St. Paul, MN - For the first time, the State of Minnesota will have a competitive bidding process for providers of state health care and focus its payments for health care on outcomes instead of procedures. Governor Mark Dayton also today signed an Executive Order requiring regular audits of health plans, and demanding full public disclosure of the profits, reserves, and administrative expenses of state contracted health care providers. These changes, announced today by Governor Dayton, Human Services Commissioner Lucinda Jesson, Commerce Commissioner Mike Rothman, and Health Commissioner Ed Ehlinger represent a fundamental shift in how the state provides and pays for health care in order to better serve taxpayers.

For far too long, uncompetitive contracts have favored managed care plans at the expense of taxpayers. Just last week, Governor Dayton called upon the state's public health plans to donate back to the state their excess earnings and reserves. Commissioner Jesson is in active discussions with health plans providing public insurance to request contributions, following a voluntary $30 million donation from one of the state's current contracted providers, UCare. If on April 1st, when plans are required to make their annual reports public, they are holding excess reserves, the Administration will ask them to return the appropriate amount to the taxpayers of Minnesota.

Under the Pawlenty Administration, state managed care contracts have gone largely unchecked, basing health plan payments on previous year's costs. The 2010 Legislature authorized the Department of Human Services to begin demonstration projects to develop more cost-effective ways to provide care. The previous Administration failed to take action. This status quo approach, along with a provider payment system that focused on procedures rather than outcomes, has contributed to health care becoming one of the major cost-drivers in the state's budget. Managed health care currently costs the state more than $3 billion annually to cover more than 500,000 Minnesotans. Over the past ten years, these costs have increased dramatically from five percent to eleven percent of the state budget. The Dayton plan to introduce competitive bidding into the process will finally rein in costs on one of the state's biggest and fastest-growing expenditures.

Dayton's reforms also include a statewide Request For Proposal (RFP) process. This RFP process invites providers to develop new ways to cover people, focused on outcomes rather than procedures. The RFPs will reward providers that work directly with people to improve their health. This is another significant reform in the way the state buys and provides health care.

"The health care industry has modernized, but the way the state manages health care has not kept pace," said Commissioner Jesson. "For far too long, health care plans have simply been paid based on what's been done before. Through full, public disclosure of plan expenses and premiums, competitive bidding, and with a focus on outcomes instead of procedures, we can modernize our approach to health care. Today's reforms are the first of many steps we will take to get a better value for the taxpayer, and better results for those who receive care."

These reforms represent a fundamental change in the state's approach to contracting and paying for health care:


In addition to the steps announced today, the Governor's budget includes proposals to lower plan costs and establish performance measures and incentives to reduce patient hospital readmissions.

/governor/assets/Executive-Order-11-06.pdf_tcm1055-93522.pdfA copy of today's Executive Order is attached.