MINNEAPOLIS, March 5, 2010 – Gov. Tim Pawlenty and lawmakers announced an agreement to save a shell of the General Assistance Medical Care program Friday.

The agreement would preserve coverage but would drastically cut provider reimbursement rates by at least 40 percent . The plan will cost about $164 million in the current biennium and then $214 in the following biennium.

GAMC will continue unchanged until May and then shift to a scaled down program. The agreement moves GAMC from a fee-for-service payment model to one where enrollees are cared for by care coordination organizations and hospiitals receive lump sum payments to care for the GAMC population.

The plan also includes a stand-alone $45 million prescription coverage plan for GAMC enrollees.

Pawlenty said the compromise “represents significant cost savings and a significant step forward in health care reform.”

Berglin said the winners of the agreement will be GAMC enrollees. She acknowledged that providers will take a steep pay cut.

“The providers are going to see less reimbursement under this new program, but we believe their losses will be less than if we would have had the GAMC population losing their coverage and a large part of the MinnesotaCare population losing their coverage,” Sen. Linda Berglin, DFL-Minneapolis.

Rep. Thomas Huntley, DFL-Duluth, said that the plan would likely result in cost shifting, higher premiums for insured Minnesotans, and hospital layoffs.

“We’re underpaying the hospital system with this plan and that means they will have to lay off employees,” Huntley said.

The agreement stops the transfer of GAMC enrollees to MinnesotaCare that was scheduled to start this weekend, even though the agreement still needs to be included in a bill and passed by the Legislature.