Friday, December 20, 2013

Minnesota sees significant slowdown in health care spending increases

Health care spending in Minnesota increased 2 percent to $38.2 billion from 2010 to 2011, according to a report released today by the Minnesota Department of Health (MDH).

The report looks at all health care spending, including private health insurance, out-of-pocket spending, state public programs, and Medicare. These latest health care spending data reflect a trend of slowing growth in health care spending since 2007. It also indicates that in national comparisons, Minnesota continues to look competitive with regard to health care spending inflation. Minnesota's growth rate was half the nation's rate of almost 4 percent in 2011, the most recent year for which data are available. This report is available online at

Total spending in 2010 was $37.5 billion or a growth rate of 1.7 percent from 2009. Together with the 2 percent growth seen in 2011, these rates mark the lowest year-over-year change in health care spending since MDH began tracking this trend for Minnesota in the mid-1990s.

In addition, Minnesota's per-person health care spending in 2011 of $7,145 was lower than the national per-person cost of $8,175. Plus, health care spending accounted for a smaller share of Minnesota's economy, 13.6 percent, compared to the national number of 16.9 percent.

"This analysis confirms Minnesota's reputation for leadership and innovation in the health care sector. While Minnesota experienced slower spending growth and lower per capita spending than the national average, we need to continue our focus on transforming the way we deliver care and improving access to care as we strive to reach our goals of lower costs and better outcomes," said Minnesota Commissioner of Health Dr. Ed Ehlinger.

Part of the slow growth in health care spending is related to lingering effects of the recession still experienced by many Minnesotans in 2011. Minnesota's uninsured rate remained above 9 percent in 2011. Due to factors including unemployment and lost wealth, some Minnesotans appear to have delayed or used less health care. Higher cost sharing requirements likely exacerbated these choices.

 "There is a vigorous debate at the state and national level over the cause of the slowdown in spending and whether it will be a one-time correction or represent a structural change," said Stefan Gildemeister, MDH's state health economist. "A period of solid recovery which would help remove the considerable effects of the economic slowdown will help to assess more definitively whether factors in Minnesota driving health care have changed fundamentally."

Other possible factors slowing the growth in costs include continued increased cost sharing in the private insurance market, slower development and implementation of medical technologies, and changes in pharmaceutical drug benefit trends. In addition, a number of reforms and private sector initiatives aimed at improving care coordination, promoting value through payment reform and investing in health information technology likely have contributed as well.

The annual report is part of the Minnesota's health reform law enacted in 2008, with the goal of significantly slowing the growth of health care spending. With bipartisan support, the law has resulted in several key efforts including, provider peer grouping and statewide quality reporting, health care homes, and the Statewide Health Improvement Program, an investment in prevention efforts designed to lower health care costs by reducing obesity and tobacco use in Minnesota.

Future spending projections
As part of the 2008 health reform law, the Minnesota Legislature requires MDH to compare projected spending and estimated actual spending to determine the level of savings over time as Minnesota implements its 2008 health reforms. This was the fourth year MDH has compared actual health care spending to projected spending to determine whether underlying trends in health care spending have changed. The comparison shows that projected spending for 2011 exceeded actual spending for 2011 by $1.9 billion. The law defines this difference as savings related to reform. MDH estimates between $99 million and $414 million of the difference between projected and actual spending is attributable to state-administered programs. This exceeds a $50 million threshold established in statute, which triggers a transfer of $50 million from the General Fund to the Health Care Access Fund.

The report shows there has been some disruption in the drivers of health spending growth, but at this time and with existing data MDH cannot determine definitively the weight of the factors that drove this change. Without a structural change in the underlying factors that historically drove spending growth, spending on health care in Minnesota is projected to increase at an average annual rate of 8.2 percent from 2011 to 2021, MDH estimates. These projections depend on an unchanged relationship between economic factors and health care spending. "Minnesota has made progress, but without a continued focus on public health and prevention and reforming Minnesota's health care system, health care spending growth could return to higher levels and consume a larger share of the economy," Ehlinger said. The report projects that without a change in cost drivers, health care spending could more than double in 10 years, growing to $89.1 billion and accounting for almost one-fifth of the state's economy.