New state health plan has handle on costs

08/12/2005

Patricia Lopez,
Star Tribune
August 12, 2005

While most health plans are seeing hefty annual cost increases, one health plan in Minnesota is projecting an increase for the coming year of ... zero.

And it’s a government plan.

Little known to the public, Minnesota Advantage, the health plan covering state government employees, is starting to get some attention from other state governments and Congress.

The plan relies on an extensive database that compares costs and effectiveness among providers—down to the clinic level—and uses that information to sort providers into four tiers.

From Gov. Tim Pawlenty to the person who cleans under his desk, Minnesota’s 128,000 state employees and their dependents now choose from among the tiers’ 2,000 clinics, hospitals and health providers. Each tier has its own level of deductibles, co-pays and other out-of-pocket costs, although all require the same monthly premium.

Out-of-pocket costs, however, can be substantial. The maximum is $3,300 per family annually.

The cost of deductibles and co-pays rises from Level 1 to 4, but the same kinds of care are available at all levels. Because the system is so new, there is as of yet no strong measure of the outcome of care in the various tiers.

Michael Scandrett, a health care consultant who formerly led the Minnesota Council of Health Plans, calls tiered plans “the wave of the future” because they put consumers front and center in decisionmaking, giving them a direct incentive to pick lower-cost providers.

Unlike some private versions of the tier concept, Advantage allows movement among the tiers during the year, Department of Employee Relations Commissioner Cal Ludeman said. That flexibility makes the system more palatable to employees and more effective at matching health care resources and consumers’ needs. For example, someone diagnosed with a life-threatening illness could move from the lowest tier to the highest level of medical care, which could include the Mayo Clinic.

Advantage is one of the few tiered plans to emanate from an employer, rather than a provider selling a product, Ludeman said. That has allowed the state to tailor its plan to its own needs, selecting from among clinics and doctors that contract with all the state’s major health care providers.

That means an employee can sign up with, for instance, HealthPartners as its home base but use clinics and doctors linked to Blue Cross and Blue Shield or Preferred One, as long as the providers are all in the same tier.

Under Advantage, employees who choose Level 1 pay $15 per office visit, while those at Levels 2 and 3 pay $20. Enrollees at Level 4, which includes access to the Mayo Clinic, pay 30 percent co-insurance for each visit. Yearly deductibles can range from $30 for a single person at Level 1 to $1,000 for a family at Level 4.

The state’s employee health coverage had experienced double-digit percentage increases in the years leading up to the conversion to Minnesota Advantage. For 2006, the plan is projected to have a 0 percent increase in claims.

Questions remain

The plan does raise some thorny questions that have plagued most health care innovations. How much of the apparent savings is simply a result of shifting costs to employees in higher out-of-pocket costs? How does quality get factored in? Can costs be restrained in the future without restricting access or reducing benefits?

Jim Monroe, executive director of the Minnesota Association of Professional Employees, said he’s waiting for the answers.

“My biggest concern is that it’s all cost-driven, not quality-driven,” said Monroe, whose union is one of two that represent state employees. “In some areas, it is working. Claims have come down.”

But Monroe said he thinks the administration is overestimating the impact of tiering and underestimating the effect of cost-shifting.

Since 2003, Monroe said, state employees have been asked to shoulder an additional $36 million of costs. “That was one of our issues in negotiations,” Monroe said. “No more cost-shifting. So we’ll see what happens from this point on.”

He said he’s also troubled that employees are trying to make decisions about providers without full information. “What kind of savings are we going to see if someone skips routine diabetes checks to save the office co-pay and then has a major episode down the line?” he said.

Pawlenty acknowledges that gauging quality is elusive. Without it, he said, health care consumers remain somewhat in the dark.

“But we’ve made a very important start, and we’re going to be gathering more information on quality as time goes on,” he said. “The whole industry is moving in that direction.”

Scandrett said much of the pressure will have to come from consumers and employers. Generations of patients trained to trust their doctors must now approach health care more like a car purchase, he said.

David Haugen, a labor relations and health policy specialist with the state’s employee relations department, said the state has already unearthed information that makes better judgments possible.

“We were incredibly surprised to find that the difference between the lowest-cost provider and the highest-cost provider could be as much as 68 percent for the same service,” Haugen said. “And that’s after adjusting for risk.”

While there is not yet a way to figure out why such differences exist, he said, pressure can now be brought to bear on providers to supply needed information.

MinnesotaCare next?

Pawlenty said the next move may be to fold in the nearly 150,000 working Minnesotans who depend on MinnesotaCare, the state’s subsidized health insurance plan. Savings would be substantially less because individual premiums contribute only 8 percent of the overall cost, but it’s something he is considering as a way to bring down the double-digit increases in publicly subsidized health care.

“I don’t want to hold out that it’s the magic bullet for MinnesotaCare, but we’re going to move in that direction,” Pawlenty said.

He said he has even higher hopes for the possibility that private employers will replicate the Advantage plan for their own workers.

“We don’t want to signal in any way that they would join the state plan somehow,” Pawlenty said. While a larger pool could theoretically command more information and even better pricing, “we don’t want this to become so large that it becomes some kind of single-payer, government-run health care,” he said.

“We are interested in providing tools and reform goals so that we can jointly say as purchasers, ‘If you want to sell us a health care product, here are our expectations,’” Pawlenty said. “That alone will change the dynamic of the marketplace.”