Health care finance reforms: Replace the provider tax with an insurance claim fee

Occasionally there are glimmers of bipartisan hope in the midst of today's political storm. One appeared in the Minnesota Legislature with the introduction of House and Senate bills proposing a claims expenditure assessment (CEA) to replace the 2% provider tax that is set to end this year.

The provider tax was instituted in 1991 to provide funding for safety net health programs. An abrupt end to those funds in January 2020 would significantly compromise the health care of 200,000 of the most vulnerable Minnesotans.

The sun-setting of the provider tax was a bipartisan compromise between the GOP Legislature and Gov. Mark Dayton back in 2011, but a solution for this looming problem was put off until now.

Political caricatures would assume a GOP reflex to rejoice in the end of the tax and a DFL impulse to reimpose it. For a few thoughtful and courageous legislators, the assumption would be wrong.

The current 2% tax is levied on the gross revenue of all health care providers on a quarterly basis. Some legislators in the House and Senate from both parties recognize the importance of maintaining the funding. But they have proposed moving the tax upstream to the health plans and third-party administrators, assessing a 2% tax on their claims expenditures.

I am not a neutral observer, but the physician owner of an innovative midwife-led maternity care practice. We have been doing our part to deliver improved care to mothers and babies. Bucking the medical confusopoly is daunting, and the 2% provider tax equals our narrow margin.

Transferring the assessment to the health plans and third-party administrators, meanwhile, makes sense.

The current provider tax is an inefficient burden, requiring quarterly payments from thousands of entities. Collecting from the smaller number of health plans and third-party administrators would be much simpler. But the major argument for the CEA is that it eliminates the regressive burden of the provider tax on self-pay patients and the uninsured.

The health plans won't be pleased with this solution and will likely increase premiums and decrease amounts paid to providers. But what else is new? At our practice, one major payer offered us 1.5% yearly increases in payment for our services while increasing the cost of health insurance for our team by 6% each year.

The CEA proposal ensures that the tax dollars will be used only for MinnesotaCare and medical assistance programs. Looking ahead, Gov. Tim Walz and the DFL House aspire to provide a MinnesotaCare option for all. Let's have that discussion, but before we do we should know exactly how public health care program dollars are currently being spent.

The solution to the provider tax problem should be the next step in the necessary fracking of our fossilized health care system. Real health care value is locked in (and sometimes locked out) of our current system. Improvement requires rattling some state agency and health insurance bureaucratic cages.

A good place to start would be an analysis of how the Department of Human Services and contracted managed care organizations (MCOs) spend more than $500 million designated for maternity and newborn care of 29,000 mother/baby pairs each year through the prepaid medical assistance program (PMAP).

The hospitals, doctors and midwives who provide maternity and newborn care don't see much of the $19,000 provided by the state to the MCOs for each pregnancy. That has to change. A legislative audit would be enlightening.

Ensuring payment transparency and closer collaboration with providers is essential. The MCOs must demonstrate that their priority is managing care rather than managing money.

But first things first. We will soon see if the CEA fix to the provider tax can be accomplished. Minnesota's demonstration of bipartisanship could serve as a national example — especially for the fevered lawmakers doing battle in Washington, D.C.

Kudos to health care provider/legislators Jim Abeler, Kelly Morrison, Matt Klein and Scott Jensen for reaching across the aisle in the service of all Minnesotans. Hopefully, they can convince their colleagues and Gov. Walz to join them.

Steve Calvin is a Minneapolis physician and medical director of the Minnesota Birth Center.