A dirty bill of health: Pawlenty’s health care cuts would soon cost more than they save

Viewed strictly through the prism of balancing Minnesota’s general fund portion of the state budget for the 2010-11 biennium, Gov. Tim Pawlenty‘s decision to propose drastic cuts in state-supported health care insurance makes sense. Health care costs are rising faster than any other sector of the budget, and the general fund is already facing a real-dollar deficit of at least $5.5 billion over the next two years. Even if a significant portion of expected federal stimulus money is directed toward Medicaid, it will be difficult for legislators to get out of this session without cutting health care and/or raising state taxes. Pawlenty has chosen to ignore a state tax increase. That leaves health care cuts.

But when it comes to creating a health care system that delivers the most efficient, effective care for Minnesotans, Pawlenty’s proposed cuts would quickly come to cost more than they save. They would renege on the state’s commitment about how it will use taxes collected from Minnesota health care plans and providers. And the negative impact of the reductions would fall disproportionately on the middle class.

Begin with the ultimate cost of the cuts. Although reducing health care coverage and payment rates to hospitals and doctors would help balance the general fund budget, the gambit would not only shift the burden of paying for health care, it would inflate it. Under Pawlenty’s proposal, approximately 84,000 people now receiving state supported health insurance would be deprived of coverage. Another 29,000 who would become eligible for coverage over the next two years under the program’s current terms would be denied enrollment. Lacking health insurance won’t prevent these folks from getting sick, of course. On the contrary, study after study has shown that people without coverage are more likely to postpone cost-effective check-ups and other preventive treatments until they are felled by a condition significant enough to warrant a trip to the hospital emergency room.

Hospitals budgets are currently under siege from all sides. State and federal payments for Medicaid and Medicare patients have fallen below the cost of treatment. The sour economy has hammered folks whose insurance comes with a high deductible. And, not surprisingly, people knocked off state-supported health insurance are more likely to default on their medical bills. Consequently, the cost of uncompensated care provided by Minnesota’s 153 hospitals has more than doubled, from $258.2 million in 2003 to $601 million in 2008.