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State Health Reform Initiatives and Prospects for National Reform Illinois Chamber Healthcare Counci


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Title: State Health Reform Initiatives and Prospects for National Reform Illinois Chamber Healthcare Counci

State Health Reform Initiatives and Prospects for
National Reform Illinois Chamber Healthcare
Council Legislative Symposium Springfield,
ILMarch 25, 2009
Enrique Martinez-VidalVice President,
AcademyHealthDirector, State Coverage Initiatives
State Coverage Initiatives (SCI)
  • An Initiative of the Robert Wood Johnson
  • Community of State Officials
  • Convening state officials
  • Resources and Information
  • Web site
  • State Profiles
  • Publications/State of the States
  • Direct technical assistance to states
  • State-specific help, research on state
    policymakers questions
  • Grant funding/Coverage Institute

Overview of Presentation
  • Background
  • State Reform Strategies
  • Lessons Learned from State Reforms
  • Federal-State Partnership?
  • Prospects and Directions for National Reform
  • Conclusion

Percent of Uninsured Adults Ages 1864 (Source
The Commonwealth Fund, 2008)
Data Two-year averages 19992000, updated with
2008 CPS correction, and 20062007 from the
Census Bureaus March 2000, 2001 and 2007, 2008
Current Population Surveys.
Health Insurance Coverage Changes Among
Non-Elderly, 2000-2007
Note Data from Current Population Survey,
Census Bureau, Historical Health Insurance
Tables,. August 2008.
The Non-Elderly as a Share of the Population and
by Poverty Level, 2006
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.
Distribution of Health SpendingAdults Ages
18-64, 2001
Source Employee Benefit Research Institute
estimates from the 2001 Medical Expenditure
Panel Survey.
Drivers of State Health Reform Efforts
  • Uninsured still high
  • Employer-sponsored insurance down
  • Costs/premiums increasingly unaffordable Indiv
    Families Govt
  • Coverage needed for effective and efficient
    health care system
  • Lack of national consensus future?
  • Greater political will at state level

Key Policy and Design Issues
  • Different Populations Require Different Solutions
  • Subsidies and Financing Who will pay? Who will
  • Should Health Insurance Coverage Be Required?
  • What is Affordable Coverage?
  • What is the Most Appropriate Benefit Design?
  • Do Insurance Markets Need to be
  • Best Mechanisms for Cost Containment/Systems
  • 2008 State of the States

  • What are States Doing to Reform the Health Care

Strategies for Comprehensive Reform
Massachusetts Pillars of the Reform
  • Employer Responsibilities
  • Section 125 Plan Requirement
  • Offer Coverage or Be Assessed
  • Personal Responsibility/Individual Mandate
  • Expansion of Publicly-subsidized Programs
  • Major Changes to Insurance Market
  • Merged Small Group and Individual Markets
  • Raising age of dependents up to 25
  • Connector Purchasing Mechanism NOT a Risk Pool

Current State of the Commonwealth
  • More than 439,000 newly-insured between June 2006
    and March 31, 2008
  • 191,000 more in private coverage (no public )
    more than 40 of all newly covered have no
  • Employer-sponsored insurance remains predominant
    source of coverage (82 of non-elderly) no
  • Non-group premiums are down over 40 and
    membership has grown over 50
  • Approximately 1-2 of the MA population or 60,000
    persons may be exempted from the mandate

Key Elements of State Reform Strategies
  • Insurance market reforms
  • Public program reforms
  • Benefit design
  • Decrease insurance costs
  • Cost containment/system improvement

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, NJ, CO
  • Change definition of dependents and extend
    coverage beyond the age of 18 for
    students/non-students Many states
  • Guaranteed issue CA
  • No Pre-ex limitations when moving between
    policies (including non-group) IA
  • Rating factors/Bands
  • Must offer non-group policies to offer small
    group policies NJ
  • Transparency of broker fees/commissions
  • Merge small group and individual markets MA
  • Purchasing mechanism (Connector) MA, WA
  • High risk pools

Public Program Expansions
  • Increase eligibility levels
  • Buy-in programs (esp. disabled) sliding scale
  • Longer eligibility periods (i.e., change from 6
    mo. to 12 mo.)
  • Outreach to eligible but not enrolled
  • Streamline/simplify enrollment processes/auto-enro
    llment strategies
  • Waivers to support premiums for small employers

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 not worth it)
  • 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, MD, NH, FL

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

Cost Containment and Quality Improvement
Prioritized by States2009 State of the States
pp. 54-59
  • Prevention/primary care/wellness
  • Chronic care management and coordination
  • Public health initiatives
  • Value-based purchasing/payment reforms
  • Medical error reduction/patient safety
  • Health-acquired infection reduction
  • Price and quality transparency
  • Heath information technology and exchange
  • Administrative and regulatory efficiencies

Vermont - Blueprint Components
Lessons Learned in State Reform Efforts 2009
State of the States pp. 20-25
Comprehensive Reform is Possible Massachusetts
Shows the Way
  • Massachusetts passage of universal reform in
    2006, demonstrated bi-partisan support for broad
    reform is possible
  • Massachusetts public-private plan represents
    compromise between single payer and strict
    market-based approaches.
  • This approach has been broadly accepted and
    incorporated into other comprehensive reform

Compromise and Consensus Building
  • Though consensus on the necessity of reform is
    growing, significant political hurdles still
    hinder reform in many states.
  • There are a number of lessons learned from the
    states related to building stakeholder support
  • Leadership is essential
  • Be inclusive
  • Build relationships early
  • Find supporters wherever possible
  • Get supporters on the record
  • Keep your eyes on the prize(s) big picture
    perfect vs good
  • States have established a consensus-building
    process for many reasons
  • Consensus building is not a magic bullet

No Free Solutions Who Will Pay? Who Will
  • Shared responsibility Who helps cover the
  • Individuals Employers Federal government State
    government Health plans/insurers Providers
  • Potential downside shared responsibility means
    shared pain
  • Enough money in current system?
  • If yes, then Redistribution (Who will pay? Who
    will get paid?)
  • States have attempted to recoup savings from the
  • Maine and the Savings Offset Payment (SOP)
  • Minnesotas 2008 health reform law
  • If not, then need new forms of revenue Sin
    taxes Sodas Provider taxes Payroll taxes
    Lease lottery Slots revenues Gross Receipts Tax

Sustained Effort Needed
  • Health reform takes sustained effort/built on
    previous efforts, financing mechanisms
  • Massachusetts
  • New Jersey, Iowa, and Wisconsin
  • Oregon, Colorado, and New Mexico
  • Sustained effort during implementation of reform
    is especially critical. To ensure success of
  • Outreach and education are crucial
  • Strong evaluation mechanisms which allow reform
    to be adapted as it moves forward

A Sense of Urgency Creates Opportunity
  • Massachusetts reforms propelled by potential to
    lose federal funds
  • Other states seek way to create similar sense of
  • Comprehensive reform will remain difficult
    without a sense of urgency or a sense of
    inevitability as many stakeholders are invested
    in status quo

Individual Mandate
  • Voluntary strategies will not result in universal
    coverage - some states are beginning to recognize
    the need for mandatory participation -
  • Unenforceable? Impingement on individual freedom?
    Money for subsidies?
  • Those pursuing individual mandate must consider
  • Affordability of mandate
  • Richness of benefits package
  • How to enforce mandate
  • Though there are significant policy challenges,
    there are also notable benefits
  • Distribution of risk
  • Fairness
  • System-ness

Relationship Btw Reducing Costs, Improving
Quality Expanding Coverage
  • Little success so far in addressing underlying
    cost of health care but a new focus on chronic
    care management/preventive care holds potential
  • Massachusetts leads on health coverage reform,
    while Minnesota is at the forefront of cost
  • The trend in states is to address access, systems
    improvement, cost containment simultaneouslyconce
    rn about long-term sustainability of coverage
    programs and improved population health
  • Concerns about rising costs are an impetus for
    reform, but cost cutting is likely to raise
    opposition from various stakeholders.

State and National Health Care ReformA Case
for Federalism 2009 State of the States pp.
Federal-State Partnership State Strengths
  • Proximity
  • Due to the local nature of health care delivery,
    states are closer to the action for implementing
    system redesign
  • Flexibility to implement system redesign
  • States have in-depth knowledge of local
    landscapes and the ability to foster
    relationships with local stakeholders critical to
    successful system change.

Federal-State Partnership Federal Strengths
  • Ability to establish minimum national standards
    for eligibility rates, benefit design, etc.
  • Capacity to address budgetary issues
  • Counter-cyclical budgeting
  • Multi-year budgets
  • Revenue raising capacity

Federal-State Partnership Features
  • Insurance Market Regulation
  • State regulation efforts are hampered by ERISA
    and lack of oversight of federal insurance
  • Federal government could take a number of policy
    steps to alleviate uncertainty on permissible
    state regulatory actions
  • Public Programs
  • Burdensome federal regulations and unilateral
    program changes have strained the federal-state
  • Systems Redesign/Quality Improvement
  • The implementation of quality initiatives has
    occurred on the state level
  • Feds can leverage federal programs to encourage
    better processes - improved outcomes could be

State Variation in the Context of Federal Reform
  • There is 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 possible solutions for federal government
    to address state level variation
  • Dont address variation and let states fend for
  • 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 best method to help states comply with
    national reform over time

Federal-State Partnership Future?
  • Funding and Flexibility
  • Broad Goals/Various Options
  • States fear federal reforms may hinder, rather
    than help state efforts
  • Despite state hesitance, inaction not an option.
  • Federal-state partnership offers real potential
    and should be considered

Prospects and Directions for National Reform
Childrens Health Insurance Program (CHIP)
  • 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
  • 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.
American Recovery and Reinvestment Act of 2009
(ARRA) - February 17, 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
  • Prevention and Wellness Fund 1 B.
  • 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

Medicaid Relief to States
  • Total funding from ARRA for FMAP is 87 billion
  • FMAP funding increases 6.2 for all states, with
    shares increased by 5.5, 8.5, or 11.5 for
    states with significant increases in unemployment
  • States who accept funding cannot restrict
    Medicaid eligibility beyond Medicaid
    beneficiaries covered as of 7/1/08, but can
    restrict services/cut provider payments
  • First installment of 15 billion in Medicaid
    relief for states released February 25, 2009
  • States have access to the first 2 quarters of
    FMAP funding
  • A Treasury account will hold the money for
    withdrawal and will be administered by CMS
  • States must meet Medicaid eligibility
    requirements in the law to receive the new

Source White House, Office of the Press
Secretary, President Obama Announces 15 Billion
in Medicaid Relief from ARRA Headed to States,
23 February 2009
COBRA Subsidies and ARRA
  • Pays 65 percent of premiums for laid-off workers
    for 9 months that qualify
  • Eligible workers pay 35 percent of the premium
  • ARRAs premium subsidies also pay for coverage
    offered by smaller employers subject to state
    mini-COBRA laws

COBRA Policy Issues for States to Consider
  • Extending the election period for mini-COBRA in
    your state (a second chance for previously
    laid-off workers to enroll, now that there's a
    new federal subsidy)
  • Creating or changing a mini-COBRA law to take
    fuller advantage of ARRA subsidies
  • Providing additional state subsidies to laid-off
    workers who already qualify for federal subsidies
    under ARRA but may not be able to afford their
    remaining premium costs
  • How to provide health coverage to laid-off
    workers who are ineligible for any federal help
  • How to deliver state subsidies
  • How to determine income-eligibility for state
    assistance expeditiously while still protecting
    program integrity
  • How to notify eligible workers that help is
  • Streamlining enrollment among eligible,
    uninsured, laid-off workers

Health Information Technology for Economic
Clinical Health (HITECH) Act
  • HITECH provides new federal funding for states to
    expand the use of HIT and accelerate adoption of
    HIT exchange
  • States are required to match 1 for each 10 of
    federal fund in 2011, 11 for each 7 in 2012,
    and 1 for each 3 in 2013 and beyond
  • A state must submit a strategic plan to HHS and
    receive approval
  • Competitive grants are also available for
    development of loan programs to facilitate
    adoption of certified electronic health record
  • States are required to match not less than 1 for
    each 5 of federal funds
  • States may use funds for low-interest loans to
    help providers purchase or enhance electronic
    record technology, train personnel, or improve
    secure electronic exchange

Source Early Federal Action on Health Policy
The Impact on States, States in Action A
Bimonthly Look at Innovations in Health Policy,
The Commonwealth Fund. February/March 2009
The Economy and Health Care Reform
  • Rapidly rising health care costs are a
    substantial part of the problem
  • President Obama pledges to cut deficit in half by
    end of first term feels that controlling health
    care costs is key to controlling budget
  • Health care reform entitlement reform
    sustainability of public insurance programs
    depends on reining in health care costs
  • Cost growth must be slowed system-wide federal
    program cost growth due to system cost growth
  • Universal coverage will end job lock and increase
    productivity of the labor force
  • HIT would increase job growth through the
    development and implementation of a new computer
  • Coverage expansion must be made simultaneously
    with cost control reforms

1994 Reform versus 2009 Reform
  • Similarities to 1994
  • Political barriers to reform remain with
    competing priorities and the lack of a
    supermajority with similar majorities in Congress
    today as in 1993-1994
  • In 1993 key stakeholders who originally gave
    support to the Clinton plan backed out this
    could happen again
  • Lessons Learned
  • Intention to work closely with Congress instead
    of the Clinton top-down approach
  • Governor Sebelius appointed HHS Secretary Nancy
    DeParle chosen as White House Director of Health
  • Lots of outreach from administration to leaders
    in Congress
  • President Obamas plan
  • Preserves employer-sponsored health insurance
  • Exempts small businesses from the employer
    mandate while providing tax credits to small
    companies who want to purchase insurance
  • It contains no politically controversial,
    centralized cost controls
  • Investing huge amounts of his time and political
  • Democrats may be more unified around a health
    care strategy with the determination to move
    quickly instead of letting momentum dissipate
  • Outreach to stakeholder community through Fiscal
    Summit, Health Summit big tent, engagement of

Prospects and Potential Timetable
  • Obama Administration made down payment on reform
  • Stimulus package had significant health
  • 634 billion reserve fund for health reform in
    President Obamas budget
  • Sought stakeholder input at Health Summit on
    March 5
  • Congressional leaders pushing for early action on
    comprehensive reform
  • Key Democrats are pushing for comprehensive
    reform by the end of 2009
  • Democratic budget leaders said they are likely to
    endorse most of Obama's proposals sometime in
  • Senate Republicans established task force on
    health reform led by Senators Enzi, Grassley,
    Gregg, and Hatch
  • Finance Committee Chairman Baucus hopes to
    introduce comprehensive reform bill this summer
  • House Energy and Commerce Chair Waxman, House
    Education and Labor Chair Miller, and House Ways
    and Means Chair Rangel expect to bring health
    care overhaul legislation to the House floor by

Conclusion States Can Advance Reform Initiatives
But Need Federal Support
  • States face growing pressures for reform
  • Uninsurance continues to rise as ESI 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 cannot achieve universal coverage without
    a federal framework and funding BUT remember
  • State and National Comprehensive reforms need
  • Sequential incremental with a vision