* State to save $20 million over five years - governor

* Aim is to reduce duplicate testing for patients

* Doctors paid by the hour rather than by procedure

* Employees pay neither a co-pay nor a deductible

By Dan Boyce

HELENA, Mont., Sept 29 (Reuters) - Montana, looking to cut down on state healthcare costs, has opened the nation's first government-run clinic for state employees in a program the Rocky Mountain state's governor says could ultimately cover a much broader range of people.

Democratic Governor Brian Schweitzer says the primary care clinic in the state capital Helena will keep the area's 11,000 state workers and their dependents healthier while saving the state $20 million over five years.

The move coincides with a national debate over the role of government in healthcare and over President Barack Obama's Affordable Care Act, under which more than 30 million people would become eligible to buy subsidized private insurance or get coverage through Medicaid, the government program for the poor, in 2014.

Republican opponents of that law better known to the public as "Obamacare," which also requires most Americans to have some form of health insurance, say it amounts to government intrusion in the private lives of individuals.

Under Montana's separate program, state employees were quickly booking slots for the privately operated clinic, which the state expects to generate savings by reducing duplicate testing for patients and by paying doctors by the hour rather than by the procedure.

"We're completely full," Schweitzer said on a recent tour of the facility ahead of its opening, the first of three scheduled to open this year.

Since starting up late last month, the clinic has seen more than 1,000 patients and was operating at 98-percent capacity, his office said.

Employees who use its services will see no change in coverage for visiting doctors outside of the clinic, although it is only at the new health clinic where they will be charged neither a co-pay nor a deductible.

"I can afford this," patient Sarah Yancy said with a laugh.

"There are a lot of times I didn't go to the doctor when I wanted to go to the doctor because I knew I'd have to pay for it," said Yancy, who works in administrative support with the Montana Department of Natural Resources and Conservation.

Schweitzer has been critical of Obama's healthcare overhaul, saying it did not do enough to control costs, while stopping short of outright opposition. He unveiled his own plan for opening state health clinics in February and then set an aggressive schedule to have the first one open by late summer.

The state hopes to start two other clinics in cities such as Billings, Missoula or Bozeman later this year.

The program is not designed to serve the state population as a whole. But if successful, the clinics could be opened to recipients of Medicare, the government health program for the elderly, as well as Medicaid, Schweitzer said.

"This is a game changer," said healthcare consultant Mike La Penna, who has been studying the on-site clinic industry for the last decade and recently published a book on the subject. "Other states will be watching this closely."

Counties and cities in other parts of the country have opened similar clinics serving municipal or county workers, but never before on the state level, La Penna said.


The state is contracting with the private Tennessee-based Care Here to operate the clinic. Physician assistant Cassie Springer says she wanted to work at the center because she liked the preventive care model.

"We're looking at bringing in patients regularly, staying on top of their healthcare," she said about the clinic, which focuses on primary care services and nutrition counseling.

The state, which already pays workers' healthcare costs directly to providers through state coffers, saves money if this prevents more expensive treatments or emergency room visits down the line. Staff are also paid salaries or by the hour, not by the procedure, which officials say should cut down on redundant or unnecessary procedures.

An analysis of the health clinic plan shows Montana saving $100 million over the next five years "based on full implementation for all clinics across the state," according to state Health Care and Benefits Division Administrator Russ Hill.

The funds for the clinic come from the same pot that Montana already uses to cover healthcare costs, and Schweitzer's administration says the Helena clinic should pay for itself in the first year.

Schweitzer has asked U.S. Health and Human Services Secretary Kathleen Sebelius for permission to import lower-cost prescription drugs from Canada for the clinic. Similar requests he has made on a statewide basis have not been approved.

Schweitzer, who will be leaving office at the end of this year due to term limits, has been getting criticism from opponents of Obama's Affordable Care Act, the president's signature healthcare reform that has been assailed during the campaign by Republican presidential candidate Mitt Romney.

"The only thing this has to do with the Affordable Care Act is we are challenging expenses here in Montana because they didn't challenge expenses in Washington, D.C.," Schweitzer said of his program, which is patterned after on-site clinics used by some private sector companies for their employees.

State Republican leaders, however, have expressed mixed feelings about the effort. Republican gubernatorial candidate Rick Hill said he does not believe it will save the state money, and he is opposed to asking state employees to leave their doctor for a government-run clinic.

Republican State Senator Dave Lewis said his problem was not with the clinic itself.

"The issue is whether or not a governor unilaterally has the authority to make that kind of policy change," Lewis said.

He is working on a bill for the next legislative session that would prevent the governor's office from having that ability in the future.

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