STATE OF MINNESOTA

Office of Governor Mark Dayton

130 State Capitol 75 Rev. Dr. Martin Luther King Jr. Boulevard
August 24, 2012

Saint Paul, MN 55155

The Honorable Kathleen Sebelius Secretary U.S. Department of Health and Human Services 200 Independence Avenue, SW Washington, DC 20201 Dear Madam Secretary: I am pleased to present you with Minnesota's Medicaid reform package entitled Reform 2020: Pathways to Independence. This initiative is a result of a rare, bipartisan agreement reached in 2011 around improving our Medicaid program. That support continues today. Minnesota's health care leadership understands the basic fact that the combination of rising healthcare costs and changing demographics will make our current Medicaid system unsustainable unless major changes are put in place by 2020. This package of reforms continues the strong tradition in our state of keeping as many people in their own homes as possible. That commitment has made us the number one state in the country in the use of Home and Community Based Services, according to a 2011 Commonwealth Fund study. But we know we must do more to lower costs, while maintaining high quality services for vulnerable populations. To that end, Reform 2020 seeks to move Minnesota's Medicaid program closer to a new equilibrium in which people receive the right services, at the right time, in the right way. This new paradigm will help vulnerable Minnesotans receive services sooner than our current system of long waiting lists. We will keep them in their communities longer and out of expensive facilities and programs. We will enhance strategies to individually assess participants to avoid "one-size-fits-all" benefit packages. We are creating more consumer-directed options to allow clients to select their own services and hire their own staff. We will provide targeted assistance to promote connections to employment and housing, including those people returning to the community after short-term, intensive stays in Minnesota's remaining psychiatric hospital. We project these efforts will save state and federal taxpayers tens of millions during the next few years. By 2020, those savings should increase significantly. Reform 2020 also accelerates our current efforts to redesign our health care delivery system through health care purchasing reforms. We were delighted to be the first state in the nation to receive federal approval to incentivize coordinated care across provider systems in our Medicaid program. This proposal builds upon that authority to more broadly integrate care and payment streams. In the long term, our goal is to expand how we shift incentives in our health care payment system (rather than shifting costs) into those activities that most effectively prevent

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The Honorable Kathleen Sebelius August 24, 2012 Page 2

and treat illness. Our Accountable Care Demonstrations offer the logical next step in that critical progression. I invite you to review the enclosed proposal detailing the proposed reforms to Minnesota's Medicaid program. We believe it offers a comprehensive approach for meeting the challenges of rising health care costs and an aging population, while still providing Minnesotans the services they need to lead meaningful and fulfilling lives. If you have any questions regarding this request, please contact my Human Services Commissioner, Lucinda Jesson, at 651-431-2923. I look forward to working with you and your staff to continue to develop important health care reforms in Minnesota. Thank you. Sincerely,

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Enclosures cc: Commissioner Lucinda Jesson, MN DHS

Mark Dayton Governor