from providing gifts to health care practitioners

The 1993 MinnesotaCare Act prohibits drug manufacturers anddistribu.tors and their employees from giving gifts with acombined value of more than $50 a year to health carepractitioners. The purpose of this requirement is to eliminatefinancial incentives for practitioners to prescribe particulardrugs, so that decisions are made based on the effectiveness,appropriateness, and cost ofthe various drugs that are availablefor treatment of a patient. The requirement does not apply tosamples provided for free distribution to patients, educationalprograms and materials, and similar activities. .

66

Drug company gifts to practitioners

,

1992 1993 1994

1 2

1995 1996 1997

[l2] Planning

Key Dates


1 May 1993. MinnesotaCare enacted with provisionsrestricting drug company gifts.

2 January 1994. Effective date of restrictions.

67

~et1

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MinnesotaCare: Progress Report

Universal Coverage

lOt

Health Care Information

1992 1993 1994 1995 1996 1997

I br!7r)zm~

MinnesotaCare Health Plans

19

Growth Limits

1992 1996 1997

Insurance Reform

1992 1993 1994 1995 1996 1997

trzuil~.,>,>,J , •.. '_-", , ,. , ',.,.," '.'" _'., ,',_ - . .' " ,', .; " ,',' .•.., .•.

ISN/RAPO System

1992 1993 1994 1995 1996 1997

i rz/y7~';"""';"""+"""""""':""""";"'"., .'.'.' '. ".' .'.'.' '. •• .'.' Co .' - .' - .'.' -',':.".'.' 'j: '.,' -.:" ,;. '. -",,' _ .,; ~-' '~ ," -'•.'.'~" ':. .'.. • ';'" :

". .'.'.' '. .' .' '. ::,".'.'.' -. ::' .; ..' .' .'; ,.~ ::' "-:.,:,";".\.::, ,,"., -, "" .'.;. \"'".' <_'''':,,' :' -: .... ;.,.:'.;,~ :" ,,-:.'.',.' -." / ,,:' ';

Data Initiatives

'002 ,~ ~.4......'.9.,95......•......... '.9.. 9.6..........•' 1997bzt11IIII, '.,' ....'. ".... ",. .D Planning

70



Regional Coordinating Boards

1992 1993 1994 1996 1997

Uniform Billing and Claims Forms

100t=~rr;~

Public Health

1992 1993 1994· 1995 1996 1997

I 1vm!T~

State Health Programs

1

Practice Parameters

19

tTechnology Evaluation

1996

Prevention

1992 1993 1994 1995 1996 1997

Vigzj I I I I I'> lZ.] Planning

71

o Transition • Full Implementation


Anlilrust Exceptions

1996

Merger Moratorium

'T '~ 19~..... 19~7 t>Major Expenditures

1996

Rural Health Programs

Market Reform/Purchasing Pools

1992 1993 1994 1995 1996 1997

tfZll!z;/~.. ·'····'····· , ' , ,.,., .. "." ., '. " . '.. i.. .. .. ,." -! ," _,':.. • r' "'. •< , '. .' .. ' ~ .. , .... , !:- -: ,.; ',_.. " :: '.' :.;'; <. ", .-',' .:' ,-:,... c.~. :. -, .. - " ' ._ "C..'_

,'" -;, ,". :: .. : ,l': ,,> .. '"';'::",.f. ," ,<; " ,<: .. _ :"-'."> ," :>, '.,"

Education and Research

19

tMalpractice Costs

1992 1993 1994 1995 1995 1997 I>( I I I I I

l2J Planning

72

t'8)' Transition • Full Implementation


Provider Conflicts of Interest

1996

Medicare Balance Billing

'i 19

Generic Drug Substitution

Drug Company Gifts to Practitioners

1996

Prescription Drug Costs

1992 1993 1994 1995 1996 1997 D Planning

73


Prevention

Tax and financing reform

u

74

Tort reform: medical malpractice

Four major areas remain where the state is not making adequate progress. These are the missing pieces in MinnesotaCare.

~ Consumer incentives and individual~ responsibility

Missing pieces

Consumer incentives and individual responsibility

MinnesotaCare includes major cost containment strategies thatfocus on the health care financing and delivery systems. However, individual consumers also share responsibility for the highcostofour existing system. Preventable illnessand overutilizationof the health care system add significant costs. Acomprehensivehealth reform package should include programs and incentives toincrease individual responsibility for reducing health care costsby maintaining healthy lifestyles and using the health care systemappropriately. Alcohol and tobacco taxes, seat belt and helmetlaws, consumer education and wellness programs, and insurancepremium discounts for healthy lifestyles will discourage unhealthy practices and encourage healthier, safer lifestyles. InJanuary 1993 the Minnesota Health Care Commission recommended legislation in these areas, but most of its recommendations were not enacted.

75

Prevention

The ISN and RAPO systems are designed to increase efforts byhealth plans and providers to prevent illness and injury throughfinancial incentives and regulatory requirements. However,much more must be done to maximize the opportunities to reducehealth care costs through prevention. Seventy percent of healthcare expenditures are spent on preventable conditions, whileonly three percent of resources are allocated for prevention. InJanuary 1993, and again in February 1994, the Minnesota HealthCare Commission recommended a number of targeted prevention programs to be funded by a cigarette tax increase. Theseprograms were not enacted. Prevention remains a significantmissing piece of the MinnesotaCare reform strategy.

Tort reform: medical malpractice

The 1992 HealthRight Act included some relatively minorprovisions to address malpracticecosts. The practice parametersprogram also has potential for reducing malpractice risks andreducing defensive medicine. However, significant tort reformis a major missing piece of Minnesota's health reform strategy.

76

Tax and financing reform

The existing system of financing government health programs isreally a nonsystem of fragmented, uncoordinated programs. TheMinnesotaCare subsidy program will continue to face shortfallsuntil adequate financing is provided. In addition, state andfederal financing and tax systems provide perverse incentivesthat work counter to the goals of health care reform. In February1994, the Minnesota Health Care Commission (MHCC) recommended that the tax and financing systems be reformed based ona study to be completed during 1994. The 1994 Legislatureaccepted this recommendation and authorized the MHCC toproceed. Financing reform will produce a more rationalfinancing system, minimize the additional costs of achievinguniversal coverage, and make possible a long-term, stablefunding base for all government health care programs.

Minnesota Health Care CommissionMinnesota Department of Health121 East Seventh PlaceP.o. Box 64975St. Paul, MN 55164-0975

(612) 282-6374

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