Worsening Budgets Compound
States’ Struggle to Bridge Health Coverage Gap

Greater Federal Flexibility Allows States
to Restructure Public Programs

WASHINGTON—Facing increasing Medicaid expenditures and declining tax revenues, states are of necessity becoming more creative in their efforts to ensure health care coverage for their citizens, according to a new report just released by the State Coverage Initiatives (SCI) program of The Robert Wood Johnson Foundation. Produced annually, the new edition, “State of the States: Bridging the Health Coverage Gap,” provides a comprehensive analysis of how states coped with extraordinarily difficult financial pressures in 2002.

The report examines the primary drivers of national health care spending last year, including increases in pharmaceutical and inpatient costs. As Medicaid expenditures continued to skyrocket in 2002, the states pursued a variety of innovative cost-containment approaches ranging from disease management programs to evidence-based formularies. “The revenue and cost crisis has forced states to find inventive and practical ways to preserve coverage and address the uninsured using existing resources,” says Vickie Gates, director of SCI and vice president at AcademyHealth.

A number of states leveraged federal funds and took advantage of the ability to design flexible coverage strategies that involve restructuring Medicaid benefits packages. This enhanced flexibility is a result of the Health Insurance Flexibility and Accountability initiative, launched by the Bush administration in 2001. States also took part in intensive planning and demonstration projects that will make it easier to preserve coverage and prepare for future expansions.

Finally, the report examines trends in the individual and small group insurance markets, which have shrunk in recent years because of low market shares among carriers. Last year, a number of states built partnerships with the private sector or made use of high-risk pools to reduce costs and increase access for those seeking non-group coverage.

AcademyHealth is the national program office for SCI, which helps states improve the availability and affordability of health insurance through grants, technical assistance, workshops, and written products. The Robert Wood Johnson Foundation recently authorized $3.5 million in funding to support SCI activities through 2004. “Now more than ever, states need help in containing costs and creating resourceful coverage approaches,” says Gates. “SCI has responded to the current reality by recognizing that preserving coverage has become as critical a goal as expanding health insurance.”

For a free copy of the new State of the States report, go to
www.statecoverage.net/pdf/stateofstates2003.pdf, or contact Emily Muller at sci@academyhealth.org.

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