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A ‘loophole’ for Minnesota’s expensive health care

Date Published: 03/28/2013

Author: Charles R. Peterson, M.D.


The U.S. health care system is broken and the Affordable Health Care Act (ACA- Obamacare) does little to fix it. It was a significant political victory but only a small health care victory. Driven by rising health policy premiums, Minnesota residents now rank second in the country in selection of high deductible health care policies (up to $30,000) in attempts to keep annual premiums affordable. The dominant employer-based health insurance plans have cut into possible employee wage increases and business competitiveness. The ACA will do little about these problems. The required ACA insurance exchange recently passed by the Minnesota Legislature has already come under serious criticism. However, a “loophole” in the ACA offers every state a better future option should it choose to do so.

But first, why is our system broken? A few of many reasons can be cited. A recent major investigative report in Time Magazine documented the skyrocketing hospital charges made to insurance companies that were often 10 times what were paid to Medicare for the same services - a disparity without good justification. Compared to the rest of the industrialized world, our spiraling costs and poor health benchmarks of effectiveness should be embarrassing.


Our Canadian neighbors demonstrate important comparison differences. Medical costs in Canada use only half the percentage of their GDP, and they spend about that much less per capita than we do. Despite this, their comparative benchmark outcomes, such as infant and maternal mortality, deaths from acute asthma, etc., are much better. Internationally, we compare favorably only in life expectancy of those who reach age 65, and that is probably because most citizens at that point have universal single payer plans called Medicare and Medicaid.

Our system of health care is based on economic theories that market competition utilizing insurance company and physician competition will control costs. This theory was defined and debunked over 50 years ago by a Nobel economics laureate, and history has proven this judgment correct. One of the biggest problems with the ACA is that lobbyists helped write the bill. It is still private-insurance-company-based, which will not control potentially bankrupting costs. Some of the present uninsured and underinsured persons will become eligible through untried insurance exchanges but even so, almost half of the 450,000 Minnesotans now without adequate insurance will remain in the same boat. An estimated 760 Minnesotans die every year because of lack of health insurance.

The ACA mandates major improvements in all insurance programs, including elimination of preexisting exclusions, arbitrary termination of coverage, etc. But the economics of full coverage remain flawed, partly due to the high overhead of multiple systems of payment through insurance middlemen. The provision that would be most effective in competitively controlling costs – the public option – was filibustered out of the original bill or abandoned as a compromise.

Fortunately, the ACA has included a window of opportunity for states to adopt their own full coverage plan. Any state that puts forth a credible plan can opt out of the ACA in 2017. The organization “Growth and Justice” has helped design a system that has been reviewed by the independent and highly regarded Lewin Group. It has judged the plan to be economically sound while accomplishing 100 percent coverage. The average annual savings per family would be about $1200, and for businesses it would be about the same savings per employee. All health care cost savings for the state would be about 10 billion dollars over the first 10 years.

This alternative health plan is a single payer system in which the state or a new non-profit corporation would collect a single type of premium in lieu of those of multiple insurance companies. It would pay private providers in the same way Medicare now does. Vermont is seriously working on this option and some other states are considering it.

Under this state option, all Minnesotans would be included, and everyone would have individual choice of physicians, dentists and chiropractors. They would not lose coverage with job losses or changes. There would be no deductibles or co-pays. There would be a single system of payment instead of payment mayhem. There would be public accountability that does not now exist. The overhead would be similar to the 2-6 percent of Medicare rather than the 20 percent+ of current insurance companies. This single payer system of coverage would have broadly pooled risk, and a streamlined, uniform, enrollment process. The plan would have increased purchasing power for services and drugs. The system would be more equitable than what we now have, reducing racial and economic disparities.

One negative factor of this single payer plan could be loss of insurance industry jobs in Minnesota, although many of those professionals could find similar employment in the new single payer system, and the broad benefits for business would create other jobs. Long-range positive improvement steps rarely come without some short-term difficulties. Many of these health care issues were debated at a local Rosenmeier Forum last year and presented in several Brainerd area Sunday church forums in recent months. Minnesotans should become informed about the ACA “loophole” lest other states adopt what we could later look at with envy.

Some related ethical questions to ask are: What kind of society do we want to be? Should health care be limited by gender, race or wealth (ability to pay)? Do we want the competitiveness of our state’s businesses to be burdened by higher than necessary health care costs? Be alert to what local newspapers and news programs have to say about these changes in the months and years ahead.


Dick Peterson is a resident of Nisswa, a retired physician and member of the Brainerd Dispatch Editorial Board.

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