MINNEAPOLIS, February 2, 2007 - Gov. Tim Pawlenty said Tuesday that a health reform group’s recommendations could serve as a “framework” for revamping the state’s health care system but he doesn’t support requiring all Minnesotans to have health insurance or increasing the tobacco tax.

The task force’s report includes a comprehensive plan for cutting health care costs. It would refocus the health care system on preventing illnesses and diseases, rather than just responding to them. The plan would also try to eliminate inefficiencies in the system by reforming the health insurance market and changing the way physicians are paid. The task force estimates its recommendations could reduce health care costs by $12.3 billion by 2015.

The MMA is generally supportive of the recommendations put forward by Pawlenty’s task force, said MMA President James J. Dehen, Jr., M.D. “They are very similar to our own recommendations in terms of the need for medical homes, more preventive services, and for all Minnesotans to receive health care.”

However, the MMA does have some concerns with the proposed payment reforms, he said. Specifically, the MMA questions a proposal in which providers would submit bids for caring for a group of patients and would then be held accountable for all costs generated. The MMA is concerned that this model is akin to capitated systems of the past and places physicians at risk for costs and utilization.

“You can't expect providers to be responsible for preventive costs and disease management, and then also tell them that they also have to capitate the care,” Dehen said.

Despite this concern about the proposal, Dehen said he’s pleased that Pawlenty is speaking with lawmakers in an attempt to move a reform package forward.

“We have been avoiding hard solutions for a long time, but we need to move forward with the process of meaningful health care reform and that is going to take collaboration and cooperation between legislators and the governor,” he said.

Here’s a look at some of the recommendations put forward by the Health Care Transformation Task Force.

Prevention and the medical home
The report calls for the state to adopt aggressive goals for reducing unhealthy behaviors, such as smoking, eating too much, and abusing drugs and alcohol. Along these lines, the report says Minnesota should enact statewide standards for physical activity in schools and increase the tobacco tax to discourage smoking.

Health insurers should also vary premiums for enrollees who engage in unhealthy behaviors.

Quality and price transparency
The task force would like to reorganize the health care system so that patients become informed consumers who purchase health care based on the cost and quality of services that are offered.

To improve quality, the report calls for the state to require all providers to use electronic health record systems as a condition of payment. It also calls for more performance measurement and for payers to stop reimbursing providers for care that does not meet minimum standards.

In terms of making prices more transparent, the task force recommends that doctors should set their own prices, instead of negotiating discounts with insurers. Providers would also need to provide costs for baskets of services, such as maternity care, so patients could shop for the best values.

Insurance reform
The task force calls for the all Minnesotans to obtain health insurance by 2011, unless the required subsidies are not available. It would also establish a health insurance exchange that would help individuals buy insurance. Insurers could adjust premiums based on a person’s age, unhealthy behaviors, and place of residence, but not because of prior health conditions. There would be guaranteed issue of insurance for individuals in the individual market regardless of preexisting conditions.

Payment reform
According to the report, the state needs to change the current payment system so it rewards clinicians for quality care that keeps patients healthy, instead just paying for volume of care.

To accomplish this goal, the task force recommends a three-level approach to reforming the payment system that would culminate in providers setting their own prices but also being accountable for the total cost and quality of care.

The first level would explicitly tie payment to quality of care in a pay-for-performance model that could include bonuses, but more likely would withhold payments from physicians failing to meet performance targets.

In the second level, providers would assume greater responsibility for coordinating the care of patients. They would receive care management fees but would also be expected to have specific care management systems in place.

The report also says the state could do a better job of treating chronic diseases and preventing hospitalizations by making care management payments to providers who can act as medical homes for patients.

In the third level, which all providers would be expected to achieve by 2012, providers would put forth bids on how much it would cost them to care for a given patient population with a standard risk profile.

The state would create a quasi-governmental body called the Health Care Transformation Organization to manage the bidding process, and basically create a market between providers, health plans and purchasers.

The Health Care Transformation Organization would also work with purchasers to establish a standardized benefit set that would be the basis of bids.

Providers would submit their bids to the Health Care Transformation Organization, and then insurers, employers, and patients could select the care system of their choice. Providers would then receive payment equivalent to their bid regardless of how much or little it cost to care for the patients during the year.

The MMA has raised concerns about this payment model because it sounds like traditional capitation models that require physicians to assume insurance risk. The report says the system will not penalize physicians for accepting sicker patients because payments will be risk-adjusted so providers get paid more for caring for sicker patients. But the MMA is not convinced current risk adjustment techniques can adequately control for variations among patients or protect physicians from risk.

The report calls for the state to eventually compel use of this payment model by making participation in it a prerequisite for receiving reimbursement for caring for state employees or enrollees in state health programs.

Among the MMA’s other concern about the level three model is it could force providers to consolidate in order to submit bids and manage expected risk. The report says that providers who lacked the size to bid could get around it by essentially subcontracting with larger providers who do submit a bid or by creating virtual system of care.

The report also recommends increasing fee levels for primary care, care management, and other cognitive services relative to other services, in a cost neutral way. The report suggests that such a policy would result in some decreasing fees to providers.