Minnesota lawmakers weigh fines, oversight of expensive medical providers

Escalating health care costs have Minnesota lawmakers considering a punitive approach if hospitals and clinics can't rein in spending.

Proposals in both the state Senate and House call for a new health care affordability board that would set spending growth targets and require correction plans if medical providers exceed them. Fines up to $500,000 could follow if providers fail to create or enact cost-cutting solutions.

"There's real teeth in it," said Duluth health economist Jennifer Schultz, who proposed the idea last year in her final session as a Minnesota state representative.

An oversight board would be a throwback to a five-year experiment in the 1990s, when a state commission tried to reduce medical spending growth in Minnesota by 10% per year. Spending growth slowed, though perhaps due to other economic or health care factors as the commission never took action against costly providers.

Recent efforts have targeted the underlying reasons for growth. State grants have funded recreational trails, farmer's markets and quit-smoking efforts to prevent people from getting sick in the first place. Health plans have shifted from paying providers per procedure to rewarding them for keeping patients healthier.

Nonprofit MN Community Measurement publicly compares medical providers' costs and outcomes to motivate improvements.

Despite the efforts, medical cost growth has outpaced inflation and wage growth, partly because of the aging baby boomers and their medical needs. A state analysis showed that health care spending increased from $39 billion in 2011 to $60 billion in 2020 and could reach $106 billion by 2030.

Minnesotans have paid the price through rising insurance premiums and copays.

Nine states created affordability boards, including Massachusetts — the model for Minnesota's legislation.

Massachusetts' cost commission took years to set spending targets and hold medical providers to them. It was formed in 2012 but its first regulatory action occurred in 2022 in response to years of high costs at Mass General Brigham, the state's largest employer and health system.

Growth there has slowed since 2012 — though Massachusetts' health care spending was still $13,319 per person in 2020, according to a federal evaluation. Minnesota's per capita total that year was $10,864, and the national average was $10,191.

Other state boards lacked enforcement powers at first but received them later, said Natasha Murphy, health policy director for the Center for American Progress in Washington, D.C., which analyzed whether affordability boards work.

"They all seem to agree that it's really important that the body have some type of enforcement authority," she said. "Without it, then it becomes more of a reporting exercise."

DFL leaders have been ambitious in pursuing health care reforms while they control the legislative and executive branches of Minnesota's government.

A health budget bill approved Wednesday by the Senate included funding and deadlines for the affordability board. It also would require nurse involvement in hospital staffing, fund a study of single-payer health care in Minnesota and make the MinnesotaCare health plan for low-income residents a public option for everyone, regardless of income.

Republicans tried to remove the affordability board from the bill. Government spending targets could prompt hospitals to refuse admission to high-cost patients, said state Sen. Glenn Gruenhagen, R-Glencoe.

"In order to control costs, they're going to ration health care based on your height, your weight, your age and your health condition," he predicted.

The board by design would require that all members have no employment or corporate ties to heath care, which could be a problem if it lacks expertise, said Lucas Nesse, chief executive of the Minnesota Council of Health Plans.

The legislation also sets some conflicting assignments: that the board's efforts cannot interfere with union contracts or providers' use of competitive wages to address workforce shortages. The board would also create a consumer protection office to help patients struggling with access to care.

"The board currently being considered needs more discussion on how it will operate … and how it would actually achieve its goals given the lack of results from similar past commissions," Nesse said.

Setting spending targets could be challenging, even though Minnesota has the benefit of other states' experiences and a claims database to compare spending across medical providers. Minnesota Department of Health economists just this year abandoned efforts to tally health care spending attributable to chronic diseases and smoking because of limits with claims data.

Mayo Clinic would present an additional dilemma because it is lauded nationally for its efficiency in everyday care but is Minnesota's costliest provider by far in community measurement studies of total costs. Leaders of the state's largest employer have justified Mayo's higher costs as the consequence of being a destination for some of the world's most complex medical cases.

The Minnesota Hospital Association urged lawmakers to create an affordability board without giving it "punitive regulatory power and severe civil penalties." The trade group also questioned spending targets when hospitals can encounter unexpected surges of RSV, influenza or trauma cases.

Schultz envisioned a state affordability board that uses penalties as a last resort and instead encourages hospitals to cooperate on cost savings — just as they cooperate on prevention of publicly reported medical errors.

"I think they can learn a lot from each other," she said.