Gov. Pawlenty unveils his health care plan


Saying that "if we don't slow down runaway health care cost increases, the budgets of families, job providers and governments will soon be suffocated," Governor Tim Pawlenty today announced several initiatives designed to slow down cost increases while improving the quality of care for patients.

"Total health care costs are rising at the rate of nearly $300,000 per hour in Minnesota," said Governor Pawlenty. "On average, total health care costs per household in Minnesota are $14,000 per year, more than many Minnesotans pay for their mortgages or rent." Pawlenty also noted that health care insurance premiums grew three and a half times faster than wages in the past four years.


Plans announced by Pawlenty today include the formation of a purchasing alliance that will use market forces to reward and encourage higher quality care, better use of technology and use of centers of excellence for care.

Pawlenty's plan also creates incentives for individuals and employers to use "health savings accounts" which operate similar to IRAs, but are used for health care expenses. The plan also streamlines paperwork, bureaucracy and regulations in the health care delivery system.

Pawlenty stated that a large majority of health care resources are expended on a limited number of chronic conditions such as cancer, heart disease, diabetes, obesity and asthma. He indicated that treatment results vary significantly by health care provider and that providers that produce the best results are often the most cost effective.

"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," Pawlenty said. Under Pawlenty's plan, those goals and others would be advanced by a newly formed, large purchasing alliance.


A cornerstone of Pawlenty's plan is the formation of a health care purchasing alliance dubbed the "Smart Buy" Alliance. While members of the alliance will continue to purchase health care individually, they will pursue common principles in their purchasing decisions.

The combined purchasing power of the alliance will utilize market forces to drive improvement in the health care delivery system.

Current members of the alliance represent more than three-fifths of Minnesota's health care consumers and more groups are expected to join the alliance in the future. The following entities have already agreed to participate in the alliance:

1.The State of Minnesota, including the Departments of Employee Relations and Human Services.

2. Buyer's Health Care Action Group (BHCAG).

3. Minnesota Business Partnership, representing Minnesota's largest employers.

4. Minnesota Chamber of Commerce, representing employers of all sizes across the State.

5. Labor/Management Health Care Coalition of the Upper Midwest.

6. Minnesota Association of Professional Employees (MAPE).

7. Employers Association.

8. Advocates for Market Place Options for Mainstreet (AMOM).

Rewarding and Utilizing the Best Health Care

Significant variations in cost and quality exist among health care providers. In many instances, health care providers with the highest quality of care and the best health care outcomes are also more efficient and economical, often by a large margin, than other providers. The Smart Buy Alliance has reached agreement on the following principles and expectations for their purchasing decisions and will encourage the use of high quality health care providers in a number of ways including:

1. Requiring or Rewarding "Best in Class" Certification.

2. Adopting and Utilizing Uniform Measures of Quality and Results.

The alliance will use value-based purchasing tools -- such as eValue8 ( sponsored by the National Business Coalition on Health (NBCH) -- to guide such decisions. It provides uniform measures of quality and results. Adjustments may need to be made to ensure continued geographic access to providers.

3. Empowering Consumers with Easy Access to Information.

The Community Measurement Project initiated by the private sector and a new health information website ( sponsored by the Minnesota Department of Health are examples of the type of information to be made available.

4. Requiring the Use of Modern Technology in Health Care Administration.

While health care providers use cutting edge technology to treat patients, the health care industry is woefully behind in using the latest technology in the administration of health care.

"Until now, purchasers have bought what has been sold to them, not necessarily what they wanted to buy," said Caroline Pare, Chief Executive Officer of BHCAG. "What we're saying today is that the public sector and private sector are going to work together in setting common expectations for what we buy. This alliance will create market changes that will allow consumers to make choices based on provider performance and value."


A new federal law encourages the use of Health Savings Accounts (HSAs). HSAs are similar to an Individual Retirement Account (IRA) except that the funds in an HSA are used for health care expenses, not retirement. When using an HSA, individuals or employers obtain insurance with a high deductible (at least $1,000 for individual coverage, and at least $2,000 for family coverage), which is less expensive than comparable low deductible insurance.

Individuals and employers can contribute tax-deductible funds each year up to the amount of the health insurance policy's annual deductible, subject to a cap, that must be used for their health care needs. HSA funds can be used to cover health care expenses such as the health insurance deductible and any co-payments for medical services, prescriptions, or medical devices. Like an IRA, individuals own their own HSA. Additionally, the HSA is portable and can be continued if an individual changes jobs.

Governor Pawlenty will recommend that the 2005 Legislature pass legislation requiring that Minnesota enact the state tax incentives that help to make HSAs an attractive option for consumers.


1. Consolidate and Streamline Reporting Requirements.

2. Establish a Single Source for Health Care Provider Credentials.

3. Use National Accreditation Standards.

4. Require timely submission of claims.

5. Enhance anti-fraud and anti-kickback enforcement.


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