Health-Care-for-All On the Installment Plan

Incremental steps to improve the health care system can lay the foundation for comprehensive reform that provides health care for all. Comprehensive reforms enacted in Massachusetts, Vermont, Maine and San Francisco were, in large part, the result of pragmatic incremental steps those states had already taken. For example, a Families USA report discusses the many reforms Massachusetts put in place over the years that led to its comprehensive 2006 reform. Not every state is as far along in moving comprehensive health care reform, but each state does have numerous options for increasing access to coverage, reducing the growth of health care costs, and improving the quality of care.

Achieving incremental successes can also build public support for broader reform. For example, as a first step to universal access to coverage, states like Illinois, Pennsylvania, and Wisconsin have built health care programs to cover all kids, a strategy feared by the Right. The Wall Street Journal referred to all-kids' programs as universal health care on the "installment plan" and has counseled Republicans in Congress and the Bush Administration to oppose broad expansion of SCHIP, believing it is a first step towards health-care-for-all -- a good thing in our minds and a backhanded compliment to such strategies. 

With the help of a new web-guide for state health care reform, created by Families USA and Community Catalyst, this Stateside Dispatch presents a menu of incremental and pragmatic steps states can take now to address health care access, costs and quality. One of the most obvious steps being taken by states is to continue to expand coverage through well-established programs like Medicaid and SCHIP, especially for children, as a first step toward broader coverage. States are also working to shore-up existing employer coverage through both employer mandates and public-private partnerships to help fund that coverage. Funds for these measures are coming from everything from federal matching funds to taxes on unhealthy products like tobacco to closing corporate tax loopholes. And, in order to assure affordability of coverage, states are enacting reforms to protect individual and group access to health care coverage and to limit profiteering by insurance companies. More broadly, a range of measures are being used to contain care costs throughout the health care system so that saved money can then be used to expand coverage. While these measures are most effective when enacted together as part of a truly comprehensive reform, enacting any of them helps lay the groundwork for future broader changes in the health care system.

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Expanding Access to Coverage through Medicaid and SCHIP

Bringing Medicaid and SCHIP to more people is one of the best and most cost-effective ways to broaden access to health care coverage.  Medicaid and SCHIP bring in valuable federal dollars and frequently do not require new administrative structures. In fact, as states contend with slowing economies, maintaining or broadening investments in social services can help prop up an ailing economy.

As presented by the Community Catalyst and Families USA web-guide, states have a number of options for expanding access to Medicaid and/or SCHIP, including:

  • Raising eligibility levels above the federal poverty line or "disregarding" some amount of income so that more people become eligible under existing income eligibility guidelines. For example, providing health care most children is relatively inexpensive. It also has broad public support; a 2007 New York Times/CBS poll found that 84% of voters support expanding SCHIP to cover all uninsured kids. Once publicly based programs are covering most children in families, it is a much smaller leap conceptually to more comprehensive programs covering adults as well. 

  • Providing Medicaid coverage for all children or children with disabilities up to 300% of the poverty line with sliding scale premiums for families, and cover adults and seniors with disabilities to 100% of the poverty line or even higher incomes by disregarding income.

  • Premium assistance offered to Medicaid-eligible employees, whereby Medicaid pays the employee's share of job-based coverage. This helps employers provide group coverage because most states require a certain percentage of employees to participate in the employer-provided plan in order for the business to qualify for group coverage.

  • Using Medicaid "Ticket to Work" programs to provide coverage on a sliding scale to people who are working but have severe disabilities.

  • Implementing "medically needy" programs which help people who are impoverished by health care costs and events to pay for their costs.

  • Securing a federal "waiver" to existing federal Medicaid and SCHIP laws. These allow states to develop programs or expand access to coverage to populations not immediately covered by existing rules, such as adults without children. Waivers, however, require "budget neutrality." This means the federal government mustn't be required to provide any additional funds and can be achieved through cost containment measures like implementing managed care programs.

Despite the cost-effectiveness of expanding Medicaid and SCHIP to low and moderate income families, many on the Right argue that such expansions drive people away from private insurance and into public programs, weakening the private market in the process. As Community Catalyst, Families USA, and the Center on Budget and Policy Priorities point out, these are "false" concerns and distract from the fact that expanding Medicaid and SCHIP is far more "cost-effective than proposals like health tax credits and deductions," which primarily benefit people who already have coverage.  Additionally, while Medicaid is a government-created program, almost two-thirds of Medicaid members receive their benefits through a privately-run managed care program. And state investments in Medicaid and SCHIP have made progress but have not been able to completely stem the tide of rising uninsured rates as employer-based health care has declined.

Recent Highlights:

  • Wisconsin has begun enrolling children and parents in the broad expansion and reorganization of the state's Medicaid and SCHIP programs called BadgerCare Plus. In 2007, lawmakers approved the expansion which covers children at no cost to 200% of poverty and provides sliding scale premiums to 300% ranging from $10 to $91 per child. Higher income families can purchase the coverage for children at full-cost. In addition, parents are eligible for the program up to 200% of poverty. The program is estimated to cost $50 million over the next year and a half, but the federal government will pay more than 60% of the costs. The authorizing legislation also gives the administration the authority to seek a federal waiver to expand the program to cover low-income workers who do not have children.

  • New York passed a budget in 2007 that authorized expansion of the state's SCHIP program, Child Health Plus, from 250% of the poverty line to 400% of poverty, roughly $82,000 for a family of four and the highest level in the country. Although the Bush Administration has refused the state's waiver request to put the expansion in place, Governor Eliot Spitzer is asking lawmakers to approve $37 million to finance the expansion. 

Worrisome Trends:

  • Texas officials have rolled out draft plans for a Medicaid-based expansion offering stripped-down medical coverage to adults with incomes up to 200% of poverty. The plan would divert $246 million in Medicaid safety net funds that currently go to hospitals to cover uncompensated care costs. Members would receive coverage for two prescriptions each month and an annual total of five primary care visits and five days in the hospital. Research, however, repeatedly shows that consumers with high deductible and/or limited benefit health plans, i.e. the under-insured, act like they are uninsured and avoid getting necessary care because of costs. 

  • Indiana began enrolling low income individuals with incomes up to 200% of poverty in a limited benefit plan that requires participants to contribute to a Health Savings Account (HSA). This is a variation on a high deductible health plan. As we have written, despite sliding scale contributions to the HSA and early enrollment exceeding expectations, HSAs are likely to lead to under-insurance, particularly for low-income residents.

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Employer Responsibility and Public/Private Partnerships

Despite a steady decline in employer-based coverage, employers still cover more than 158 million Americans, more than twice the number of Americans who receive Medicaid or Medicare. Because of the financial contributions employers make to health care, ensuring strong employer participation in health care is a key priority for reform. This is increasingly done in two ways: (1) requiring employers to provide a certain level of coverage or make a payment to the state to help fund expansion programs, known as an employer mandate and (2) developing public/private partnerships that bring more affordable and often subsidized insurance options to market for small businesses and their employees and individuals.

Employer Mandates:  Massachusetts, Vermont, and San Francisco each passed comprehensive health care reform measures in 2006 and are early leaders in requiring all employers to provide some degree of health coverage for their employees or pay additional fees to the government. The main goal is to ensure that "low road" employers are not dumping their health care costs solely on the public, thereby both costing taxpayers additional money and unfairly giving those employers a competitive advantage against responsible employers providing coverage.

San Francisco's comprehensive health care law has the strongest employer mandates, requiring employers with 20 or more employees to provide health care or pay the city $1.17 to $1.76 per hour depending firm size. Employers have tried to challenged the law in court, but recent court decisions allowing the city to continue with the mandate during the appeal process bode well for the program and employer mandates elsewhere. In fact, the Lieutenant Governor of Rhode Island, Elizabeth Roberts, has proposed a reform package that requires employers to provide coverage or pay $1,000 annually for every uninsured employee. 

Public/Private Partnerships:  Many states have developed programs that contract with private carriers and offer coverage to individuals and small businesses and their employees who are not eligible for Medicaid and can't afford private insurance. These typically offer insurance-like coverage administered by public and private entities coupled with sliding scale subsidies or premiums up to 300% of the poverty line. 

  • Contracting with Insurers: Vermont's Catamount Health Plan and Maine's DirigoChoice insurance program similarly contract with private carriers to offer a comprehensive benefits package with sliding scale premiums or subsidies to 300% of poverty. In case private carriers do not step up to the plate and bid to offer the health plan, each state is authorized to offer the coverage through a public entity or state-run non-profit. Both programs are available to individuals and small business employees. Maine's program is available to small businesses as long as employers cover 60% of the employee's premium. It is also available to employees eligible for Medicaid and provides a wrap-around benefit to ensure those employees receive the full range of Medicaid services. New Mexico's State Coverage Insurance is a similar but more limited program. It offers coverage to individuals and small business employees with incomes up to 200% of the poverty line. Importantly, the program limits total out of pocket costs to 5% of a family's income.

  • New Regulatory Agencies, Insurance Connectors: Massachusetts' Commonwealth Connector negotiates and contracts with private insurers to bring more affordable insurance options to market for individuals and small businesses. The law combined the small group and individual markets, resulting in a 15% decrease in individual premiums. The state created Commonwealth Care, a program offering subsidized coverage to adults with incomes up to 300% of poverty and who are not eligible for Medicaid, and Commonwealth Choice, a similar program that offers non-subsidized health plans to individuals, documented immigrants, families and small businesses. Both Commonwealth programs are administered by the Connector.

  • Reinsurance: New York's Healthy New York program employs reinsurance to offer low-income individuals and employees more affordable insurance. Reinsurance is a form of insurance for insurance companies. To enable insurers to offer lower rates, reinsurance subsidizes carriers by paying for costly medical claims. To keep rates below market prices, Healthy New York covers 90% of medical claims between $5,000 and $75,000. The program is available to individuals and employees with incomes below 250% of poverty and to small businesses with a high percentage of low-wage employees. Through 2006, the program covered 130,000 New Yorkers. As the Community Catalyst and Familes USA webguide explains, the program has had success in getting small employers to participate. Benefits, co-pays and co-insurance are comparable to private insurance and all HMO's in the state are required to carry the program. 

Another example of a public/private partnership comes from Howard County, Maryland. Health officials have proposed Healthy Howard, a plan to provide the county's 20,000 uninsured residents with comprehensive health care services. The proposal hinges on state lawmakers exempting the program from state health insurance requirements, notably the requirement that insurers have adequate reserves to cover a high volume of costly medical claims. County officials assert that the program is not insurance, rather, as draft legislation says, it is a "public-private partnership" providing and financing health care services for residents without health insurance. 

For more on these and other approaches, a 2004 Commonwealth Fund report, Stretching State Health Care Dollars: Building on Employer-Based Coverage, discusses state efforts to build on and support existing employer-based coverage. 

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Funding Health Care Expansions

As states face another economic downturn and growing budget deficits, expanding access to coverage may seem like an impossible goal.  However, there are steps states can take to generate revenue and "stretch" health care dollars to ensure access to health care. 

Following the budget stress states felt earlier this decade, the Commonwealth Fund issued a series of reports titled, Stretching State Health Care Dollars During Difficult Economic Times. The included four reports focus on shoring up employer-based coverage, improving prescription drug purchasing through pooling and evidence-based systems, improving chronic care management, and innovative uses of uncompensated care funds.

Sources of funding include:

  • Employer Pay-or-Play Mandates: As already noted, ensuring strong employer participation in financing health care is a key priority for health care reform considering that employers cover more than 158 million Americans. Employer mandates help ensure employers provide coverage, but for those that don't, the penalties for non-compliance can help fund health care expansions. Notably, San Francisco's law requires employers with 20 or more employees to provide health care or pay the city $1.17 to $1.76 per hour depending firm size. 

  • Tobbaco Settlement Dollars: The 1998 multi-state tobacco settlement is projected to total $246 billion over the first 25 years of the settlement. Unfortunately, only three states have used their settlement dollars to fund tobacco cessation and prevention programs at or above minimum levels prescribed by the Centers for Disease Control and Prevention - Maine, Delaware and Colorado.  These funds, which should be used for health care instead of non-health care related expenditures, are a good source for programs expanding access to coverage.

  • Cigarette and Sin Taxes: Despite their regressivity, raising cigarette, alcohol and other so-called sin taxes can provide valuable revenue to fund health care expansion programs. Additionally, raising tobacco taxes has shown to help reduce rates of smoking, which is a key public health goal. Even lawmakers in South Carolina are considering a proposal to increase the country's smallest cigarette tax and ban smoking in public places, which in many cases has been shown to strengthen local economic growth.

  • Ending Corporate Loopholes: Instead of cutting social services or foregoing expansions during difficult economic times, states can raise revenue by requiring corporations to pay their fair share. Options include: requiring combined reporting of profits from all subsidiaries, refusing to automatically grant special interest tax breaks handed out by the Feds by "decoupling" state and federal tax codes, enacting oil windfall taxes, and requiring tax disclosure to expose corporations that are abusing the tax code.

  • Maximizing Federal Matching Dollars: As Familes USA and Community Catalyst points out, it is in a state's best interest to maximize federal matching dollars, particularly during economic downturns. For every dollar a state puts up for Medicaid programs, the federal government matches it with at least $1 and in many cases more, depending on a state's per capita income. States can generate additional state funds to draw down more federal match through provider taxes. The recent stalled California reform measure included a 4% tax on providers that would have generated an estimated $2.3 billion, in large part through additional federal match. Agreement was reached with the hospital industry by promising increased Medicaid provider rates. Other options for maximizing the federal match are summarized by the Kaiser Commission on Medicaid and the Uninsured.

  • Capturing Savings: A bold feature of Maine's comprehensive Dirigo Health Reform initiative is a unique funding measure called the Savings Offset Payment. The Payment is a fee paid by insurance companies that is proportional to health care savings that are achieved by the Dirigo Health's cost containment provisions. The strength of this model is that it builds health care expansions on top of cost containment, which is necessary for sustainable reform.

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Insurance Reforms to Ensure Fairness and Access to Coverage

Highlighting the need for tighter regulation of the insurance industry, California regulators have had their hands full investigating and imposing fines on many of the state's for-profit and non-profit insurance companies. Recent headlines documenting abusive and anti-consumer business practices include HealthNet providing bonuses to employees who cancel health plans after members submit costly claims and Blue Cross of California recruiting physicians in canceling health insurance coverage. To the North, news that a Washington State-based non-profit insurer has transfered $49 million in premium revenue over the past three years to a faltering for-profit subsidiary in Arizona has fueled debate for stronger insurance oversight and rate regulation.

States are working to ensure consumers in the individual and small group markets are treated fairly and that more of our premium dollars actually go to health care. In fact, as Families USA explains, Massachusetts' 2006 health care reform law was "built on Massachusetts' expanded public programs and its highly regulated insurance market." State reforms to better regulate the insurance industry include:

  • Rate Review and Oversight -  requiring insurers to gain prior approval for premium increases.  On Friday, the Washington State House and Senate passed SB 5261, which will restore the insurance commissioner's oversight of the individual health insurance market and requires individual health plans to maintain a 77% medical loss ratio. 

  • Medical Loss Ratio - requiring insurers to spend a certain amount of premium revenue on direct medical care. As Families USA discusses, these laws ensure that more of our premiums are used on medical care and less on profits, bonuses, and inefficient administration. New Jersey has a medical loss ratio of 75% for the individual and small group markets. If less than 75-cents of every premium dollar is spent on direct medical care, an insurer must issue the difference in refunds to their members. Minnesota has a tiered loss ratio, setting different levels for the large group, small group, and individual markets.

  • Guaranteed Issue - preventing insurers from refusing coverage to individuals because of their health status, age, gender, or other factors.  This helps ensure the availability of coverage and is espcially important in the individual market, where many states allow insurers to cherry-pick their customers and refuse coverage to certain residents.

  • Community Rating - creating more consistency in health insurance rates across insured populations. These laws limit how much an insurer can adjust a health insurance policy based on a person's age, gender, health status, history, and other factors. Pure community rating sets the same rate for an entire insured population, regardless of demographic factors. Modified community rating, the more common form, sets a rating band within which insurers can vary rates based on certain factors. Last year, Colorado strengthened the community rating standards in the small group market through HB 1355, which removes health status as a factor in setting premium rates.

  • Coverage for Young Adults - requiring insurance companies to allow children to stay on their parent's health insurance well into their 20's. Eleven states have authorized coverage up to age 25, but New Jersey has extended dependent coverage to age 30. This is a simple and relatively low-cost way to expand access to coverage. Of the 45 million uninsured in the US, 31% are between 19 and 29 years of age.

  • Pre-Tax Employee Premium Payments - requiring employers to set up "section 125 plans," which allow employees to pay their share of employer-based health insurance premiums pre-tax. This federal tax subsidy can help employees afford coverage, even if employers do not pay towards employee premiums. 

  • Standardized Benefit Plans - requiring insurers in a particular market, often the individual market, to always include a certain level of benefits in their insurance options. This prevents insurers from selling inadequate insurance and allows consumers to better compare the value of different health plans. And, as Community Catalyst points out, states can also establish maximum premiums and out-of-pocket costs to protect consumers from medical debt and bankruptcy.

  • Health Insurance Connector - pooling consumers and negotiating on their behalf with insurance companies for more affordable insurance rates. Following Massachusetts' lead, several states are considering establishing insurance connectors which typically negotiate or contract with insurers to offer insurance plans that meet set standards for coverage and costs. As Community Catalyst describes, connectors create a common marketplace for consumers to compare options and work best with other insurance reforms like guaranteed issue, community rating and standardized benefit plans.

  • Merging Insurance Markets - creating one large pool by combining the individual and small group markets can make more affordable options available to small businesses and to individuals, in particular. Massachusetts has merged these markets and early projections estimate the move will reduce individual insurance premiums by 15% and cause only a slight up-tick in small group premiums. This works best if the two markets have similar consumer protections, as Community Catalyst points out.

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Reducing Costs and Improving Quality of Care

The federal agency that directs Medicare and Medicaid has projected US health care spending to double in ten years to more than $4 trillion. One of every $5 dollars in your pocket will go to health care costs. All too often, it takes a crisis to put foresight into action, as with the current mortgage and foreclosure crisis. Fortunately, state lawmakers are taking on the elephant-in-the-exam-room and working to curb the growth of health care costs and unnecessary spending.

As part of a growing trend among states, Rhode Island's Lieutenant Governor Elizabeth Roberts has proposed a comprehensive health care reform package that targets cost containment to help provide a framework and more funds for a health-care-for-all system. The plan includes many of the measures described here:

  • Managing Chronic Disease: A staggering 78% of all health care costs are for people with chronic conditions, like diabetes, heart disease, lung disease, and depression. Improving the management of chronic diseases to prevent emergencies and stabilize and prevent symptoms is a key policy goal towards reducing the growth of health care costs. Most states have some sort of Medicaid managed care program, either administered by a private firm or contracted directly with primary care physicians. Elsewhere, Vermont's Blueprint for Health is working to move the health care system to one that helps people stay healthy, rather than merely treating isolated medical events. Pennsylvania is also making notable inroads. A state commission recently outlined a chronic care model that would establish local collaboratives of providers through which care and problem-solving would be coordinated and best practices would be shared. The model focuses on engaging patients in making better health decisions, creating a quality-oriented provider culture, information systems, and payment incentives for providers. 

  • Eliminating Health Disparities: There is great inequity in US health care across racial, ethnic, economic, gender, and geographic factors.  As the Opportunity Agenda shows, compared to whites, people of color are more likely to receive sub-par care, experience worse outcomes, lack health insurance, and are less likely to receive routine or necessary care. The Families USA and Community Catalyst webguide presents a number of best practices for reducing disparities and creating equity in US health care, including targeting expansion programs and enrollment in underserved communities, requiring cultural competence in provider settings, reimbursing for language services, and supporting providers who serve low-income and underserved populations.   

  • Certificate of Need: Certificate of Need (CON) is a state regulatory process designed to contain health care costs by preventing spending on unnecessary heatlh care infrastructure and services. Under CON, hospitals and other medical facilities are required to get state approval before building a new facility or offering a new medical service. Approval, in large part, hinges on a clear demonstration of need for the new facility or service. Maine's Dirigo Health Reform strengthened the state's Certificate of Need process by including in the approval process hospitals as well as large outpatient doctor collaboratives. Additionally, the state established a budget, called the Capital Investment Fund (CIF), to guide the CON approval process. The CIF limits the amount of expenditures approved by CON. CON applications are also reviewed by the state's Maine Quality Forum to assess a proposed project's effect on the quality of care. 

  • Pay for Performance: A sure way to improve quality of care is to change how health care is paid for. Paying providers in a way that rewards quality care and care that keeps people healthy, instead of paying for each service rendered or office visit can reduce costs and keep people healthier. More than half of US states have pay for performance systems in their Medicaid programs and a Medicare pilot project is achieving cost reductions and quality improvements in participating hospitals. A December report from the Robert Wood Johnson Foundation, Paying for Quality: Understanding and Assessing Physician Pay-for-Performance Initiatives, examines public and private health care initiatives offering financial incentives as a reward for providing quality care. Additionally, as Families USA and Community Catalyst point out, pay for performance is also a mechanism to eliminating health disparities and hospital errors.

  • Ending Reimbursement for Avoidable Hospital Errors: Washington is the latest state to announce an agreement by health care providers not to charge for avoidable hospital errors. The Pennsylvania Medicaid program recently launched a program to identify and stop reimbursements for care related to avoidable hospital errors. The effort is similar to a Medicare rule that it will no longer pay for preventable conditions acquired at hospitals.  

  • Reducing Hospital-Based Infections: Other approaches to reducing errors include public reporting, or medical error "sunshine" laws, and reducing infections acquired at medical facilities. The Governor of Pennsylvania reports that in 2006 there were 19,154 infections, resulting in 2,500 deaths and more than $3.5 billion in hospital charges. In response, lawmakers enacted SB 968 which will require hospitals to test their highest-risk patients and patients admitted from nursing homes for infections that are resistant to antibiotics. The law will also increase reimbursements to hospitals that meet benchmarks in preventing infections and require reporting to the CDC.

  • Reducing Prescription Drug Costs: States have many options before them to reduce prescription drug costs. The National Legislative Association on Prescription Drug Prices (NLARX), an organization every state legislative body should join, offers an encyclopedic array of model legislation, talking points, and other valuable resources designed for legislators. Legislative best practices include reining in harmful drug industry marketing that inflates health care costs, establishing drug purchasing pools, and promoting use of generic medications. 

  • Electronic Medical Records: A statewide electronic medical records system in Maine could save the state $50 million each year by eliminating duplicate and unnecessary tests, procedures, prescriptions and hospital admissions. The program was created by private and public stakeholders and medical professionals and will start with a pilot project before expanding statewide. Similarly, Vemont' s chronic care management system, Blueprint for Health, is creating a new web-based and free Chronic Care Information System. The system will ensure clinicians have comprehensive patient information and clinical guidance to support diagnosis and treatment decisions. Delaware has already built a statewide system providing immediate access to patient records and New York City has launched a system that is expanding across the city. The New York City program offers training and maintenance assistance to doctors with a large number of Medicaid patients.

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The goal is quality, affordable health care for all.  If it can't be done all at once, pragmatic incremental steps help lay the foundation for comprehensive reform and strengthen the public's resolve for broader initiatives.

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