Minnesota Eats Itself

Another Pawlenty budget, another round of bloodletting

It's the old "welfare mother" stereotype revisited. In its review of the last biennial budget, the Minnesota Council of Nonprofits defines one group of GAMC enrollees as being "ineligible for MA [Medicaid] because they live in an Institution for Mental Disease (IMD)." "About 60 percent of the people on GAMC have a severe mental illness," says Glenn Anderson, the executive director of the Human Development Center in Duluth. "In many cases they are eligible for Social Security disability, but are too mentally ill to make the application. They need regular psychotropic medications, need to see a psychiatrist or a therapist, and need chemical dependency treatment."

If Anderson's estimate is accurate and Pawlenty is indeed poised to wipe out GAMC, about 20,000 of these folks will lose their access to basic health care maintenance. Pawlenty and Sviggum also say that they will propose a broad-based series of measures to control health care costs, based on the recommendations of a state commission led by former Sen. Dave Durenberger. Some of these reforms, such as steering patients to providers who utilize "best practices" medical care and urging employers to band together in a critical mass to negotiate lower premiums and provider rates, are sound policy. But Pawlenty chose to ignore two other Durenberger commission recommendations that might bring some sanity to both health care and the upcoming budget. One would impose a dollar-a-pack tax on cigarettes. Another would expand, not reduce, public health insurance, warning that health care costs will continue to spiral upward if those who currently lack insurance coverage aren't allowed "universal participation" in the system.

Durenberger is echoing what study after study has shown. When poor and needy citizens lack health insurance, they don't receive cost-effective, preventative medical care and ongoing maintenance of their chronic ailments. Instead, they show up in hospital emergency rooms and community clinics, having allowed their condition to deteriorate to the point where they require more drastic and expensive treatment. Bound by law to treat these patients and without any health insurance to pay for it, hospitals inevitably absorb these "uncompensated care" costs by raising their rates for private insurers and, in the case of public hospitals, consuming more tax dollars.

Steve Johnson and Lou Fancher

In December 2003, the Minnesota-based State Health Access Data Assistance Center published a study on the impact of MnCare on state health care costs. Using data from 1992-1996, it concluded that every one-percentage-point increase in MnCare's enrollment resulted in a decrease in uncompensated care spending of $2.19 per capita. Put another way, the study claimed that between 60 and 100 percent of the actual spending on hospital services for MnCare enrollees during that four-year period would have been uncompensated care costs borne by the state's hospitals if MnCare didn't exist.

Medical malpractice reform is nearer to Pawlenty's heart than the impact of uncompensated care; he has endorsed tort reform proposals in the legislature that would limit the size of legal judgments against providers. But the fact is that Minnesota has already passed a number of laws to reduce frivolous or outsized liability lawsuits. The medical liability crisis is not nearly as acute in Minnesota as elsewhere: The state's internists and surgeons pay the second-lowest malpractice insurance rates in the country, and Ob/Gyns here pay the fourth-lowest rate nationally, according to the October 2004 issue of Medical Liability Monitor, a trade publication devoted to the subject. Julie Sonier, assistant director of health economics programs for the Minnesota Department of Health, says that medical malpractice premium collections represent just 0.5 percent of total health care spending in the state, versus 2 percent nationally.

Even if the hidden cost of unnecessary tests ("defensive medicine") could be factored in, it is difficult to imagine any tort reform that could produce savings as dramatic as what an increase in MnCare enrollment did to uncompensated care costs. Case in point: By far the biggest provider of uncompensated care in this state is the Hennepin County Medical Center. As Pawlenty prepares to dump thousands more citizens from state-supported health insurance, 5.3 percent of HCMC's expenses are already consumed by uncompensated care, a major factor in the huge deficits besetting the hospital's budget. Ultimately that debt is the responsibility of Hennepin County property taxpayers.


IV. Goodbye to All That

In June 2003, St. Olaf College economics professor Terry J. Fitzgerald wrote an analysis entitled "Business Cycles and Long-Term Growth: Lessons from Minnesota" for the Federal Reserve Bank of Minneapolis. More specifically, Fitzgerald took an in-depth look at how the state's per capita income had managed to go from 14 percent below the national average in 1929 to 8 percent above it in 2001.

Fitzgerald found that the state's per capita wealth really began climbing in the 1960s and continued steadily upward through the rest of the century. During that time, the number of Minnesotans who were employed rose from 41 percent in 1970 to 54 percent in 2000, a faster rate than the national average. Earnings per worker and worker productivity also increased more rapidly. This correlates with Minnesota's increased emphasis on education. In 1950, the percentage of Minnesotans who had completed four years of college was about average nationally; ditto the percentage of state residents completing four years of high school. But by 2000, Minnesota ranked third in the nation in the percentage of residents with a high school diploma, and seventh in the percentage who held a bachelor's degree. "Obviously, there is an important interplay between an education system that supplies educated people and a state economy with enough jobs that demand those educational skills," Fitzgerald wrote.

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