MinnesotaCare provider tax report reveals tax burden on patients; diversion of funds

Today, Citizens' Council on Health Care (CCHC), a Minnesota health care policy organization, released a 128-page, 556-footnote report titled, "Distribution, Utilization, and Impact of the MinnesotaCare Provider Tax." The CCHC report details the dollars entering and exiting the state Health Care Access Fund (HCAF) since the tax began in 1993 and concludes that the provider tax has:

¥ increased the cost of health care,
¥ burdened the sick and those who care for them,
¥ decreased access to health care services, and
¥ had little impact on decreasing the uninsured population rate.

(Click here to view the Executive Summary)

Few Funds for Patient Care
"As a result of low enrollment, federal subsidies, poor reimbursement and diversion of funds, a surprisingly small percentage of the MinnesotaCare provider tax has been used to pay for the care of MinnesotaCare recipients," said Twila Brase, R.N., president of CCHC and author of the report.

Between 1993 and 1998, tax revenue collections exceeded total medical and administrative expenses by 208 percent. Collections were 2 1/2 times the cost of medical care alone.

Even CCHC calculations for MinnesotaCare expenses could be low, clarifies Brase. "Capitated payments to HMOs lump administrative and medical expenses together. Since switching MinnesotaCare to capitation in 1998, state officials no longer know exactly how much care is being provided for each dollar spent out of the Health Care Access Fund."

Funds Diverted
Meanwhile, $276 million—nearly 40 percent of all HCAF expenditures and 'rainy day' federal contingency reserve fund designations—was diverted from the subsidy program, and another $200 million resides as surplus in the Fund.

"If a legislative initiative can technically be classified as health care-related, provider tax dollars will most likely be used. Use of health care access funds has not been restricted to the subsidy program. As a result, patients are paying higher prices for health care, not only to insure the uninsured, but to subsidize the General Fund, build a 'rainy day fund,' and expand managed care networks across the state."

"Managed care is not known for timely or accessible care," adds Brase, who receives calls from frustrated patients at the CCHC office. "Ironically, those who provide and use health care services are paying millions of dollars to limit access to care."

Brase also points out that Department of Human Services officials report using administrative health care access funds for activities unrelated to the operation of the MinnesotaCare subsidy program, such as $3.5 million to the medical education trust fund.

Patients and Providers Bear Tax Burden
In addition, CCHC found little evidence that health care providers and hospitals are able to pass the tax through onto insurers and HMOs as the 1992 legislature required. The two state departments responsible for enforcement require a simple statement of compliance from insurers and HMOs, but receive no specific funding for compliance checks or enforcement.

"A signed one- or two-sentence statement from HMOs and insurers does little to assure compliance," states Brase. "Because the tax is not itemized in reimbursements received from health plans, doctors, dentists and hospitals do not believe health plans are paying the tax. This places the burden of the tax squarely on patients and providers."

From 1992 through 1999, the Health Care Access Fund collected over $960 million. Seventy-eight percent (78%) of those dollars—nearly $750 million—came from the MinnesotaCare provider tax, which has been reduced from 2 percent to 1.5 percent until January 1, 2002.

Public Expectations Not Met
Early expectations for the MinnesotaCare subsidy program—the primary reason for enacting the provider tax—included a decrease in Minnesota's uninsured population rate and a drop in the cost of uncompensated care.

Instead, CCHC finds state officials concerned over lack of health care practitioner interest in participation with the program, and despite a current rate of enrollment exceeding 110,000, officials at the Department of Finance acknowledge that the program has not decreased the uninsured population rate.

"Our research finds that people who support the tax, and those who pay the tax, want the money to be used solely for the MinnesotaCare program—to insure the uninsured and to reimburse those who care for them," Brase explained. "We believe the public will be surprised by how few dollars have gone into the MinnesotaCare program and how many have been diverted to the General Fund or stashed away for a 'rainy day.'"

Media Contact:

Twila Brase, President and Co-founder
Office: 651-646-8935