In this Issue:

1. States Forced to Make Tough Choices on Medicaid

2. SCI Releases States of the States 2005

3. Oklahoma submits HIFA Waiver to CMS

4. Medicaid Reform and Health Care Cost Lead Discussions at the SCI Winter Meeting

5. HRSA Announces New FY 2005 State Planning Grants

6. Employer-Based Coverage Declines among Low-Income Groups

7. AcademyHealth Career Center Profiles Amy Lischko

8. Reports of Interest

9. Coming Soon from SCI

1. States Forced to Make Tough Choices on Medicaid

Already 2005 is proving to be a tough year financially for many states, forcing governors to make difficult decisions about Medicaid, which in 2004 surpassed elementary and secondary education as the largest component of state spending. Faced with significant budget shortfalls and rapidly increasing costs, several governors have proposed reforming their Medicaid programs-either through changing eligibility or limiting covered services-to address the program's financial burden on the state.

Governors in Missouri and Minnesota, for example, have proposed  reductions in current eligibility levels in their Medicaid programs that would result in a loss of coverage for 90,000 beneficiaries in Missouri and 33,000 beneficiaries in Minnesota. Tennessee Governor Phil Bredesen (D) in 2004 announced his plan to eliminate coverage for 323,000 adults enrolled in TennCare, the state's Medicaid managed care program. The move would reduce costs by about $1.7 billion annually. He has also called for restrictions on coverage for 396,000 adults who would remain in the program.

Other states have proposed more significant reforms to address Medicaid's increasing financial burden on the state. 

California

Governor Schwarzenegger's (R) FY 2004-05 budget calls for a redesign of the California's Medicaid program-called Medi-Cal. The Medi-Cal redesign initiatives include:

-          Expanding managed care programs to families, children,  seniors, and persons with disabilities.

-          Seeking a new five-year hospital financing waiver that will allow the state to continue contracts with selected hospitals serving low-income and vulnerable populations.

-          Modifying the Medi-Cal benefit package by placing an annual limit of $1,000 on dental services provided to adults.

-          Establishing new beneficiary cost sharing based on income levels, which will affect about 550,000 Medicaid beneficiaries.

-          Improving eligibility processing for Medi-Cal applications for children.

Florida

In January, Governor Jeb Bush (R) released a new Medicaid reform proposal that allows the state's 2.2 million Medicaid participants to direct the use of Medicaid resources allocated on their behalf. It also allows provider networks established by community health plans, hospitals, non-profits and managed care companies to offer competing benefit plans to the participants. Under the proposal, beneficiaries would choose the plan that best meets their needs and the state would pay that network a "risk-adjusted premium" based on the beneficiary's individual health conditions and needs. The plan is based on the idea that competition between provider networks and financial incentives for people to adopt healthier lifestyles would reduce inefficiencies and bring predictability to costs.

The Medicaid benefit structure would be changed to include comprehensive care, enhanced benefits, and catastrophic coverage up to the maximum benefit established per beneficiary. As a part of the enhanced benefits, beneficiaries would be offered a flexible spending account that could allow them to purchase additional health care services or retain the funds to opt out of Medicaid and purchase employer-based insurance.

New Hampshire

A November 2004 redesign of GraniteCare, the state's Medicaid program, proposed by officials from the New Hampshire Department of Health and Human Services is being considered by newly elected Governor John Lynch (D) who has announced plans to host a series of public conversations with the state's community partners and citizens about their ideas for improving Medicaid. "We can and should improve Medicaid for the people we serve and our taxpayers. But I am committed to make sure we approach any Medicaid reforms thoughtfully and with full public involvement," Gov. Lynch said.

The proposal from the Department of Health and Human Services would move eligible individuals with incomes greater than 133 percent of the federal poverty level into health service accounts, which are similar to the health savings accounts (HSAs-personal accounts that are coupled with catastrophic coverage endorsed by President Bush).

Additionally, the proposal would use a catastrophic pool to manage high-cost individuals, encourage greater use of community-based services for the elderly and individuals with disabilities, and pay for behavioral health services and developmental disabilities services under an individual budget. The state would outsource several activities to manage care and create a single point of entry for individuals with behavioral health care needs, developmental disabilities, or elderly individuals in need of long-term care.

Following the public conversations, Gov. Lynch plans a series of working sessions between his office, the Department of Health and Human Services, and the state's community partners to decide which ideas are worth pursuing further, and to develop pilot projects and initiatives. Additionally, a special state House subcommittee will hold a series of public hearings on bills that detail aspects of the GraniteCare Medicaid reform proposal. The hearings will address the proposals for health service accounts, long-term care, and Healthy Kids.

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Vermont

In response to the state's $78 million deficit in the Medicaid program, Vermont Governor Jim Douglas's (R) administration has presented a multi-pronged reform plan to reduce the state's spending on Medicaid. The major components of this plan include:

-          A five-year agreement with the federal government known as the "Global Commitment" that would allow the state to negotiate a set annual increase in federal funding and maintain more control over the use of federal Medicaid money;

-          Full implementation of the Governor's Chronic Care initiative, known as the "Vermont Blueprint for Health;"

-          Program restraints and modifications, premium increases, and provider savings that are expected to save $63.2 million;

-          Premium subsidies to beneficiaries who are offered but cannot afford employer-sponsored insurance;

-          Offering incentives for beneficiaries who switch from brand-name to generic drugs; and

-          Malpractice insurance reform.

According to the administration, the proposals would reduce Vermont's Health Access Trust Fund deficit to $615,607 in 2010.

Federal Outlook

Medicaid reform discussions at the state level are inextricably linked to federal budget discussions in Washington. The Bush administration has announced plans to work with governors to develop changes in Medicaid in addition to those included in his budget proposal, which includes a plan to save $60 billion over 10 years in Medicaid funds through state reimbursement "loopholes" and tighter eligibility requirements.

Department of Health and Human Services (HHS) Secretary Mike Leavitt said that the administration will not limit federal expenditures for mandatory Medicaid beneficiaries. However, there are still concerns regarding whether the administration would consider a limit on federal expenditures for optional Medicaid beneficiaries and services, which account for about two-thirds of Medicaid costs.

In response to the President's Medicaid funding recommendation in the FY 2006 budget, the the National Governors Association (NGA) urged the administration to avoid imposing federal restrictions on Medicaid. NGA said in a statement, "We hope the Administration and Congress will work with states to develop program efficiencies and other policies that can save both the states and federal government money, as opposed to shifting costs to the states through budget cuts, caps or other mechanisms. The Medicaid program is growing rapidly because health care inflation is running two to three times the general inflation rate and the case load has grown 33 percent over the last four years, including increases in elderly and disabled populations who are responsible for the majority of Medicaid spending."

2. SCI Releases States of the States 2005

State Coverage Intiatives is pleased to announce the release of State of the States: Finding Alternate Routes. This annual report tells the story of state health coverage activities from the previous year. Despite continued state financial pressure, rising insurance premiums, and increasing numbers of uninsured, states continued to develop strategies to expand health insurance coverage in 2004.

We hope State of the States will be a valued resource for state policymakers to learn from one another how to improve and expand health coverage in these challenging times.

To obtain copies of State of the States, contact Alyson Brice at 202.292.6731 or alyson.brice@academyhealth.org.

3. Oklahoma submits HIFA Waiver to CMS

In mid-January, officials from the Oklahoma Health Care Authority (OHCA) submitted a new Health Insurance Flexibility and Accountability (HIFA) waiver to officials at the Center for Medicare and Medicaid Services (CMS) that outlines the state's plan to establish a premium assistance program for small employers. Known as The Oklahoma Health Care Recovery Act (OKHRA), the plan was passed by the state legislature in 2004.

OKHRA initially will be available for workers and spouses with household incomes at or below 185 percent of the federal poverty level who work in firms with 25 or fewer workers, including those that currently offer coverage. Unemployed individuals seeking work will also be eligible. Participating employers will be required to pay 25 percent of the cost of employee premiums. Employees will be responsible for up to 15 percent, and the state and federal governments will pay whatever is not covered by the employer/employee contributions.

"Our goal is to have this program operational by fall 2005," said OHCA CEO Mike Fogarty. "By expanding access to health coverage, Oklahoma will make significant headway toward addressing the state's insurance crisis." When the program is fully operational, the agency expects to enroll up to 70,000 Oklahomans based on the current funding.

On January 13, Alice Burton and Isabel Friedenzohn attended the last workgroup meeting for the Oklahoma State Planning Grant, where the final details of the waiver were presented to stake holders.

4. Medicaid Reform and Health Care Cost Lead Discussions at the SCI Winter Meeting

On February 3-4, State Coverage Initiatives (SCI) hosted its national meeting for state officials in Washington, D.C. More than 100 state officials from 37 states and the District of Columbia gathered to learn about recent cost drivers in the health system, the future of entitlements and public insurance, and possible federal reforms. The conference was held immediately following the National Health Policy Conference (NHPC), co-hosted by AcademyHealth and Health Affairs.

The potential for federal reforms to Medicaid and the State Children's Health Insurance Program (SCHIP) was a major focus of the meeting. With Medicaid such a critical component of the safety net, states and other proponents of the program have expressed concern over proposals to cap federal expenditures or transform Medicaid into a block grant program for states. In the session "Rethinking Public Insurance," Alan Weil of the National Academy for State Health Policy and Debbie Chang of the Nemours Foundation suggested that both Medicaid and SCHIP play a vital role in providing coverage but both can be improved. Adding a state prospective, Alan Levine, executive director of the Agency for Health Care Quality in Florida, laid out Governor Bush's proposed Medicaid reforms.

States officials continued their dialogue about overall health system cost. Private coverage has slowly eroded, leaving public insurance absorbing the rising number of uninsured citizens at a considerable cost to states. As reported in State of the States: Finding Alternative Routes, 2004 saw Medicaid surpass elementary and secondary education as the largest component of total state spending (21.9 percent). "Today's cost trends continue to make insurance less affordable and strain public finances," said Paul Ginsburg of the Center for Studying Health System Change, who presented new data on health care cost drivers. State officials from Maine and Indiana also discussed their efforts to understand and address rising costs in their states.

The meeting highlighted various purchasing strategies. Richard Curtis from the Institute for Health Policy Solutions and John Grgurina from the Pacific Business Group on Health put to rest myths that purchasing pools alone will improve health insurance coverage. David Haugen also presented on Minnesota's new "Smart Buy" purchasing alliance, a voluntary program of health care purchasers representing approximately 3.5 million Minnesotans that uses its purchasing power to drive value reform.

The pending changes in state pharmacy programs and cost containment efforts received much attention. Vernon Smith from Health Management Associates laid out the impact of Medicare Part D on Medicaid programs. Kim Fox from the Rutgers Center for State Health Policy provided lessons for State Pharmacy Assistance Programs (SPAPs) based on the experiences of states with the Medicare Discount Card. Finally, Jack Hoadley from Georgetown University's Health Policy Institute spoke about recent state cost-containment strategies and the impact of Part D on these efforts.

Delivering the keynote address, "Eras of Health Reform," AcademyHealth President and CEO David Helms looked back at health planning and reform efforts over the past 40 years. He provided policymakers with a historical context to reflect on the current health care debate, including the many reasons why we have failed to expand coverage in the past, and lessons on how to make progress now.

To view presentations and access additional information on this meeting, please visit www.statecoverage.net/0205agenda.htm.

5. HRSA Announces New FY 2005 State Planning Grants

The HRSA State Planning Grants (SPG) Program has recently announced a call for proposals for Fiscal Year (FY) 2005 grant funding. The program anticipates funding 2 New grants to states and/or U.S. Territories, 10 Limited Competition Pilot Project Planning grants, and 22 Limited Competition Planning grants.

The due date for the FY 2005 grant application is March 30, 2005. The SPG office will be conducting two conference calls for potential applicants during which details of the SPG program will be discussed and guidance on preparing applications will be provided. Dates are still to be determined. For updated information on the conference calls and to view the application guidance please visit www.hrsa.gov/osp/stateplanning.

6. Employer-Based Coverage Declines among Low-Income Groups

Health insurance rates changed little among non-elderly black, Latino, and white Americans between 2001 and 2003, but sources of coverage shifted among these groups, according to a 2004 Center for Studying Health System Change Community Tracking Study, a nationally representative survey that includes data on 47,000 people.

Low-income Latinos and whites experienced marked declines in employer-based coverage. From 2001 to 2003, employer-based coverage dropped from 28.3 percent to 22.9 percent for low-income Latinos, from 46.3 to 41.8 percent for whites, and remained fairly constant for low-income blacks. In addition, both access to, and take-up of, employer-based coverage declined significantly for low-income Latinos. Among low-income white Americans, access to employer-based coverage was reduced but take-up rates remained fairly constant.

The decline of employer-based coverage has had a significant impact on public insurance programs, which fill in the coverage gap among these groups. The proportion of nonelderly Latinos and whites with public coverage increased from 2001 and 2003, while the proportion of blacks with public coverage remained statistically unchanged.

While there was little change in access to care among these groups from 2001 to 2003, gaps in access persisted. The report finds that as long as access problems for racial and ethnic minorities persist it is unlikely that health disparities will diminish significantly.

7. AcademyHealth Career Center Profiles Amy Lischko

Why do individuals choose health services research or health policy as a career? Find out through the AcademyHealth Career Center's new Career Profiles. The Center is an important source for career advancement in the fields of health services research and health policy that offers access to professional training and job opportunities, fellowships, continuing education credits, and a place to advertise position openings.

Recently, the Center added the profile of a leader in state health policy,  Amy Lischko, assistant commissioner of health care finance and policy in the Massachusetts Department of Health. Lischko heads a group of policy analysts that monitor and evaluate every aspect of the health care system.

Lischko was the project director for SCI's planning grant awarded to Massachusetts in 2002. The project team used the award to study options for providing coverage to workers in health and human service organizations. Lischko is also the director for the Massachusetts' State Planning Grant funded by the Health Services and Resources Administration (HRSA). She recently presented on selecting data source at SCI's meeting, "Modeling: From the Back of the Envelope to Inside the Black Box."

"Many complex challenges confront our health care system today, and I am as excited as I was 15 years ago to be involved with providing data and analysis that helps policymakers find workable solutions," says Lischko. "I can't imagine a better career path."

Learn more about Lischko and other research and policy professionals at www.academyhealth.org/career/profiles.htm.

8. Reports of Interest

The following are the most recently released reports on coverage. State specific reports can be found in SCI's database of state reports.

Financing Health Coverage: The State Children's Health Insurance Program Experience

The Henry J. Kaiser Family Foundation
February 2005

Medicaid's Optional Populations: Coverage and Benefits
The Henry J. Kaiser Family Foundation
February 2005 

Summary of the Final Rule to Implement the Medicare Prescription Drug Benefit
The Henry J. Kaiser Family Foundation
February 2005  

Time to Revisit the Costly Medicare Drug Entitlement
The Heritage Foundation
February 2005

Making Medicaid a Block Grant Program: An Analysis of the Implications of Past Proposals

The Milbank Quarterly

January 2005

Study of Health Insurance Expansion Options

State of Nevada Legislative Counsel Bureau

January 2005

Understanding the Recent Growth in Medicaid Spending, 2000-2003

Health Affairs

January 2005

Report on the Healthy New York Program 2004

EP&P Consulting for the State of New York Insurance Department

December 2004

Indiana Market Assessment & Drivers of Health Care Costs

Mathematica Policy Research, Inc. for the Health Insurance for Indiana Families Committee

November 2004

9. Coming Soon from SCI

Check for updates on SCI's latest publications and meetings, including:

• An issue brief on lessons learned from the Communities in Charge program (SCI collaboration with Terry Stoller, project director, Communities in Charge);
• SCI's Summer Workshop for State Officials to be held in Chicago, July 28 - 29, 2005.