Opinion editor’s note: Star Tribune Opinion publishes a mix of national and local articles Comments daily online and in print. (To contribute, click Here.) This article is in response to Star Tribune Opinion dated June 4th Call for contributions to the question, “Where does Minnesota go from here?” Read the full collection of answers Here.
The 2023 session of the Minnesota legislature may be remembered as the year Minnesota began questioning its 50-year-old approach to health care cost containment. This depends on the findings of several reports ordered by the legislature and the legislature’s reactions to them.
The reports need to examine the role administrative costs play in driving up health care costs in Minnesota. For the past 50 years, lawmakers have been unaware of the role administrative costs have played in healthcare inflation. Beginning with the HMO Act of 1973, legislation was enacted that was intended to reduce health care costs but drove them up by driving up administrative costs (which in turn drove up prices) and mergers in the insurance and hospital sectors promoted.
A new approach is long overdue. Thanks in large part to our evidence-free cost-containment policies, Minnesota has one of the highest per capita healthcare costs in the country, according to the latest federal data.
For the past half-century, the legislature, spurred on by half a dozen commissions, has passed policies based on the misdiagnosed health-care inflation. Total spending in any economic sector is a product of two numbers: price times quantity equals total spending. Legislators have long assumed that the solution is excessive volumes, not excessive prices. However, the evidence suggests that the legislator made a mistake: inflating prices for everything (insurance premiums, hospital fees, doctors’ fees, medicines, etc.) rather than ‘over-utilisation’ of medical care is the main reason for high healthcare costs in the EU USA compared to other nations and in Minnesota compared to other states.
Yes, overuse exists, but it should be addressed with carefully tailored solutions, not the HMO chainsaw that has been lawmakers’ weapon of choice against rising healthcare costs for half a century.
Prices are high mainly because the cost of running our Byzantine system is so high and because the entire healthcare system is heavily concentrated in the hands of a relatively small number of insurance companies and hospital-clinic chains. And ironically, both of those problems — sky-high administrative costs and merger madness leading to health-care consolidation — have been exacerbated by the very “solution” lawmakers have adopted to control alleged “overuse” that requires an insurance company to sway doctors and to control. It turned out that the legislature’s prescription was worse than the disease.
In the last session, the legislature enacted legislation mandating these reports on Minnesota’s administrative expenses:
- A March 1, 2025 Department of Health report recommending “a set of actionable strategies to address administrative spending volume and growth.”
- “Periodic Reports” from a new Center on Health Care Affordability within the Department of Health, detailing, among other things, the center’s research on “unproductive administrative spending.”
- On January 15, 2026, a Department of Human Services (DHS) report comes out on how much money Minnesota could save by bypassing the HMOs that now participate in Minnesota’s Medicaid and MinnesotaCare programs (from the report should shows that the savings result almost exclusively from this). reduced administration costs of the HMOs).
- A 15 January 2026 study by the Ministry of Health on how much universal health insurance would cost under a single-payer scheme (single-payer schemes reduce healthcare costs primarily by reducing administrative costs, e.g. insurance company spending). advertising, restricting patients’ choice of doctor and scrutinizing doctors, and spending by doctors and hospitals to deal with the insurance industry’s attempts to control “overuse” of medical services).
Lawmakers approved a fifth report, this time from the Department of Commerce and Human Services, due February 1, 2024, that looks at “various models” of a “public option.” The law that prompts this study doesn’t specifically require the report to analyze a “model” in which there are no insurance companies (i.e., a version in which the DHS would bypass HMOs and pay doctors and hospitals directly), but the implication is is there. A public option that bypasses insurance companies would lower administrative costs enough to drop premiums by about 15%.
The legislature deserves credit for passing these laws. Now it’s up to the agencies responsible for compiling the reports to produce unbiased reports based on research, not the groupthink that obsession with the alleged overuse of medical services has dominated Minnesota policymaking for half a century has.
Kip Sullivan serves on the Advisory Board of Healthcare For All Minnesota.