Improving Coverage and Access: An Overview of State Activities

Donald Cohn, AssociateAcademyHealth

December 7, 2006

2

State Coverage Initiatives (SCI )

An Initiative of The Robert Wood Johnson Foundation

Direct technical assistance to states State specific help, research on state policy

makers’ questions Convening state officials Web site: http://statecoverage.net Coverage Matrix Publications

Grant funding

3

State Role in the Health System

Payer

Regulator

Provider

Public Health

Medicaid/SCHIP State Employees & Retirees

Coverage High-risk pool Uninsured Underinsured Oversight of health insurance

market Oversight of providers Oversight of facilities Prevention Health performance

4

Drivers of State Health Reform Efforts Health insurance becoming increasingly

unaffordable for working families Increasing numbers of uninsured Some states beginning to emerge from

fiscal crisis Lack of national consensus

5

Health Care Premiums Outpace Worker’s Wages = Health Coverage

Increasingly Unaffordable

12.0

18.0

0.8

7.7

13.9^

12.9*10.9*

8.2*

5.3*

11.2*

8.59.2*

0

5

10

15

20

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Health insurance premiums

Workers' earnings

Overall inflation

* Estimate is statistically different from the previous year shown at p<0.05.^ Estimate is statistically different from the previous year shown at p<0.1.

Note: Data on premium increases reflect the cost of health insurance premiums for a family of four. Historical estimates of workers’ earnings have been updated to reflect new industry classifications

(NAICS).Data: KFF/HRET Survey of Employer-Sponsored Health Benefits: 1999-2006.

6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2004

Uninsured

Private, Non-Group

Medicaid/Other Public

Employer-Sponsored

63.167.9

8.6 10.5

5.6 5.8

17.9 20.6

Note: Data taken from Kaiser Commission on Medicaid and the Uninsured/Urban Institute, Health Insurance Coverage in America, 2004 Data Update. November 2005.

Health Insurance Coverage Changes Among Working-Age Adults, 2000-2004

7

Reasons Why 3.4 Million Employees Lost Insurance Between 2001 and 2005

Employee Take-Up Decline

27%

Employer Sponsorship Decline

48%

Loss of ESI Dependent Coverage—11%

Employee Eligibility Decline—14%

Note: Data taken from “Changes in Employees’ Health Insurance Coverage, 2001-2005”, Kaiser Commission on Medicaid and the Uninsured, October 2006.

8

Percent of Adults Ages 18–64 Uninsured by State

Data: Two-year averages 1999–2000 and 2004–2005 from the Census Bureau’s March 2000, 2001 and 2005, 2006 Current Population Surveys. Estimates by the Employee Benefit Research Institute.

WA

ORID

MT ND

WY

NV

CAUT

AZ NM

KS

NE

MN

MO

WI

TX

IA

ILIN

AR

LA

AL

SCTN

NCKY

FL

VA

OH

MI

WV

PA

NY

AK

MD

MEVTNH

MARI

CT

DE

DC

HI

CO

GAMS

OK

NJ

SD

WA

ORID

MT ND

WY

NV

CAUT

AZ NM

KS

NE

MN

MO

WI

TX

ILIN

AR

LA

AL

SCTN

NCKY

FL

VA

OH

MI

WV

PA

NY

AK

ME

DE

DC

HI

CO

GAMS

OK

NJ

SD

19%–22.9%

Less than 14%

14%–18.9%

23% or more

1999–2000 2004–2005

MA

RI

CT

VTNH

MD

NH

Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2006

IA

9

WA

OR

ID

MT ND

WY

NV

CAUT

AZ NM

KS

NE

MN

MO

WI

TX

IA

ILIN

AR

LA

AL

SC

TNNC

KY

FL

VA

OH

MI

PA

NY

MD

MEVT

NH

MA

RI

CT

DE

DCCO

GAMS

OK

SD

States Vary in Employer Coverage

Less than 50 %

More than 59 %

Quartile Rank

50% to 53 %

54% to 59 %

Adapted from Kaiser Family Foundation

Source: Urban Institute and KFF estimates from 2005, 2006 CPS supplement

10

Different Strategies to Improve Coverage and Access Comprehensive approaches

Massachusetts, Vermont, and Maine

Incremental Covering children Making new insurance options more

affordable for low-income working uninsured

Improve access through safety net

11

Reactions to Recent State Reforms

New approach presents excitement about what is possible– states want to “avoid being left behind”

This works for that State, but we are different

New idea sparks new creative approaches Fear of over-reaching – sustainability of

initiatives Importance of on-going coalition of support

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Comprehensive Efforts

MassachusettsVermontMaine

13

Maine’s Dirigo and MaineCare Eligibility

0%

100%

200%

300%

400%

Children Parents Childless Adults

Inco

me

as %

Po

vert

y

MaineCare MaineCare ExpansionExpansion

Dirigo Health: Reduced Employee Dirigo Health: Reduced Employee Contributions for Workers in Small Contributions for Workers in Small

FirmsFirms

MaineCareMaineCare

Dirigo Health: Affordable Premiums for Dirigo Health: Affordable Premiums for Workers in Small FirmsWorkers in Small Firms

14

Access: DirigoChoice

New Insurance product offered by Anthem

DirigoChoiceSmall Employers,

Individuals,Self-employed

MedicaidEmployerPremiums

General FundsYear 1

IndividualPremiums

Savings OffsetPayment in Year 2

PremiumSubsidy

< 300% FPL

15

Maine - potential lessons

Voluntary programs not likely to achieve universal coverage

Financing – difficult to transfer uncompensated care dollars to premium subsidies

Challenge of building and maintaining a consensus

16

Employer and Individual Coverage Mandates

Hawaii Prepaid Health Act (1970s) 86% employers offer insurance versus 56% nationally 12% uninsured vs. 18% nationally

Maryland Fair Share Act Court rejected

Massachusetts Employer Assessment & Free Rider Surcharge Individual mandate (affordability is key question)

Vermont Employer Assessment Will consider individual mandate in 2010 if 96% coverage not

achieved

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Incremental Approaches

Children

Purchasing Pools

Limited Benefits

Reinsurance

Creative Uses of Medicaid

Safety Net

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Children and AllKids: Illinois

IL – AllKids expansion (July 2006) All uninsured children eligible, sliding scale

premium $45 million estimated cost - financed through

savings from shift to primary care case management (PCCM)

Builds on success and bi-partisan support for SCHIP

Cost effective to cover children Improves outreach to eligible, but unenrolled Other states consider SCHIP Reauthorization due in 2007

19

Purchasing Pools: California PacAdvantage

Longest running and largest health insurance purchasing alliance formed in 1993 Over 100,000 covered lives

Small firms (2-50) able to enroll and offer a choice of private health plans

Evaluations demonstrated that PacAdvantage improved choice of health plans, but was never demonstrated to have expanded coverage

August 2006 - PacAdvantage announced closing due to withdrawal of participating plans

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Purchasing Pools: Insure Montana

$10 million coverage initiative funded through tobacco tax Tax Credits

40% of overall funding is for tax credits for small business that provide health insurance (tax credit provided on a “first come first serve basis”)

Purchasing Pool – 60% of overall funding is for subsidies for

small businesses that were previously unable to offer coverage on a “first come first serve basis” to assist both employer and employee pay portion of health insurance premium.

Enrollment (Fall 2006) = 360 firms, 2200 lives

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Lessons Learned: Purchasing Pools

Strategy has generally not expanded coverage to the uninsured

Has improved plan choice for small firms Has not generated significant

administrative savings or price discounts Unless designed carefully, pools can

create adverse risk selection To be effective, need to combine pool with

other strategies such as subsidy or individual mandate

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Limited Benefit Plans have had Marginal Impact

At Least 13 states have passed limited benefit legislation, 2 states have passed new legislation in 2005

Barebones and other limited benefit plans have had low take-up rates

May lead to currently insured to scale back benefits

May contribute to increased uncompensated care

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What are Consumer-Directed Health Plans?

Common characteristics High deductible insurance plan Personal account to pay for care Gap between the annual amount in account and deductible Internet-based decision support

Driven by rising health care costs Past cost containment approaches have not

worked- Traditional health insurance (until early 80’s)- Regulated prices for government programs (until

early 90’s)- Managed care and purchaser power (until early 00’s)

New solution- CDHPs?- Shift of power to cost-conscious, educated consumers

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Distribution of Health Spending

Adults Ages 18-64, 2001

Source: Employee Benefit Research Institute estimates from the 2001

Medical Expenditure Panel Survey.

$0

$10,000

$20,000

$30,000

$40,000

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Percent of Population

Ave

rage

Cos

t P

er P

erso

n

Average Cost = $2,454

or higher

20% of population that accounts for 80% of spending

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Common State Reactions to CDHPs

State as a Payer CDHP option within state employees plan or high-

risk pool? Medicaid reform Give additional state tax incentives to encourage

CDHPs? State as a Regulator

Allow high deductible plans to be sold in market? If so, sold in which market?

Market segmentation and risk selection Do consumers really understand new cost sharing?

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Reinsurance: Healthy New York

20% of people account for 80% of health spending

State subsidizes costs for high cost enrollees with the goal of lowering premiums for all

State requires all HMOs to offer product Some benefits excluded (MH/SA) Small firms w/ low-wage workers, low income

self-employed, uninsured workers w/o access to employer sponsored insurance may enroll

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Healthy New York Reinsurance Subsidy

$ 0 $5,000 $75,000

Carrier 100%

State Reinsurance Fund 90%

Carrier 10% Carrier 100%

Estimated savings of 50% for individuals Over 125,000 enrolled (8/06)

Most enrollment is non-group State Reinsurance Fund spent $13.3 million in

2003, $34.5 million in 2004, $61.7 million in 2006

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Early Lessons on Reinsurance: Healthy NY

Requiring HMOs to offer Healthy New York product is less expensive than establishing new program

Perceived efficiency and value of program Getting participation requires long-term partnership

to build trust that coverage will continue to be there While targeting small groups, product has enrolled

mainly individuals and self-employed Must have market oversight to assure lower

premiums

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Creative Uses of Medicaid

Premium Assistance: 15 states Medicaid/SCHIP pays for employee

portion of existing private insurance Medicaid Buy-In

All-Kids = sliding scale subsidy subsidized by SCHIP

New Insurance Product with a subsidy Subsidy for low income individuals,

and small firms

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Coverage: Both a Problem of Offer and Take-up

0%

10%

20%

30%

40%

50%60%

70%

80%

90%

100%

<100% 100-199% 200-399% 400%+

Poverty Level

Not offered through own orFamily Member's Employer

Declined offer from Own orFamily Member's Employer

Covered by Own FamilyMember's Employer

30%

15%

55%

52%

14%

35%

79%

8%

13%

92%

4%

Note: Data taken from “Changes in Employees’ Health Insurance Coverage, 2001-2005”, Kaiser Commission on Medicaid and the Uninsured, October 2006.

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New Medicaid Strategies Address Low Offer Rates

New insurance products for small firms with low-wage workers

Employers, individual and Medicaid pay premium New Mexico – open to uninsured adults <200%

FPL, individuals may pay employer contribution Oklahoma covers workers and spouses <185%

FPL who work for small firms; program begins with voucher; safety-net option will be provided for workers with employers unwilling to participate

Arkansas recently received waiver to offer limited benefit product to small firms, Medicaid funding will be available for low-wage workers (<200% FPL)

32

New Mexico State Coverage Insurance: Public/Private

Partnership

New Mexico Human Services Department

$20

$75

$51

$209

Federal $209State $51Employer $75Employee $20

$355 estimate per person

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Medicaid’s Changing Role

Use in expanding coverage to the uninsured

Covering different populations, sometimes higher income groups

Increased cost-sharing Changing benefit designs Consumer Responsibility

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Utah’s Primary Care Network

Adults to 150% FPL (1115 waiver) Some reductions in benefits Medicaid Primary care benefit package for expanded

population: Office visits - DME Immunizations - Basic dental Emergency/Urgent care - Hearing and vision screening (no

glasses) Lab/X-ray - Rx (4 per month)

Donated care from Hospitals

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Recent DRA State Plan Amendments

West Virginia: “Secretary-approved coverage” for children and parents Member agreement – providers monitor patient’s

compliance Kentucky:

4 Benefit plans: global choice (default), Family Choices (most kids); Optimum Choices (MRDD), Comprehensive Choices (Nursing Home Care)

New cost sharing and service limits “Get Healthy Benefit Accounts”

Idaho: 3 Benefit plans for healthy children and working adults,

individuals with disabilities and elderly

Source: Robin Rudowitz, KCMU, June 2006

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Medicaid – Looking Ahead

Growing complexity of Medicaid Enrollment growth offset decline of employer

sponsored insurance Medicaid growing for same reasons health

care cost growing + enrollment State budget pressures – cost containment

options – eligibility, utilization, reimbursement

Medicaid important source of federal matching funds for new state initiatives

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Growth in Uninsured Population

Served by Health Centers, 1990-2005

0%

25%

50%

75%

100%

125%

1990 1995 2000

All Uninsured

(47 million; 34% increaseSince 1990)

Uninsured Servedby Health Centers

(6.4 million; 128% increase since 1990)

Percent Increase

SOURCE: Data from 1996-2005 UDS; National estimates from Bureau of the Census.

2005

38

Growth of Health Centers: 1970-2005

0

5

10

15

20

1970 1980 1990 2000 2005

Millions of Persons Served by Coverage Source

Uninsured Medicaid Private Insurance Medicare

150Centers

952Centers

Source National Association of Community Health Centers

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Access versus Insurance

Communities with strong insurance coverage and a strong safety net presence demonstrated the highest access to care.

Investment in insurance goes further to improve access to care versus investment in the safety-net.

Insurance expansions and safety-net expansions should be viewed as complements.

Without universal coverage, the safety net is important and some investment in the safety is needed. The question is how much?

Cunningham and Hadley, “Expanding Care versus Expanding Coverage: How to Improve Access to Care,” Health Affairs: July/August 2004

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Challenges of Community-Based Models

Assuring long-term, sustainable funding Need to address both access and

insurance The safety-net is a delivery system while

insurance is a financing strategy Difficult to design a program to fill gaps in

complex health system

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Terminology Matters

Conservative-Speak Liberal-SpeakPersonal Responsibility Individual MandateInsurance exchange Purchasing PoolBasic Health Insurance Barebones PoliciesReasonable cost-sharing High DeductiblesCostly Mandated Benefits Essential BenefitsEmployer Assessment Employer Fair ShareQuality Health Insurance Comprehensive Health

Insurance

Source: Lischko, A. Communicating the Policy Choice. Slides presented at SCI’s Policy Analysis Workshop, Virginia, October 2006.

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Concluding Thoughts

States play critical role in moving the conversations about coverage expansions Testing new ideas (politically and practically) Creating momentum for national policy solution

Catch 22: Often need ambitious goal to sell new initiatives but need to be realistic about what states can do Given overall fiscal picture, how far can states go?

Comprehensive versus Incremental Sequential = incremental plus a vision

Few states can even approach universal coverage without a federal framework and funding