George Mason University Lessons From State Health Reform

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George Mason University Lessons From State
Health Reform

• W. David Helms
• April 9, 2009

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Presentation Outline

• What is driving state reform?
• What are states doing to reform the health care
  system?
• How will recent federal actions affect state
  reform?
• Why do states need a strong federal partner?

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What is Driving State Reform?

• Increasing number of uninsured
• Decline in employer-sponsored insurance
• Health insurance becoming increasingly
  unaffordable for working families
• Increased recognition that coverage expansion is
  necessary for an effective and efficient health
  care system

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Percent of Median Family Income Needed to Buy
Family Health Insurance
Source Calculations by Len Nichols (1987) and
AcademyHealth (2008), using KFF and AHRQ premium
data, CPS income data.
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Source Uwe Reinhardt, The U.S. Economy and
Health Care Implications for Health Reform.
Families USA Annual Conference. January 29-31,
2009.
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Source Uwe Reinhardt, The U.S. Economy and
Health Care Implications for Health Reform.
Families USA Annual Conference. January 29-31,
2009.
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Presentation Outline

• What is driving state reform?
• What are states doing to reform the health care
  system?
• How will recent federal actions affect state
  reform?
• Why do states need a strong federal partner?

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Strategies for Comprehensive Reform
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Key Elements of State Reform Strategies

• Benefit design
• Insurance market reform
• Public program expansions
• Decrease in insurance costs
• Cost containment/system improvement

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Benefit Design

• Services included/excluded cost-sharing
  structure of access to providers
• Not just cost of coverage but value of the
  benefit plan what set of services are purchased
  for specific amount of money
• Before limit benefits raise cost-sharing
  limit networks (value issue)
• Levers within benefit design
• reduce premiums
• encourage efficient/appropriate consumer behavior
• change carrier and provider behavior
• Evidence-based benefit design? MN
• Consumer-driven health plans? IN
• First-dollar benefits? TN
• Direct consumer behavior change? RI

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Insurance Market Reforms

• States use insurance market rules to try to lower
  premiums, expand choice of plans/products, and
  increase efficiencies
• Examples
• Require minimum insurance medical loss ratios CA
• Change definition of dependents and extend
  coverage beyond the age of 18 for
  students/non-students Many states
• Guaranteed issue
• Rating factors/Bands
• Merge small group and individual markets MA
• Purchasing mechanism (Connector) MA
• High risk pools

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Public Program Expansions

• Increase eligibility levels
• Buy-in programs
• Outreach to eligible but not enrolled
• Streamline/simplify enrollment processes
• Waivers to support premiums for small employers

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Decreasing Insurance Costs

• Direct and Indirect Subsidies
• Reinsurance
• Premium assistance
• Tax credits
• Structural Changes to Lower Premium Costs
• Section 125 plans MA, RI, CT, MO
• Administrative simplification/standardization MN

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Cost Containment and System Improvement

• Strategies
• Prevention/wellness/primary care
• Chronic care management and coordination
• Public health initiatives
• Value-based purchasing/payment reforms
• Medical error reduction and patient safety
• Price and quality transparency
• Heath information technology and exchange
• Administrative and regulatory efficiencies

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Presentation Outline

• What is driving state reform?
• What are states doing to reform the health care
  system?
• How will recent federal actions affect state
  reform?
• Why do states need a strong federal partner?

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CHIP Reauthorization

• Extends CHIP through FY 2013 with an additional
  32.8 billion over four and a half years
• Marked increases in CHIP allotments
• Changes in the formula used to determine how much
  CHIP funding a state receives
• Continues coverage for 7 million children,
  provide coverage to an additional 4 million
  children
• State options to cover legal immigrant children
  and pregnant women
• New rules on covering moderate-income children
• Elimination of adult coverage

Source The Childrens Health Insurance Program
Reauthorization Act of 2009, Overview and
Summary, Georgetown University Center for
Children and Families, February 2009.
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Major Health Care Provisions in Stimulus Package
(ARRA 2009)

• Medicaid FMAP Increase (10/08-12/10) 87 B
• Promotion/Adoption of HIT 20 B
• COBRA subsidies (9 months) 25 B
• Comparative Effectiveness Research 1.1 B
• Extension/New Moratorium on Medicaid Regulations
• Community Health Centers 0.5 B for services and
  1.5 B for capital investments/HIT
• Temporary increase in Disproportionate Share
  Hospital (DSH) Payments FY09 FY10 2.5

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Impact of Federal Reform on States

• CHIP reauthorization and FMAP increase
• Substantial help to states to maintain/expand
  coverage
• COBRA subsidies
• States play vital role in extending coverage to
  unemployed
• Federal resources to fill major gaps for states
  and halt further cuts

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Presentation Overview

• What is driving state reform?
• What are states doing to reform the health care
  system?
• How will recent federal actions affect state
  reform?
• Why do states need a strong federal partner?

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States Can Advance Reform Initiatives But Need
Federal Support

• States face growing pressures for reform
• Uninsured continues to rise as employer sponsored
  insurance declines
• Cost increases threaten state budgets and
  capacity to sustain Medicaid/SCHIP
• States play critical role in moving the
  conversations about coverage expansions
• Testing new ideas (politically and practically)
• Creating momentum for national policy solution
• States are needed to implement federal reform,
  with states being key to implementation
• State roles in reformed system
• Oversee connector structure
• Adjust benefit design to meet unique state
  circumstances
• While we have used states as laboratories to
  advance/test reforms, need to be realistic about
  what states can do without a federal framework
  and funding

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Federal-State Partnership Federal Strengths

• Authority to establish minimum national standards
  for eligibility, benefit design, subsidy levels,
  etc.
• Feds have both the most progressive tax and
  capacity to do deficit financing
• Health reform requires significant income
  redistribution for which income tax best suited
• Counter-cyclical budgeting is essential
  especially for employment related health insurance

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Federal-State Partnership State Strengths

• Proximity
• With closer proximity to the populations being
  served, states are well suited to adapt federal
  framework to specific state needs
• Flexibility to implement system redesign
• States have greater ability to foster support
  among key stakeholders to achieve successful
  system change.

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State Variation in the Context of Federal Reform

• Broad agreement on the need for reform, but
  significant differences on means to needed to
  achieve it.
• Uniform national strategy will not have uniform
  effects at the state level and will not guarantee
  uniform outcomes
• Three options for how federal government could
  address state level variation
• Let states fend for themselves
• Provide variable assistance based on state need
• Allow states to comply with federal guidelines in
  a sequenced fashion over time.
• Combination of variable assistance and sequencing
  likely to be best method to help states comply
  with national reform framework over defined
  period of time

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