A Minnesota health reform that worked

  • Article by: EDITORIAL BOARD , Star Tribune
  • Updated: July 18, 2014 - 6:16 PM

State’s Medicaid payment initiative could be a national model.

Despite the bitter battle over the Affordable Care Act, there’s a surprisingly large patch of common ground when it comes to health reform. Among Democrats and Republicans, there’s widespread agreement that delivering health care more efficiently is key to taming the nation’s staggering health care costs without sacrificing care quality.

The hitch is that the reimbursement system overall remains one that rewards the volume of care delivered, not the value. Medical providers generally make more money when they provide more care. They’re penalized for doing less. What that means is that those with the necessary expertise to provide better care at less expense unfortunately have little incentive to do so.

That’s why the announcement last week that a payment reform demonstration project in Minnesota generated $10.5 million in savings its first year is a significant achievement, with federal health officials, other states and health care wonks taking note to see if it can be replicated elsewhere.

While the savings are a small fraction of the state’s and nation’s annual health expenses, the innovative effort by the Minnesota Department of Human Services (DHS) successfully enlisted providers in holding down Medicaid costs by promising to share some of the savings with them. The providers also had to meet quality benchmarks to ensure that the cuts didn’t diminish the care patients received.

The program’s first year of operation in 2013 suggests strongly that this approach works. After meeting cost savings thresholds, three of the six participating providers shared $2.8 million of the first year total savings, with the remaining sum returned to the state and federal governments. Medicaid, funded by state and federal dollars, provides care for the poor.

The initiative, dubbed Integrated Health Partnerships, is one of the earliest efforts at payment reform within the Medicaid program, and it appears to offer a solid path forward here and elsewhere.

Medicaid is one of the largest items in both the state and federal budgets. The program on average consumes “approximately 23 percent of state budgets and 8 percent of federal outlays,’’ according to the American Academy of Actuaries’ trade journal. If the Minnesota program can be scaled up, enormous sums could be saved.

About 100,000 Medical Assistance enrollees were involved in the program in 2013, with that number rising to 165,000 by early 2015. Total savings after the Minnesota program’s second and third years are complete are expected at $90 million.

With the rocky rollout of the Affordable Care Act continuing, the DHS initiative stands out as a health reform bright spot. DHS Commissioner Lucinda Jesson deserves credit for seizing the new opportunities for innovation that the ACA created; the state is one of six to be designated as a state innovation model by the Centers for Medicare and Medicaid Services and receive funding to test new ideas.

Setting up the Integrated Health Partnerships for the Minnesota Medicaid program was sensible. The DHS approach is similar to the “accountable care organization” payment reform model that federal officials are pursuing with the Medicare program for seniors.

Accountable care organizations are a much-discussed health reform championed by leading health experts. It made sense to see if it would work with Medicaid, the nation’s other big medical entitlement program, as well. It’s worth noting that MNsure’s new CEO, Scott Leitz, was one of the key DHS staff members working on this reform when he was still at that agency.

Minnesota’s providers also deserve credit for jumping in and making it work. Minnesota Hospital Association President and CEO Lorry Massa said that his members are enthusiastic about the initiative’s promise and that they looked upon it as a chance to improve patient care, while making payment reform a reality. Among the innovations that providers came up with to deliver quality care more efficiently: a groundbreaking program that has community paramedics visit high-risk patients at home to help avoid expensive emergency room visits.

The University of Minnesota’s Humphrey School of Public Affairs just named the DHS program as one of the winners of its State Innovation Awards. The accolade is deserved. This reform combined common sense, creativity and flexibility, qualities that too rarely come together in health care. Minnesota needs to continue this promising program, and other states should follow its lead.

  • Promising start

    “Minnesota’s initial results are encouraging and will provide valuable lessons for our nation’s health care delivery system. The findings demonstrate that states and organizations are working with health care providers and engaging with patients to better understand and deliver high quality care while reducing costs.”

    Dr. PATRICK CONWAY, deputy administrator for innovation and quality and chief medical officer at the Centers for Medicare and Medicaid Services

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