State-Initiated Health Reform

Over the past several weeks, Massachusetts has garnered most of the attention from policymakers and the press because of its passage of unprecedented legislation establishing an individual mandate to purchase health insurance. However, a handful of other states, including Illinois, Maine, and Hawaii, have adopted proposals over the past few years with the explicit aim of assuring universal health insurance coverage for their citizens. Many other states are debating proposals now, ranging from enacting universal coverage (California, Oregon, Arizona, and New Mexico) to helping small businesses purchase coverage (Kansas, Maine, Minnesota). Maryland also recently enacted legislation requiring employers with more than 10,000 employees to spend at least 8 percent of their payroll on health insurance benefits. While not explicitly mentioned in the legislation, the bill is widely known to be aimed at Wal-Mart, which has been criticized for its limited health benefits and the number of its employees enrolled in tax-supported public programs such as Medicaid or CHIP. Other states are contemplating similar legislation.

Below is summary of several states' initiatives.

Massachusetts
On April 3, the Massachusetts' legislature adopted the "Health Care Access and Affordability" bill, a bipartisan initiative to establish universal health care coverage in the Commonwealth. The bill passed nearly unanimously, with only two House members voting against it.

Republican Governor Mitt Romney introduced the legislation in 2005 spurred by a federal threat to decrease Medicaid funding if the state did not do more to address its uninsured. The federal announcement dovetailed with a growing recognition among state leaders that Massachusetts' uninsured were straining the state's safety net system and imposing higher health care and business costs to taxpayers.

The most distinctive feature of the bill is an individual mandate to acquire health insurance. Residents who fail to purchase or enroll in health insurance will be financially penalized with penalties increasingly incrementally over time. Other key elements, outlined below, include insurance market reforms aimed at creating more affordable health insurance premiums, establishment of sliding-scale subsidies for residents earning less than 300 percent of poverty ($48,000 for a family of three), and expansion of children's Medicaid to 300 percent of poverty. Families and individuals earning less than 100 percent of poverty would be insured at no cost to them.

To encourage more businesses to offer health insurance, the package also assesses an annual surcharge on employers who do not offer health insurance. Monies collected through the program would be put in a pool to help subsidize the uncompensated care costs incurred by hospitals, community clinics, and physicians (this latter provision may be vetoed).

Passage of the bill was no easy feat and naysayers already are emerging to highlight the bill's shortcomings. However, bucking Washington-style politics, Governor Romney worked closely with the Democratically led legislature, business leaders, and the state's senior U.S. Senator, Edward Kennedy, to assure the final package would appeal to stakeholders across the political spectrum. Supporters of the legislation include a who's who of business, health, religious, and consumer organizations, including the Massachusetts Medical Society and state chamber of commerce.

Texas and Massachusetts starkly contrast economically, politically, socially, and geographically (see chart), meaning some of the Massachusetts' proposals may not be workable here. Moreover, it will be several years before it is known whether Massachusetts' experiment achieves its goals, particularly the ability to develop truly affordable, attractive health insurance products. However, the bill, and the collaborative process used to enact it, offers potential options for achieving TMA's Healthy Vision 2010 goals to enact a mix of public and private insurance reforms that will reduce the number of uninsured and improve the financial health of Texas' health care safety net.

Massachusetts Health Reform Strategy

Phase I - Medicaid Outreach
A year before introducing his broad-based reform package, Governor Romney initiated a Medicaid outreach campaign to sign up the quarter of the uninsured population estimated to be eligible for the program but not enrolled. The campaign also included an initiative to expedite the application and eligibility review process for patients applying for Medicaid or CHIP. To date, the effort has resulted in 60,000 low-income patients enrolling in the program.

Phase II - Implementation of Comprehensive Legislative Reform
The final bill, awaiting Governor Romney's signature, establishes the following:

Health Care "Connector"
A centralized state entity known as the "Commonwealth Health Insurance Connector" will be established to connect individuals and small employers with affordable health insurance, including Health Savings Accounts (HSAs), and to certify and offer affordable health insurance of "high value and good quality." A board composed of public and private representatives will oversee the connector's activities.

The connector will place particular emphasis on designing affordable insurance products for 19- to 26-year olds. All products sold through the connector must offer comprehensive benefits, including mental health coverage, despite efforts by the insurance industry to reduce the number of mandates. (A separate provision of the bill freezes implementation of new mandates until Jan. 1, 2008, to allow the state to assess the costs and medical necessity of existing mandates.) Insurers will be allowed to use limited provider networks (e.g. community clinics and hospitals) to help lower costs.

Insurance provided through the connector will be portable, allowing enrollees to change jobs without fear of losing health insurance.

Individual Responsibility
Beginning in mid-2007, all Massachusetts residents will be required to have individual or employer-sponsored health insurance. Bill sponsors included the provision to ensure that healthy people enroll in new, low-cost insurance products to be developed as a result of legislation. The requirement will be waived if it is determined that affordable health insurance is not available. An "affordability scale" will be set by the board of the connector. Residents will confirm that they have health insurance coverage on their state income tax forms filed in 2008. Coverage will be verified through a database of insurance coverage for all individuals. Residents who do not purchase health insurance will lose their personal tax exemption in the first year. In subsequent years, the penalty would be calculated at half the cost of the premium of a health insurance product offered via the connector.

Employer Responsibility
Employers who employ 11 or more full-time employees and who do not offer health insurance will be assessed a fee of $295 per employee per year to offset uncompensated care costs of safety net providers. Under existing Massachusetts' law, employers who do offer health insurance already contribute to this fund. (Governor Romney opposed the employer surcharge and used his line item authority to veto it; however, the legislature is expected to override the veto. Surprisingly, the business and hospital associations opposed the veto over worries that it would destabilize the coalition that worked to pass it).

Additionally, the bill establishes a "free rider" surcharge on employers who do not offer health insurance and whose employees use free care. Imposition of the surcharge will be triggered when an employee receives free care more than three times, or a company has five or more instances of employees receiving free care in a year. The surcharge will range from 10 percent to 100 percent of the state's costs of services provided to the employees, with the first $50,000 per employer exempted. Revenue gained from the surcharge will be deposited in the Commonwealth Care Trust Fund.

Employers also will be required to offer cafeteria plans to allow employees to purchase health care and other services, such as day care, with pre-tax dollars.

Insurance Market Reform
The bill authorizes a number of insurance market changes designed to reduce premiums. Particular emphasis is given to establishing affordable premiums for young, healthy adults entering the workforce who may otherwise forego insurance.

• Merges the non- and small-group markets. Provision is estimated to drop non-group premium costs by 24 percent. An actuarial study of the merging of the two insurance markets will be completed before the merger to assist insurers in planning for the transition.
• Allows HMOs to offer plans linked to HSAs.
• Allows young adults to remain insured on their parents' insurance for two years past the loss of their dependent status or until they turn 25 (whichever is first).
• Freezes enactment of new health insurance mandates until 2008 to allow review of the impact of each mandate on the cost of premiums.

Subsidized Care for Low-Income Families

• For families earning $48,000 a year or less (300 percent of the federal poverty), the bill establishes fully or partially subsidized insurance coverage depending on the family's income. Two programs will be used to insure moderate and low-income patients - Medicaid, which was expanded to cover more children, and establishment of new low-cost insurance option known as "Commonwealth Health Care Insurance." The latter will be developed by the connector.

Medicaid coverage . Medicaid will be available for all children living in families earning up to 300 percent of the federal poverty level. The bill also establishes a pilot smoking-cessation treatment program for Medicaid enrollees, restores services eliminated in 2002 (vision and dental), and allocates $3 million to continue Medicaid outreach efforts.

Commonwealth Health Care Insurance . For residents with incomes of 100 to 300 percent of poverty and who do not qualify for Medicaid, the connector will offer health insurance on a sliding scale basis and without deductibles. To help low-wage workers purchase coverage, employers may contribute funds toward premium costs. For residents earning less than the poverty level ($9,600/year for an individual) and who do not qualify for Medicaid, insurance premiums will be fully subsidized.

The existing Medicaid managed care plans will provide the subsidized insurance plans in the first several years after implementation provided they meet certain enrollment targets. After July 2009, other products will be available to enrollees of subsidized programs.

Investment in Medicaid Physician and Hospital Networks
The bill allocates $270 million over three years in new state funds to increase Medicaid rates for physicians and hospitals. Combined with federal funds, the funding increase exceeds $500 million.

The bill also establishes a Medicaid payment policy advisory board to "review and evaluate rates and payment systems by the office of Medicaid and recommend Title XIX rates and rate methodologies that provide fair compensation for MassHealth services and promote high-quality, safe, effective, timely, efficient, culturally competent, and patient-centered care."

Pay for Performance
Beginning in 2008, a portion of the new Medicaid physician and hospital reimbursement will be tied to meeting quality and cost containment performance measures established by the state with the assistance of a new health care quality and cost council. The performance measures also will be incorporated into private health insurance policies developed by the new connector. Quality benchmarks must include process and outcome data, advance a "common national framework," be "clinically important …standardized, timely, and encourage physicians, hospitals, and other health care professionals to improve their quality of care." The bill also states that any data reported by the council "should be accurate and evidence-based, and not imply distinctions where comparisons are not statistically significant."

The bill also requires the state to maintain a consumer health information Web site to help patients make more informed decisions about their care and the quality of physicians and health care providers.

Health and Racial Disparity Reductions
The legislation requires hospitals to report racial and ethnic data as part of their hospital discharge data reports and ties a portion of future Medicaid rate increases to efforts by hospitals and physicians to reduce health care disparities. The law also establishes a new community outreach worker program to target vulnerable populations that may face cultural or linguistic barriers to obtaining care and a Health Disparities Council to develop additional legislative recommendations to reduce disparities in health care access and quality.

Wellness Promotion
The state Medicaid agency is directed to implement a wellness program to encourage enrollees to undertake activities that improve health, including smoking cessation (the bill includes a pilot program to pay for smoking cessation treatment), diabetes screening for early detection, teen pregnancy prevention, cancer screening for early detection, and stroke education for enrolled individuals. Enrollees who "comply with the goals" of the wellness program will be eligible for reductions in their premiums or copayments.

New Fees to Subsidize Charity and Uncompensated Care
The bill establishes fees on "surcharge payers" for services provided at acute care hospitals and ambulatory surgical centers. Surcharge payers are entities or individuals that arrange for or provide health care services, excluding government payers. The surcharge fees will be deposited in a "Health Safety Net" trust fund. Massachusetts initiated an uncompensated care pool in 1985 to support community hospitals and community health centers that provide free or reduced cost care to the uninsured. The uncompensated care pool is funded via a combination of disproportionate share dollars and an assessment on insurers and employers.

Funding
Most of the new funding will be paid by leveraging federal Medicaid matching funds and imposition of surcharges on employers who do not offer health insurance. In the first three years, $125 million will be contributed annually by the state.

Sources: Office of Massachusetts' Gov. Mitt Romney, Boston Globe , Kaiser Family Foundation, Texas Health and Human Services Commission, Census Bureau

Illinois
To little fanfare, Illinois in 2004 adopted the "Health Care Justice Act" that established a 29-member, "Adequate Health Care Task Force" to develop recommendations for extending coverage to the state's nearly 2 million uninsured residents. The bill states that "it is a policy goal of the State of Illinois to insure that all residents have access to quality health care at costs that are affordable." The task force, composed of physicians, business leaders, consumer advocates, insurers, and state legislators, is scheduled to submit its report by the end of the summer. Proposals being discussed include a mix of tax incentives or subsidies for small businesses, public insurance expansions for low-income patients, and establishment of limited-benefit health plans. The task force likely will target initial reforms to specific populations, such as young adults, low-income parents, and workers ages 55 to 64 who do not yet qualify for Medicare.

The bill also required that public hearings be held in each of Illinois' congressional districts in order to gain input as to what a health plan should encompass. Hearings began in fall 2005 and will be completed by May 2006.

The state already has enacted a major component of assuring affordable health insurance. Last November, it adopted legislation implementing the "AllKids" health care program to assure affordable child health insurance for moderate and low-income families. Under the legislation, which will take effect July 1, 2006, families with incomes above the poverty level ($20,000 for a family of 4) will be able to purchase child-only insurance on a sliding scale basis (lower income families are fully subsidized). Monthly premiums, copayments, and prescription-drug costs are tied to the family's annual income. For example, a four-person family with an annual income of 200 percent to 300 percent of poverty ($40,000 to $60,000) would pay a $10 copay per visit, excluding preventive services, and a $40 monthly premium per child. Families with multiple children would pay a maximum premium of $80.

Maine
In 2003, Maine adopted the "Dirigo Health Reform Act," which outlined three goals: promote universal coverage, contain costs, and improve quality by 2009.

• Universal coverage : The key feature of the program is a low-cost insurance product offered to employees of small businesses, self-employed residents, and individuals who do not qualify for Medicaid. Under the program, which began in January 2005, participants with income at or below 300 percent of the federal poverty level ($28,000 for an individual; $60,000 for a family of four) receive sliding-scale discounts on monthly premiums, annual deductibles, and other out-of-pocket costs depending on their income. Individuals and families with incomes below poverty are fully subsidized. Anthem Blue Cross/Blue Shield administers the program. DirigoChoice is funded through a mix of employer, employee contributions, and in year one, state funds. After the first year, the state funds will be replaced by an assessment on insurers' gross premium revenues, but only if savings are achieved. Benefits include inpatient and outpatient hospital care, physician services, and 100 percent coverage of preventive services. Maine addresses its uninsured population by setting a higher Medicaid eligibility limit for working parents than does Texas or many other states - 157 percent of poverty vs. 23 percent in Texas.
• Cost containment : To reduce costs, the Dirigo enabling legislation specified a variety of strategies, each of which is evolving based on new input from the legislature and the Dirigo health reform task form. Among the key strategies are: (1) reducing charity care/bad debt of safety-net providers, largely by expanding coverage to the uninsured; (2) establishing price transparency to help consumers make informed choices; (3) requiring health insurers to submit standardized annual reports comparing loss ratios and profits across lines of business. The state has defined administrative and medical costs to ensure standard reporting; (4) increased oversight by the state department of insurance regarding health insurer premium increase requests; (5) a voluntary 3 percent limit on health care cost increases by hospitals, insurers, and other health care providers; (6) strengthening use of Certificate of Need requirements, including a one-year moratorium on new construction. In Maine, CON is triggered in the following situations: capital expenditures of $2.4 million or more, major medical equipment costing $1.2 million or more, or, the offering of new services that cost more than $110,000 in capital expenditures or that have new third-year operating costs of $400,000 or more. The state also is examining the use of pay-for-performance.
• Improve Quality - Less has been achieved in this area, but Maine is pursuing efforts to implement widespread use of electronic health records and to collect and compare data on the performance of physicians, hospitals, and health care providers.

To help the state meet its ambitious goals, in 2005, Maine also held town-hall style meetings called "Tough Choices" to get residents' input about the health issues affecting the state and what strategies that could best be used to address them.

The Ash Institute for Democratic Governance and Innovation at Harvard University's John F. Kennedy School of Government - in partnership with the Council for Excellence in Government - recently named Dirigo Health as one of the top 50 in government innovations saying the program is one of "the most innovative, creative and results-oriented efforts in American government today." An estimated $45 million has been saved through the program to date.

Applicability of Other States' Reforms to Texas
Of the reforms outlined, it is too early to tell whether they might work in Texas. Many have not been implemented or have been in place only a short while, so there is no reliable data to evaluate whether the reforms work or are cost-effective over the long term. Moreover, socioeconomically, culturally, and politically, Texas is very different than the health care reform signal states and the magnitude of Texas' uninsured population, as well as Texas' myriad public health challenges, makes formulating a workable solution that much more difficult. However, all that being said, Texas can certainly learn from the processes other states have used to develop their proposals and can examine the reforms to glean from them proposals that may translate here. A common element among the other states' reform measures is blending both public and private health insurance options in order to achieve widespread coverage. TMA policy supports such a pluralistic approach.

In March, TMA convened a summit of leaders of medicine, other health care professions, commerce, insurance, state government, and other arenas to "test the waters of real health care reform" in Texas. Stakeholders spent six hours addressing the question: "What can we accomplish together that we cannot accomplish alone?" Topics discussed included ways to reduce the number of uninsured, promote healthier lifestyles, prevention, and wellness, and better use of technology to promote more effectiveness and efficient health care.

In the summer, a second stakeholder session will be held to focus on specific reform goals, particularly the uninsured and prevention promotion. Stakeholders will be asked to evaluate the more promising aspects of Massachusetts' and other state's reform measures to assess whether they could work in Texas. The goal of the summit is to develop mutually supportable reform options to present to the legislature in 2007.

Relevant TMA Policy:

110.003  Private Individualized Medical Care : The Texas Medical Association reaffirms its position that private, individualized medical care and free enterprise insurance mechanisms which involve a specific degree of direct patient responsibility within and allow pluralistic, free choice options offer the highest quality of medical care at the lowest possible cost (Council on Socioeconomics, p 144, A-93; reaffirmed CSE Rep. 6-A-03).

110.009  Health Care Coverage : The Texas Medical Association supports tax law reforms which (1) increase the tax-preferenced insurance and spending choices available to patients; (2) encourage individuals to buy insurance and set aside funds for medical needs; (3) provide subsidies to those who are most in need; and (4) encourage personal responsibility and participation of patients in the financing and benefit design decisions that ultimately determine their health benefit coverage. TMA supports efforts to develop viable policies that can improve the provision of care for the uninsured population. The status of Texas' high-risk pool should be monitored and any necessary reforms should be supported to assure its continued viability (CSE Rep. 6-I01).

190.023 Policy Principles for Medicaid and CHIP Legislative Initiatives . The Texas Medical Association adopted the following policy principles to guide the evaluation of emerging Medicaid and CHIP budget and legislative initiatives and association advocacy efforts:

D. Promote and improve health care quality . The foundation of an efficient, effective delivery system is high quality care. Yet measuring quality is notoriously difficult. Texas should work collaboratively with physicians and health care providers to devise realistic, clinically driven ways to measure and improve quality across the spectrum of care.

E. Assure accountability among all elements of the Medicaid system. Each component of the Medicaid program - patients, physicians, providers, community, and government - has a shared responsibility toward making Medicaid successful. Medicaid policies should articulate, promote, and reward, when met, those responsibilities. For example, physicians have an obligation to practice high quality, evidenced-based medicine as well as to promote preventive care. Patients should help with treatment decision-making, comply with treatment protocols, and begin to assume a nominal share of the cost of care; communities should recognize their unique role in educating patients about the health care system and how to use it.

H.  Encourage innovative partnerships between the public and private sectors to address shared health goals . Government and the private sector each play an important role in the financing, regulation, organization, and innovation of health care. Too often, however, those spheres of influence remain separate, failing to recognize the relative strengths of each. Texas should explore ways to integrate public and private health insurance initiatives to address the mutual concerns of improving quality care and patient safety, reducing the number of uninsured, and promoting prevention and wellness.

I. Recognize the diversity of the Medicaid population and devise strategies to address the unique health care needs and costs of each . Medicaid often is evaluated and discussed as one monolithic system. In fact, it is many. Medicare serves primarily an adult, aged population; private health plans serve primarily healthy, working adults. Medicaid, however, insures a range of populations with vastly different needs (children, individuals with disabilities, the elderly) and in vastly different settings (acute vs. long-term care, community vs. institutions). Reforming Medicaid will require developing strategies appropriate for the diversity of the populations served and the cost drivers inherent to each.

115.001 Indigent Care : The Texas Medical Association approved the final report of its Task Force on Indigent Health Care which recommended the following:

(1) TMA should work to improve the availability of health insurance and adopt measures to make health insurance more available and affordable;
(2) TMA should work to preserve existing indigent health programs in the short term and work on improving Medicaid eligibility in the long run;

(Amended Council on Socioeconomics, pp 138-144) I90; amended CSE Rep. 5-I01).

TMA House of Delegates: TexMed 2006