Fiscal Fitness: How States Cope
Maine eliminates 'cliff' of falling off Medicaid with Dirigo health care program
Maine's "Dirigo" health care reform is appropriately named, after the state's motto meaning "I Lead." "We built our reform on a Medicaid base and made modest expansions to Medicaid, covering parents to 200% FPL," says Trish Riley, director of the Governor's Office of Health Policy and Finance in Augusta.
The state's program now includes DirigoChoice, a sliding-scale subsidy implemented in September 2008 to eliminate the "cliff" that individuals fell off if they had a little too much income to qualify but were still unable to afford the full cost of coverage. The program provides coverage to individuals, who would otherwise be uninsured.
"When we began in 2003, Maine had the highest rate of uninsured in New England. By 2006, we had the lowest. Our rate of uninsured dropped while every other New England state's rose," says Ms. Riley.
Ms. Riley also is proud of the comprehensive approach that was taken. "The U.S. spends twice what other developed nations spend on health care, but gets less," she says. "We have set in place several strategies to bring efficiencies to health care and reduce costs."
Enrollment has stalled
From the very beginning, rough spots were encountered with funding. Although the original goal was to cover everyone in the state within five years, this was compromised in the initial bill. Although this compromise won the bill strong bipartisan support, it also eliminated some major funding sources.
The original proposal had a fee on insurers, explains Ms. Riley, and those who administered self-insured plans that could not be passed on to premium payers. "We knew that covering the uninsured and the underinsured would create savings from lowering the cost shift from bad debt that is passed on to premiums," she says.
Ms. Riley says the insurers were given additional tools to negotiate lower rates to "pay" for the assessment. Notably, the original proposal included a global budget to limit hospital growth. These were "compromised away," she says, replaced by voluntary targets and a savings offset payment that could be levied only when the state documented savings.
Ms. Riley says the federal Medicaid program proved to be a difficult partner. "We had hoped to use our revenues, pooled at the Dirigo Health Agency, to match Medicaid for those dually eligible for Medicaid and Dirigo, but the feds disallowed it," she reports.
Implementation challenges further reduced available funding for the program, forcing the plan to suspend enrollment. "We had expected to collect 60% from employers for both the employee and employer share of premiums," says Ms. Riley. "In the end, we only got the share for the employee, not their dependents. We have been successful, but funding is a problem, so our enrollment has stalled. Enrollment was suspended in July 2008.
Maine's landmark program was funded by a controversial "savings offset plan," a fee on insurance carriers for paid health claims. During the last legislative session, an alternative funding strategy was passed to replace the current savings offset payment with a newand lowerflat 1.8% assessment on paid claims, and adding modest taxes of a few cents per bottle on wine, beer, and sugared drinks.
"As part of that, we also passed a reinsurance program to bring rate relief to the individual market," says Ms. Riley. "Sadly, this alternative has been caught up with an anti-tax group and a well-financed campaign from the beverage industry to overturn the taxes."
In November 2008, Maine voters rejected the beverage tax, leaving the savings offset payment in place with a fixed 1.8% assessment on insurance claims. Thus, the state cannot move forward with its planned reinsurance program with the individual insurance market.
"It is unfortunate that a compromise thoughtfully developed by the legislature and backed by a blue-ribbon commission was overturned," says Ms. Riley. "But the program continues with the savings offset plan. And we will continue to work with the legislature and the Obama administration to secure needed additional funding."
Some hard lessons learned
Ms. Riley says she has learned the hard way that when it comes to enacting coverage expansion, "the devil is in the detail. All parties need to sit together and resolve inevitable implementation challenges," she says. "Also, funding is always an issue, and we need the federal government to help. True reform cannot be done by the state."
Despite the current obstacles, Ms. Riley contends that the state's approachto address the entire system and look at all costs and inefficienciesis the right one. "Just paying for the uninsured isn't enough. We need system reform to assure the most efficient and effective health care system, so all can have affordable, quality coverage," she says.
Ms. Riley points out that Maine succeeded in creating the foundations for a more cost-effective health care system, saving $150 million since the program's inception. This, she says, is largely due to collaborating with Maine's hospitals, which complied with voluntary cost growth targets, more stringent review of hospital building projects, and covering more residents to prevent uncompensated care. Growth in premiums has slowed from an average increase of 13.2% from 2001-2003 to 6.4% from 2004-2006.
Even with all the funding problems, Maine has been able to increase its rate of insured residents significantly. Though the number and percentage of uninsured residents has risen in many states, in Maine the number of uninsured has fallen. This is partly due to the provision of subsidized health insurance coverage to moderate income workers through the Dirigo Choice program and the funding for parents of eligible children in MaineCare. Combined, the two programs provided coverage for almost 29,000 individuals since 2005.
"We have an $838 million deficit in a $6 billion state biennial budget," says Ms. Riley. "Our goal is to preserve eligibility. In Medicaid, we are proposing a variety of initiatives around rates, benefit management, and hospital payments. We have put in a $99 million placeholder, in anticipation of FMAP relief from Congress and the president."
However, the Dirigo program will continue with its current funding regardless of legislative action, says Ms. Riley.
As for the long-term future of the program, Ms. Riley says it's needed now more than ever, as demand is only growing in the current downturn. "We will again seek legislation to convert the savings offset payment to a less contentious, more predictable flat assessment," says Ms. Riley. "And we will redouble our efforts to bring down health care cost growth as well."
Unlike Massachusetts, which had $400 million in federal funds supporting uncompensated care that the federal government allowed the state to use for its coverage expansion reform, Maine had no extra dollars.
"We therefore sought to finance access expansions by reducing cost growth in health care and reinvesting in access," says Ms. Riley. "We hope to secure different funding that will allow us to open the program to our waiting list, and to work with the new administration to transition Dirigo for the reforms we hope will come."
In order to maintain or expand the program, the state is hoping to obtain federal matching Medicaid dollars, which was rejected by the Centers for Medicare & Medicaid Services under the previous administration and is currently being appealed.
Ms. Riley says she is eager to share what has been learned over the past six years with the Obama administration. "The issues that played out in Maineas small as we areare very similar to those that will affect health reform in the much larger and more complex national arena," says Ms. Riley. "We have had contact with some of the transition folks, several of whom were consultants to us as we shaped our original proposals here. We remain eager to help in any way we can."
Contact Ms. Riley at (207) 624-7442 or [email protected].
Maine's "Dirigo" health care reform is appropriately named, after the state's motto meaning "I Lead." "We built our reform on a Medicaid base and made modest expansions to Medicaid, covering parents to 200% FPL," says Trish Riley, director of the Governor's Office of Health Policy and Finance in Augusta.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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