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In this Issue:
1 . New SCI Brief Explores Implications of HSAs
2. SCI Sponsors Meeting on Public Purchasing Collaboration
3. Uninsured Rose by 1.4 Million in 2003
4. In Tough Budget Times, Illinois Continues to Expand Coverage
5. Dirigo Sign-up to Begin this Fall
6. Montana Ballot Initiative Could Increase Health Funding
7. Hawaii Builds on a 30-Year Commitment to Coverage
8. Brief Explores Effects of Tiered Formularies on Costs and Utilization
9. Report Gives Update on Individual Health Insurance Trends
10. SCI Says Goodbye to Jeremy Alberga
11. Coming Soon
12. Reports of Interest
1. New SCI Brief Explores Implications of HSAs
While state officials are considering the effects of the new Medicare Part D benefit on their drug assistance programs, they must also think about another outcome of the Medicare Modernization Act: Health Savings Accounts (HSAs). A new SCI issue brief explores the key issues that officials need to know about HSAs-which are tax-free accounts that can be set up by individuals or employers and must be coupled with a high-deductible health plan.
The brief covers how the accounts can be used, who is eligible for them, and how they compare to other tax-preferred accounts. It also explores their policy implications and the implementation issues that states need to consider. The brief was written by Mila Kofman, J.D., assistant research professor at Georgetown University's Institute for Health Care Research and Policy.
To further explore how states are being affected by the "new consumerism," see slides from SCI's summer workshop at www.statecoverage.net/0604agenda.htm .
2. SCI Sponsors Meeting on Public Purchasing Collaboration
On August 18, 2004, SCI convened public health care purchasers from Delaware, Maine, Minnesota, New Mexico, Washington, and West Virginia to discuss their experiences collaborating with public agencies across states on efforts ranging from joint contracting to sharing requirements for quality improvement work. The meeting, which was held in Portland, Maine, was facilitated by staff from AcademyHealth-SCI's national program office-and the Center for Health Care Strategies. It came at the request of the Maine Public Purchasers Steering Group (PPSG), established by Governor John Baldacci (D) on his first day in office (1/9/03) as part of an executive order that launched the comprehensive Dirigo Health reform initiative. The PPSG is hoping to learn from other states that have attempted collaborative efforts.
The meeting focused on the broad spectrum of state public purchasers, including Medicaid (the largest public purchaser of health care), health benefit plans for state employees as well as those for educators, retirees, and municipal and correctional employees. Such purchasers might choose to coordinate a number of activities. Perhaps the most ambitious collaborative undertaking is when states jointly contract with health plans, and share a common risk pool, set of benefits, and program rules. However, states with experience in exploring this route have faced considerable challenges in working with often conflicting state and federal regulations. The states represented at the meeting chose to focus on the following more targeted areas for potential collaboration:
- Strengthening quality improvement by aligning program goals, data collection, and measurement;
- Simplifying administrative processes for providers and health plans by sharing reporting requirements and standards;
- Cultivating greater understanding among providers on programmatic rules, including requirements on what is covered, when, and under what circumstances;
- Consolidating procurement processes by requiring health plans to bid at the same time and leveraging participation in multiple programs;
- Encouraging purchasers to develop a greater understanding of providers and health plans by participating in procurement processes in multiple programs;
- Getting better prices for prescription drugs through pooled purchasing; and
- Developing shared approaches to reward health plans, delivery systems, hospitals, and providers for improved quality.
The meeting participants were mainly interested in collaborative efforts to improve quality measurement and care management; most said that their states were moving away from considering or implementing joint procurement and purchasing. Participants agreed that in order for collaborations to be successful, no matter what the activity, purchasers need to clarify goals up front and demonstrate value to all partnering agencies.
Many collaborations start with "top-down" efforts that are initiated by a governor or through legislation. However, purchasers must work to achieve staff-level commitment among all participating partners from the "bottom up" if they wish to sustain functional arrangements, according to the participants. They noted that the personal relationships among state staff who work first in one agency and later in another are important components of building the trust and respect needed for collaboration.
Engaging strong leadership and building solid relationships are essential to the process. Some participants noted that including private purchasers in their discussions was helpful. These purchasers can offer valuable perspective because of their additional market share and flexibility. Some participants said that strategies targeted to multiple stakeholders, including health plans, employers, providers, and patients, were needed to improve care and outcomes.
Because public purchasers serve different populations, operate under diverse rules, and have varying relationships with plans and providers, there are unique challenges to potential collaborations. The Medicaid program, for example, must conform to federal requirements that make it complicated to coordinate with others on certain activities, such as standardizing grievance and appeals processes. Managers of health benefits for state workers, on the other hand, must respond to the concerns of unions as well as to political and budget pressures.
For more information and resources about how public purchasers (especially Medicaid) have implemented purchasing for quality initiatives, please see the CHCS Web site at www.chcs.org .
3. Uninsured Rose by 1.4 Million in 2003
According to recently released data from the U.S. Census Bureau's Current Population Survey (CPS), 45 million Americans did not have health coverage in 2003. These data document that the number of uninsured has risen for the third straight year. The newest estimates were published August 26 in the report Income, Poverty and Health Insurance Coverage in the United States: 2003 by Carmen DeNavas-Walt, Bernadette D. Proctor, and Robert J. Mills. The report's major findings include:
- The number of people without health insurance coverage rose from 15.2 percent of the population in 2002 to 15.6 percent in 2003-representing an increase of 1.4 million people.
- Uninsurance rates among children remained stable from 2002 to 2003.
- There was a drop in the rate of employer-based insurance from 61.3 percent in 2002 to 60.4 percent in 2003.
- The number of people covered by government health insurance programs, including Medicare, Medicaid, and the State Children's Health Insurance Program, increased from 25.7 percent in 2002 to 26.6 percent in 2003.
On August 27, 2004, the State Health Access Data Assistance Center (SHADAC) sponsored a conference call to explore these findings with Charles T. Nelson of the U.S. Census Bureau. Linda Bilheimer of The Robert Wood Johnson Foundation and Stephen Zuckerman of the Urban Institute also participated in the discussion. The call included more than 60 health policy and data analysts from 29 states, several universities, and national health policy organizations. For more information on the audioconference or on issues related to CPS data, visit www.shadac.org .
4. In Tough Budget Times, Illinois Continues to Expand Coverage
Illinois has made many strides in broadening health coverage over the past several years, and the state appears to be keeping up the good work. On July 30, 2004, Governor Rod Blagojevich (D) signed the state's fiscal year 2005 spending plan. The budget closes an anticipated $2.3 billion deficit, while raising health care spending by $600 million. The increase will be used to expand coverage to 56,000 working adults and 20,000 children from low-income families; all current Medicaid patients will be allowed to keep their existing coverage. Under this expansion, the income threshold for FamilyCare-a component of the state's SCHIP program-will rise from 90 percent of the Federal Poverty Level (FPL) to 133 percent FPL.
Illinois was among the first group of states to receive a HIFA demonstration waiver in 2002. Through the waiver, the state incrementally expanded coverage to parents of Medicaid and State Children's Health Insurance Program (SCHIP) children with incomes up to 185 percent of the federal poverty level (FPL), beginning with those at 54 percent FPL. In 2003, Illinois was one of just three states to expand coverage at a time when most states were struggling to maintain their health services. The state raised income limitations for children in SCHIP to 200 percent FPL and for parents to 90 percent FPL at a cost of $25.8 million.
5. Dirigo Sign-up to Begin this Fall
Beginning in early October, low- to middle-income Maine residents will be able to sign up for DirigoChoice, the state's ambitious public-private partnership. The plan will help Maine 's small businesses to offer coverage to their employees and will cover self-employed and, within 3 months, individuals in the group product. After negotiations, the state has agreed to contract with Anthem Blue Cross and Blue Shield of Maine. Coverage is scheduled to start January 1st. Maine was awarded an SCI grant in February 2004 to assist with implementation of the Dirigo program.
This is considered a major step in the process established by the Dirigo Health Reform Act. The long-term goals of Dirigo Health Reform, enacted last year by a two-thirds majority in the legislature, are to ensure that health care is affordable and available to all Mainers and that it is of the highest quality.
The first-year plan is to enroll up to 31,000 Maine residents through their employers, and 5,000 individuals who are self-employed or unemployed.
For more information about Dirigo, please see " Dirigo Health Reform Act: Addressing Health Care Costs, Quality, and Access in Maine . "
6. Montana Ballot Initiative Could Increase Health Funding
This fall, Montana residents will vote on a ballot initiative for a tobacco tax increase that could bolster the state's health programs. If passed, "The 2004 Healthy Kids, Healthy Montana Tobacco Increase Act," will provide new funding for Montana's State Children's Health Insurance Program, allow for the creation of a prescription drug program, and possibly support development of a coverage program for small businesses.
The initiative would raise the price of a pack of cigarettes by $1 per pack, increase the tax on spit tobacco to 85 cents per ounce, and raise taxes on other tobacco products to 50 percent of the wholesale price. Forty-four percent of the income generated through the tax would be earmarked into a state special revenue fund for health care programs.
The proposed prescription drug program would serve children, seniors, chronically ill, and disabled persons. The tax revenue may also fund the establishment of a tax credit program to assist small businesses with the cost of health insurance; this proposal will be finalized later this month. Approximately 60 percent of small businesses in Montana do not offer coverage.
Preliminary plans indicate that the tax credits would be available for small groups with nine or fewer employees (which is the predominant size of small businesses in the state), and would give preference to groups with two to four employees. The tax credit would be:
- Refundable and advanceable;
- Available to small businesses on a sliding scale, depending on the average age of the group;
- Significant enough so that small business owners have an incentive to participate in the program; and
- Valid up to an income limit of $150,000 for any employee or employer.
7. Hawaii Builds on a 30-Year Commitment to Coverage
Hawaii has a distinguished tradition of engaging stakeholders in health care reform and developing innovative approaches to coverage expansions. This year, the state celebrates the 30th anniversary of the Hawaii Prepaid Health Care Act (PHCA), which mandates that employers provide health insurance for employees working more than 20 hours per week. Recent efforts by officials to prevent erosion in coverage among its workers-through partnerships with SCI and others-highlight the state's continued commitment to the uninsured.
The original intent of the PHCA was to develop an employment-based system that would be market-driven and relatively easy to administer. However, as health care costs have skyrocketed, so too, has employers' share of the premiums, because the law limits employees ' contributions to 1.5 percent of their wages or less. As a result, many small businesses in Hawaii are facing difficult choices, such as whether to hire more part-time workers to avoid the cost of the generous benefit package mandated under the 1974 law. Further, because Hawaii's PHCA has a specific exemption from the Employee Retirement Income Security Act (ERISA), it cannot be amended without approval from Congress-a step that many in Hawaii are reluctant to take.
Despite the PHCA, Hawaii's uninsured rate is not insignificant: It is estimated at 10 percent of the population (about 120,000 people), and has more than doubled over the past decade. A large number of the state's uninsured are part-time workers or sole proprietors (workers who are not covered by the employer mandate). Other individuals are opting to be self-insured or are declining coverage for higher wages, even though they would otherwise be covered under the PHCA.
Since January 1, 2003, the Hawaii Department of Health, in collaboration with the Hawai`i Uninsured Project , has been working to better understand and develop options to address the state's rising number of uninsured through an SCI demonstration grant . Over the past 12 months, the project's Uncovered Workers group has been reviewing survey and research data as well as initiatives undertaken in other states. One of the strategies that officials are considering is an individual mandate for the working uninsured that would include a slimmed-down package of benefits to be subsidized with a state-funded reinsurance mechanism and tax credits.
On October 13, the project will hold the 2004 Health Policy Forum, which will bring together stakeholders from across the state to hear about the Uncovered Workers group proposal and to discuss several broad issues, including:
- The impact of the PHCA on employers and employees;
- Health care cost drivers and challenges and opportunities for reducing them;
- The correlation between a healthy workforce and productivity; and
- Overall implications of an increasing uninsured population.
Forum attendees will also have the opportunity to hear from a panel of national experts that includes Alice Burton of AcademyHealth; Deborah Chollet of Mathematica Policy Research, Inc.; former SCI director Vickie Gates; Ted Halstead of the New America Foundation; and Alan Weil of the National Academy for State Health Policy.
8. Brief Explores Effects of Tiered Formularies on Costs and Utilization
Individuals faced with significant co-payment increases for a high-cost drug may opt to stop taking their medication, according to new findings from Harvard University's Richard Frank, Ph.D., Haiden Huskamp, Ph.D., and Arnold Epstein, M.D., and colleagues at MedcoHealth. This research was highlighted in a recent findings brief published by The Robert Wood Johnson Foundation's Changes in Health Care Financing and Organization (HCFO) program.
The researchers compared non-elderly employees and their dependents from two employers that contract with the same large health plan. Both of the employers recently changed their pharmacy benefits--one from a one-tier to a three-tier formulary structure with an across-the-board co-payment increase, and the other from a two-tier to a three-tier structure with increased co-payments only for non-preferred brand-name drugs. They set out to examine:
- The impact of three-tiered formularies on use and spending for prescription drugs and on total health care spending; and
- The effect of three-tiered formularies on treatment patterns and continuity for selected tracer conditions affected by formulary changes.
The formulary change resulted in noticeable switching or stoppage among the drug classes examined by the employees who had been using third-tier brand-name drugs (i.e., the most expensive medications). The researchers also found that there was a significant shift in who bore the financial burden for the medications: Employees experienced a significant increase while the health plan saw a reduction in expenditures. The study findings suggest that a formulary's structure greatly influences an individual's behavior regarding drug therapy. AcademyHealth is the national program office for HCFO.
9. Report Gives Update on Individual Health Insurance Trends
The Kaiser Family Foundation and eHealthInsurance have initiated a series of reports on individual health insurance products and their purchasers. The first in this series, titled " An Update on Individual Health Insurance ," provides policymakers and others with information about individual health insurance purchasers, premiums, retention rates, and cost sharing.
The Robert Wood Johnson Foundation's The Synthesis Project recently released a technical report synthesizing research about state reforms to the individual health insurance market. The synthesis, titled," Expanding the Individual Health Insurance Market: Lessons from the State Reforms of the 1990s ," is intended to translate research into lessons for health care policymakers. These and other publications can be found at rwjf.org/publications/synthesis/index.html .
10. SCI Says Goodbye to Jeremy Alberga
After working to expand health coverage in nearly every state, SCI Senior Manager Jeremy Alberga is leaving AcademyHealth and the United States to tackle new challenges abroad. In October, Jeremy and his family will move to Cameroon, where he will manage an HIV/AIDS research and prevention program for the Johns Hopkins Bloomberg School of Public Health. The SCI team would like to take this opportunity to say goodbye and thank you to Jeremy for his years of hard work and commitment to state coverage.
Over the past five years, many of you have come to know Jeremy not only as a tireless proponent of health insurance coverage, but as a good-natured colleague who is always quick to make others laugh. He started with us in 1999 as an associate in SCI's predecessor program-State Initiatives in Health Reform-and quickly moved up the ranks to become senior associate and then senior manager for the SCI team. He has been a key contributor to SCI's Web site and publications, and has also worked closely with state officials to provide technical assistance and research to inform coverage expansions.
Jeremy's last day with SCI will be September 15. Please join us in wishing him well on his new endeavors. The team will begin recruitment for a senior manager to replace Jeremy immediately.
11. Coming Soon
New Products
Check in with statecoverage.net for updates on SCI's latest publications. We have several issue briefs in the pipeline, including those focusing on:
- The Role of Reinsurance in State Efforts to Expand Coverage (Deborah Chollet, Mathematica Policy Research);
- Lessons Learned from HRSA State Planning Grant Program (Issue Brief collaboration with SHADAC);
- Profile in Coverage: Healthy New York (Q &A with Governor Pataki and Commissioner Serio and Jeremy Alberga, SCI Senior Manager); and
- Communities in Charge: Lessons Learned (SCI collaboration with Terry Stoller, Project Director, Communities in Charge, and Isabel Friedenzohn, SCI Associate).
Look for these products this fall.
Upcoming Meeting
SCI, in collaboration with the Rutgers Center for State Health Policy , will host the Invitational Summit for State Policymakers: Medicare Part D Implementation Issues . This meeting, which is for state Medicaid and pharmacy assistance program officials, will help states navigate the Medicare prescription drug benefit. It will be held on October 7 - 8, 2004, in Philadelphia, and is funded by The Robert Wood Johnson Foundation (through SCI and the Center for Health Care Strategies), the federal Agency for Healthcare Research and Quality , and The Commonwealth Fund .
Coming Soon from AcademyHealth
Health Policy and Politics: An Orientation to Decision-Making in Washington , will take place October 25-28, 2004 and will include an in-depth introduction to the key players who shape health policy, formal and informal policymaking processes, and critical issues. Find out more at www.academyhealth.org/orientation/index.htm .
12. Reports of Interest
The following are the most recently released reports on coverage, most of which are additions to SCI's database of state reports .
Trends in Health Insurance Coverage, 2001-2003
Center for Studying Health System Change
August 2004
Consumer-Directed Health Plans: Will Patients Get the Care They Need?
The Commonwealth Fund
August 2004
Still a Vital Role for State Rx Assistance
The Commonwealth Fund
August 2004
Counting the Uninsured: Why Congress Should Look Beyond the Census Figures
The Heritage Foundation
August 2004
Trends in Americans ' Access to Needed Medical Care, 2001-2003
Center for Studying Health System Change
August 2004
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