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Minnesota's Health Care Gamble

By David S. Broder
Thursday, December 9, 2004; Page A33

No one is immune from the problem of runaway costs in the dysfunctional U.S. health care system -- not individual families, not businesses, and certainly not state and federal governments. The universality of the problem is what makes an experiment being launched in Minnesota this month an important national story.

Gov. Tim Pawlenty announced on Nov. 29 the formation of the Smart Buy Alliance, an unprecedented partnership of state government and private employers that will, he hopes, mobilize the purchasing power of three out of every five consumers in Minnesota to raise the quality, improve the efficiency and reduce the cost of health care.


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In a statement setting forth his plan, the first-term governor said, "Encouraging health care providers to better manage chronic diseases, rewarding providers for improved health outcomes and encouraging patients to use the best providers will not only help contain costs, it will improve the quality of care."

Those are the same goals that President Bill Clinton and Hillary Rodham Clinton set for the ill-fated health care plan they tried and failed to push through Congress a decade ago -- a plan that, like this one, envisaged mobilizing alliances of purchasers to bargain for better deals.

But it is sheer necessity -- not political envy -- that has moved Pawlenty, a Republican, to make his state a pioneer in actually forming such a purchasing alliance. "The current system," he told me in an interview, "is broken. Next year, the health and human services budget I send to the legislature is going to increase by 20 percent. The health sector alone will rise 27 percent. At the rate we're going, in 12 years health will consume 85 percent of our total budget. It is simply drowning the budget."

Pawlenty's plan does not change the financing of health care -- or its provision. It includes an idea popular with President Bush: the option for individuals to set up health savings accounts (HSAs), which combine high-deductible medical insurance with a tax-free savings account that can be rolled over from year to year if not needed.

But HSAs are useful only for minor, routine expenses. As Pawlenty noted, it is chronic illnesses such as diabetes and heart disease that push up medical costs. His plan uses market forces to seek more effective results in treating these expensive conditions.

It builds on a model developed in the private sector during the 1990s and now coming into its own. Pushed by the National Business Coalition on Health (NBCH) and by such firms as American Express Co. and Pitney Bowes Inc., it pulls together groups of purchasers to work for reform of health care at the local level.

The first step, said Dorothy Jeffress of NBCH, is simply gathering data on the performance of various providers -- how patients rate their satisfaction with local hospitals, for example, or what the readmission rate is for asthma patients under various practices. "That leads to setting goals -- just as in an employee evaluation -- and once you have standards, you can hold each practitioner accountable," she said.

In Minnesota, the 40 largest private employers formed such a regional purchasing alliance, called the Buyers Health Care Action Group. Originally representing 400,000 customers, it has expanded to include many workers in state government and at the University of Minnesota. With Pawlenty's support, this core group will expand in the new Smart Buy Alliance to embrace 3.5 million members, including 600,000 beneficiaries of the state Medicaid program and workers in small businesses that belong to the state Chamber of Commerce or are represented by certain unions.

Each bargaining unit will continue to negotiate its own contracts with hospitals, doctors and HMOs. But by setting uniform performance standards and reporting requirements, the alliance will empower its members to press for better coordination of treatment, more use of technology and fuller information to consumers about the results each hospital or doctors' group is achieving for its patients.

"We'll do this by harnessing market forces, without a new government bureaucracy micromanaging what providers do," Pawlenty told me. "But at some point, I wouldn't mind seeing it morph into a [single] purchasing alliance," bargaining for all its members.

That would bring it even closer to the Clinton design, but for now, it is simply a nationally important and unique public-private partnership -- the first such effort combining the market strength of all the main purchasers of health care in a state to push through needed reforms and improve the efficiency and quality of medical services.

It is an effort sure to be watched carefully by other states and by private employers across the nation.

davidbroder@washpost.com


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