Feature: States React to Fiscal Crisis, Oregon Reaches for Comprehensive Health Reform

States are responding to the current fiscal crisis and uncertainty about federal health reform in very different ways. Several are holding back on planned coverage expansions, capping or even cutting eligibility for existing programs, or waiting for federal reform to unfold or the economy to turn around before implementing health reforms. Yet some states are forging ahead with health system reforms intended to strengthen the safety net, transform the delivery of health care, and contain long-term cost growth. This issue of States in Action discusses the pressures facing states and describes the health reforms in Oregon, Wisconsin, and Maryland.

States in Fiscal Crisis
States are experiencing severe budget crises, with revenues continuing to fall and demand for health care and other assistance programs rising. At least 48 states faced budget shortfalls going into fiscal year 2010, totaling at least $166 billion, equivalent to 24 percent of state budgets. Estimates of aggregate state deficits over the next three years range from $200 billion (from the National Governor's Association) to more than $350 billion (from the Center on Budget and Policy Priorities).

While many state policymakers support federal health care reform proposals that would expand insurance coverage, governors have been expressing their concerns that such expansions would create new Medicaid obligations that states cannot afford. And as the income levels for Medicaid eligibility would rise under proposed federal reforms, states would likely need to increase payments to primary care practitioners and certain other medical providers to encourage them to participate—putting even greater pressure on state budgets.

Even without passage of major federal health reform, states must prepare for the enhanced federal Medicaid matching funds to expire at the end of 2010. The increased percentage of Medicaid spending contributed by the federal government was a provision of the American Recovery and Reinvestment Act of 2009, known as the stimulus plan.

Varying State Reactions: From Cuts to Expansions
Most state policymakers are working hard to maintain current public program eligibility levels, so as not to "lose ground" while demand for safety net services rises along with unemployment and to remain eligible for the enhanced federal Medicaid funds, as they wait to see how federal reform transpires in the coming months.

However, because they don't have the funds to invest, some states are leaving federal matching funds on the table. The Children's Health Insurance Program (CHIP) was reauthorized in February 2009, including a provision allowing states to raise income eligibility levels to three times the poverty level. Yet, the majority of states have not taken advantage of this option. In fact, a handful of states have chosen not to enact CHIP expansions that were previously authorized, or failed to pass proposed bills that would have expanded eligibility or reduced premiums in their CHIP programs. Budget pressures have led Wyoming to put an enrollment cap on its CHIP program (though the program has not yet reached that cap) and led California to freeze enrollment in July.

Still, some states have taken a different approach, moving ahead with coverage expansions and other health reforms ranging from incremental to comprehensive. States are expanding health coverage by raising income eligibility levels for Medicaid or CHIP, enabling people to buy in to these programs, and/or using creative outreach and enrollment strategies. And they are finding ways to finance these expansions.

Several of the most comprehensive state coverage expansions continue to move forward because they were established as Medicaid Section 1115 demonstration waivers, with significant federal financial participation. So far, these states have been able to generate the non-federal revenue that is required to match federal funds and sustain these demonstration projects. Table 1 includes examples of Section 1115 waivers approved or extended within the past four years. Most of these expand Medicaid eligibility, usually through managed care, and some create new programs to cover low-income people who are uninsured and not covered by Medicaid. It is the more comprehensive coverage initiatives, which usually include expansions of Medicaid and CHIP, that receive most of the attention—particularly the efforts in Vermont and Massachusetts. These reforms are designed to achieve near-universal coverage.

 

 

Table 1. Recent Examples of Medicaid Eligibility Expansions and Coverage Initiatives Achieved Through Medicaid Section 1115 Demonstration Waivers
State	Waiver Name	Most Recent Approval or Extension	Fundamental Program Initiatives
California	Medi-Cal Hospital Uninsured Care	2005	Create a Safety Net Care Pool to subsidize coverage for low-income uninsured
Florida	Florida Medicaid Reform	2005	Create customized benefit packages for Medicaid enrollees, and allow Medicaid enrollees to earn enhanced benefits through healthy behavior
Indiana	Healthy Indiana Plan	2007	Expand Medicaid eligibility to provide a health savings account for uninsured adults and caretaker relatives previously ineligible for Medicaid
Iowa	IowaCare	2005	Expand Medicaid eligibility to provide a limited Medicaid benefit through select hospitals for uninsured adults previously ineligible for Medicaid
Massachusetts	MassHealth	2008	Create a Safety Net Care Pool to subsidize insurance premiums for low-income uninsured with a goal of near-universal coverage
Maryland	HealthChoice	2008	Expand Medicaid eligibility to provide a limited primary care health benefit for uninsured adults previously ineligible for Medicaid
New York	Partnership Plan	2006	Expand Medicaid eligibility to provide comprehensive health coverage (Family Health Plus) for uninsured adults previously ineligible for Medicaid
New York	Federal-State Partnership Plan	2006	Redirect spending on hospitals and nursing homes to primary care and home and community-based service settings; no Medicaid eligibility or coverage expansion
Rhode Island	Rite Care	2008	Create a premium assistance program (RiteShare) for Medicaid-eligible individuals that wraps Medicaid benefits around employer-sponsored insurance
Rhode Island	Global Consumer Choice	2008	Provide cost-effective services that will ensure beneficiaries receive appropriate services in the least restrictive and most appropriate setting.
Vermont	Global Commitment to Health	2007	Provide premium assistance to purchase employer-sponsored insurance or Catamount Health Plan coverage for the uninsured
Wisconsin	BadgerCare Plus	2008	Expand Medicaid eligibility to provide Medicaid benefits to previously ineligible adults
Source: CMS Medicaid Waivers and Demonstrations List (accessed July 28, 2009): http://www.cms.hhs.gov/MedicaidStWaivProgDemoPGI/MWDL/list.asp Note:. This table does not include the full list of current 1115 waivers. Selection for this table was based on  (1) significant Medicaid eligibility expansions and/or (2) coverage expansions for groups not eligible for Medicaid and/or (3) significant system restructuring and (4) was approved or extended by CMS since 2005 and (5) is active today.

 This Feature describes Oregon's comprehensive health reform package, which builds on a Medicaid Section 1115 waiver that was approved in 1993 as well as subsequent amendments and expansions to the original proposal. The Snapshots describe incremental coverage and financing strategies undertaken in other states.

Oregon Moving Ahead with Comprehensive Health Reform
Despite having a $4.5 million revenue shortfall and the third-highest unemployment rate in the country, Oregon is moving ahead with comprehensive health reform. On June 11, the state legislature approved companion House Bills 2009 and 2116 to reform the health care system and move toward universal coverage. These bills, along with others passed into law during this past legislative session, work together to expand eligibility for state coverage programs and begin processes to change the delivery and improve the quality of health care services, as well as contain the growth of health care costs.

"It took commitment by the governor and the state legislature, reasoning that when things are this bad, you have to do something," said Tina Edlund, deputy director for planning and policy implementation at the Oregon Health Authority.

The outline for the legislation grew from recommendations by a Health Fund Board established in late 2007 by the Healthy Oregon Act (SB 329) that was tasked with developing a plan for universal coverage. The Board recommended starting with incremental coverage expansions for children and low-income adults, and moving toward universal coverage by 2015. After prior experience in which coverage programs became unsustainable, Oregon stakeholders also "felt strongly that if we expand coverage again, we need to set in place real cost containment," said Edlund.

Short Term: Expanding Coverage to Children and Low-Income Adults
Oregon expects to add 80,000 children—about 95 percent of uninsured children in the state—to the Healthy Kids Plan over the next two years. Through a single, and short, Healthy Kids application, a child will be enrolled in the most appropriate program among the state's Medicaid/CHIP plan (Oregon Health Plan, or OHP), a new private insurance plan, or employer-sponsored insurance. In October 2009, OHP eligibility for children and families will expand from 185 percent to 200 percent of the federal poverty level (FPL). By January 2010, families with income between 200 and 300 percent of FPL will be able to buy a subsidized insurance product providing benefits comparable to those in the OHP; the subsidies will be on a sliding scale, based on family income. And families with higher incomes with uninsured children will be able to buy into the program by paying full cost. Further, Oregon's Family Health Insurance Assistance Program, which subsidizes employer-sponsored insurance for low-income families but had frozen enrollment since October 2007, will likely accept new enrollees in the fall.

The state is also reopening OHP Standard, which was created through an 1115 waiver in 2003 to provide limited benefits to adults with income up to 100 percent of the FPL who are not eligible for traditional Medicaid. OHP Standard froze enrollment in 2004 due to budget shortfalls, and then allowed about 30,000 adults into the program in 2008 through a lottery system. The new expansion will more than double enrollment over the next three years, from the current level of about 25,000 adults to 60,000 adults. "While this doesn't meet the full need, which is probably twice that number, it is an improvement," said Edlund.

Long Term: Universal Coverage, Quality Improvement, and Cost Control
A new Oregon Health Policy Board is charged with overseeing development and implementation of state health care policies, including a plan for universal access to affordable health care for all state residents by 2015, statewide quality standards and evidence-based clinical standards, cost-containment mechanisms, and a plan to ensure a sufficient and qualified health care workforce.

The legislation also established an Oregon Health Authority (OHA) charged with implementing cost containment, quality improvement, delivery system, and payment reforms. Most state health purchasing, including Medicaid, CHIP, and state employee health benefit programs, will be brought under the OHA's authority. The goal is to align all state purchasing around common contracting and quality standards, thereby reducing reporting burdens on providers and improving health outcomes, and also to have greater leverage for containing costs.

Another OHA priority is payment reform. In the short term, this will involve raising payments for primary care, while setting standards for patient-centered primary care homes and exploring mechanisms such as bundled payments and accountable care organizations. OHA will also establish a health information technology oversight council to promote statewide adoption of electronic health records and create an all-payer, all-claims database that will enable examination of variations in the cost and quality of care in the state across payers.

In addition, OHA will develop a statewide Physician Orders for Life-Sustaining Treatment (POLST) registry. Oregon has a strong culture of respecting end-of-life wishes, and many residents who are older or very sick have expressed their desire to forgo many medical treatments on such POLST forms. Yet, because emergency medical providers often are not aware of a patient's wishes, they deliver a full range of interventions. A POLST registry that provides easy access to emergency medical providers is expected to reduce unwanted interventions.

Oregon is also enhancing its investments in public health, focusing on preventing or reducing the incidence of tobacco use, obesity, and chronic conditions and improving local public health systems.

Financing Strategies
Three million dollars in 2009 General Funds were appropriated to pay for some of the transition and development costs, and to establish some of the necessary data systems for Oregon's comprehensive health care reform. The coverage expansions are financed through two provider assessments. A 1 percent health insurance premium tax on health insurers, Medicaid managed care plans, and the state employee insurance program is paid into a new Health System Fund to finance the children's coverage expansion. This is expected to raise $105 million in tax revenues, which will draw an additional $240 million in federal matching funds over 2009–11 to cover 80,000 additional children.

An assessment on hospitals of approximately 2.8 to 3 percent of net patient revenues will fund the adult coverage expansion. The $307 million expected in tax revenues over the 2009–11 period, which will draw about $550 million in federal matching funds, is based on additional revenues the hospitals are expected to receive in aggregate for newly covered patients and increased reimbursement. "We are comfortable with this financing strategy, because hospital uncompensated care is largely driven by low-income adults. You can see a bright line between the tax and what it's being used for," said Edlund. Further, the assessments are not new strategies but rather a restructuring and broader application of a prior premium tax on Medicaid managed care plans scheduled to end in September.

A tobacco tax is funding investments in the public health efforts noted above.

Doing Business Differently
Moving ahead on so many fronts is both promising and challenging. According to Edlund, "it's hard to do business differently, but that's what we're calling on people to do." The reforms will require different state health purchasers (i.e., Medicaid and state employees benefits managers) to agree on quality standards. The reforms also will encourage primary care providers to change the way they practice and depend on consumers to adopt healthier lifestyles. Another challenge will be to keep the business community at the table by seeking solutions that bring some relief to them and do not feel like a loss of autonomy.

In terms of possible federal health reforms, Oregon appears to be well situated. The federal proposals are largely in sync with what Oregon is already pursuing, and state planners are monitoring federal progress and considering how it might affect the state. "Federal and state reform coming together might be better than either alone," said Edlund.

For more information Contact: Tina Edlund, deputy director for planning and policy implementation, Oregon Health Authority, tina.d.edlund@state.or.us See:  House Bill 2116 House Bill 2009 Oregon Health Policy Commission

 

State Health Reform in the Midst of Fiscal Crises

Despite budget crises and other economic challenges facing states, some are expanding eligibility and implementing strategies to increase enrollment of adults and children in public programs. Launching and financing these efforts under current conditions is requiring even more creativity, political commitment, and cooperation among state agencies than usual. The availability of stimulus funding and the possibility of federal health reform are also influencing how states pursue their policy goals.

For example, Wisconsin and Maryland are moving ahead with health reforms aimed at increasing insurance coverage for children and adults. Wisconsin is expanding eligibility and enrollment as part of an effort to cover 98 percent of its population, while Maryland is working to expand its coverage of low-income adults. Maryland is also implementing a new strategy using income tax forms to identify children who are potentially eligible for its Medicaid and CHIP programs.

Wisconsin: Strategies for Increasing Coverage Eligibility and Enrollment

In February 2008, Wisconsin launched a health reform effort with three goals: provide universal coverage for children, simplify existing public programs, and remove barriers to stable coverage for families. The coverage reforms were implemented in two phases. Phase I consisted of a new coverage expansion under Wisconsin's CHIP, Medicaid, and Healthy Start programs called BadgerCare Plus, which extended eligibility for uninsured children at all family incomes and many caretaker adults. A recently launched Phase II will use the BadgerCare Plus "Core Plan" to increase coverage among uninsured, low-income, childless adults.

Despite extremely challenging economic times, Wisconsin's Governor Jim Doyle strongly supported enactment and continued funding for these health coverage reforms. The state is also supporting a rigorous evaluation of the program to ensure that it is achieving its goals among its target populations.

Expanding Coverage
Starting in February 2008, all children without access to affordable health insurance (defined as an employer contributing at least 80 percent of the cost of a family premium) became eligible for BadgerCare Plus regardless of income, with sliding-scale premiums and cost-sharing for families with income above 150 percent of the FPL. Pregnant women with income up to 300 percent of FPL became eligible, while eligibility for parents and caretakers was extended to 200 percent of FPL (Figure 1). BadgerCare Plus administrators check applicants' access to affordable employer coverage using an Employer Health Insurance Verification database that is maintained by a contractor to the Department of Health Services' Division of Health Care Access and Accountability. The database tracks elements of employer coverage, including companies' contribution to premiums and variations in health plans offered to different units within the same employer. BadgerCare Plus also simplified the income calculation used to determine eligibility, basing it only on gross income minus child support payments and student income, and eliminating a number of other income "disregards."

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Figure 1. (click to view)

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The evaluators of these health care reforms report that total enrollment in BadgerCare Plus rose 14 percent between December 2007 and September 2008, from 516,000 to 590,000 people. More than 42,000 children and over 31,000 adults gained coverage, and there was a reduction in people exiting the program.

"We believe that enrollment is particularly robust for multiple reasons: the program's message is simply that all kids are eligible, and eligibility is not limited to children. Previous data have shown that children are more likely to be enrolled when their parents and whole families have the opportunity to be enrolled," said Donna Friedsam, a member of the University of Wisconsin research team evaluating the program.

Almost two-thirds of the increase in children enrolled was among those in families with incomes at or below 200 percent of FPL (Table 2). "One of the things we're most proud of is the success of the outreach effort for BadgerCare Plus," said Karen Timberlake, secretary of the Wisconsin Department of Health Services and a partner in the evaluation effort. "Most of the children being enrolled have incomes low enough that they were already eligible before the expansion, but they had not been reached before."

 

 Table 2.  Child Enrollment in BadgerCare Plus, by Family Income Level

 

 Source: DeLeire, T. University of Wisconsin Population Health Institute, 2009.

Enrollment Strategies

In addition to expanding eligibility, Wisconsin implemented a variety of strategies that appear to have succeeded in enrolling eligible individuals. "This program required a very strong, broad-based communication effort to convey the message that all kids were potentially eligible, regardless of income," said Timberlake.

One strategy involved limiting "crowd-out" restrictions, allowing people with incomes below 150 percent of FPL to enroll in BadgerCare Plus even if they had an offer of employer-sponsored insurance. Data had suggested that, even when offered employer-sponsored insurance, those with very low incomes are often not able to afford the cost-participation requirements, and thus remain uninsured. With implementation of BadgerCare Plus, responsibility for verifying whether an individual has employer coverage or access to employer insurance also shifted from applicants to the state. Further, the program no longer holds applicants responsible if their employer fails to respond to requests for such information. Also, BadgerCare Plus automatically enrolled family members of already-enrolled children if they were found to be eligible under the expansion guidelines.

A broad outreach and enrollment effort involved more than 200 organizations in identifying and enrolling eligible families, including community health centers, hospitals, food pantries, schools, faith-based organizations, and community advocacy groups. In addition, BadgerCare Plus gave grants of up to $25,000 to 31 organizations for community outreach and enrollment, paying $50 for each approved application.

About 39 percent of applications are submitted using the state's online application system, ACCESS, which screens applicants for eligibility for health care programs in addition to food stamps, tax credits, and other benefits. Organizations were trained to use the online application system as part of the outreach.

Wisconsin is financing the coverage expansion with a variety of strategies, including the premiums and cost-sharing for enrollees with incomes above 150 percent FPL, a hospital assessment that increases the federal funding available for Medicaid, greater efficiencies in prescription drug purchasing, and a $1 increase in the cigarette tax. The state may also seek cost savings through other reforms.

The ongoing evaluation of BadgerCare Plus is examining take-up rates by various income and age groups, rates of "churning" on and off public programs among enrollees, the impact of the coverage expansion on employers' offering of insurance, movement from private to public coverage among people who were newly eligible, and enrollment among people who were uninsured despite being eligible for private or public coverage. The second phase of reform, aimed at covering childless adults with incomes up to 200 percent of FPL, began statewide enrollment in June 2009.

For more information For questions about BadgerCare Plus, contact: Milda Aksamitauskas, policy analyst, Wisconsin Department of Health Services Division of Health Care Access and Accountability, (608) 264-6724, Milda.Aksamitauskas@wisconsin.gov For questions about the BadgerCare Plus evaluation, contact: Donna Friedsam, UW Population Health Institute, (608) 263-4881, dafriedsam@wisc.edu To learn more about the BadgerCare Plus program, see: www.badgercareplus.org To learn more about the program evaluation, see: State Health Access Data Assistance Center Web site To learn more about the BadgerCare Plus program for childless adults, see: Wisconsin Department of Health Services Web site To learn more about ACCESS, see: https://access.wisconsin.gov/

 

 

Maryland: Using Tax Forms to Identify Eligible Kids

Under the 2008 Maryland Kids First Act, Maryland is using state income tax forms to identify families with children who may be uninsured and eligible for Medicaid or CHIP and sending them information about how to enroll. Maryland's experience could provide important lessons for the many states that are considering and/or developing similar outreach strategies. The Act, signed in May 2008, requires the Medicaid and CHIP programs to coordinate with the state comptroller, who oversees state tax collection.

"Collaboration between the Medicaid and CHIP programs and the comptroller presented valuable new opportunities for outreach to potential enrollees, but also involved challenges that the agencies are continuing to address as the new approach evolves," said Charles Milligan, executive director of the Hilltop Institute at the University of Maryland, which is evaluating the Kids First Act under a SHARE (State Health Access Reform Evaluation) grant from the Robert Wood Johnson Foundation. The evaluation is focusing on how the Act was established and implemented, how well it is identifying and enrolling eligible children, and the advantages and disadvantages of using tax form information to reach potential Medicaid/CHIP enrollees.

The comptroller was responsible for developing the language to include on the tax form, which for 2009 and 2010 tax returns asks individuals who report having dependent children the following: "Does child have health care?" (Figure 2). Due to space limitations, no detailed information about existing insurance coverage is collected on the tax form. There is no penalty for not answering the question about health care, and when parents leave it blank their children are counted as not having coverage. The approach is designed to be overly inclusive in order to maximize the number of potentially eligible children identified.

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Figure 2. (Click to view)

 

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After tax forms are submitted, the comptroller's office sends a mailing to taxpayers who reported having dependent children without health care and whose income falls within program eligibility (at or below 300 percent of the FPL). The mailing includes a cover letter developed by the Medicaid/CHIP program informing families that their children may be eligible for Medicaid or CHIP and asking for more detailed information about existing health insurance coverage. It also includes a Medicaid/CHIP application to be returned to that program.

Early results of the evaluation suggest that broad political commitment, as well as effective collaboration between Medicaid, the health department, and the comptroller's office, were important to the passage and implementation of the Kids First Act. Maryland's governor made the initiative a priority, and it also benefited from significant support in the state legislature and from the state comptroller.

Tax returns for 2008 identified 338,495 children who did not have health care, while 855,296 children did have health care, out of a census estimate of 1.5 million children in the state. It is still too early to estimate how many children have enrolled in public programs as a result of the tax form outreach strategy.

Challenges and Opportunities
The usefulness of income reported on tax returns for determining Medicaid/CHIP eligibility is a critical issue for the future of Maryland's—and other states'—outreach efforts. Major questions include whether annually reported income is too crude a measure for tracking children's eligibility, since income may change on a seasonal or monthly basis over the course of the year. Similarly, it is not clear whether reported income is an adequate proxy for eligibility, given that it may be subject to deductions and "disregard" rules.

The logistical and operational details of implementing the new system also made it more costly than anticipated, and presented practical challenges. The mailing costs associated with the outreach were much higher than they would have been for a more narrowly targeted effort. The new system required updates to the tax forms and to the comptroller's data systems to track responses to the new question as well as Medicaid eligibility thresholds. The wording of the question added to the tax form was vague (asking about "health care" rather than "health insurance") and did not ask for the age of the child or specify a time period, which could affect the accuracy of responses. The state is exploring how to modify the language on the tax form and other materials to elicit more accurate responses. Early evaluation has highlighted the importance of communication and problem-solving among stakeholders for addressing the operational challenges of implementing this kind of strategy.

Another critical issue involves the sharing or merging of tax and Medicaid/CHIP data systems. Data sharing between Medicaid and the comptroller could help target outreach by eliminating mailings to children that Medicaid data show are already enrolled. Data sharing would also enable the state to determine which enrollments result from this tax form–based outreach. However, current Maryland state tax laws strictly protect the privacy of taxpayers' financial information. And prior to the passage of the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA), the Maryland Attorney General determined that state and federal confidentiality laws did not allow data sharing. CHIPRA encourages states to adopt Express Lane eligibility, which uses eligibility information for other state benefits—such as food stamps or Temporary Assistance for Needy Families—to satisfy some of the Medicaid or CHIP eligibility requirements. CHIPRA includes a provision that explicitly permits information-sharing across state agencies to enroll children in Medicaid or CHIP, "notwithstanding any other state or federal law." This suggests that Maryland could revisit its tax data-sharing laws, and potentially use parental consent on the tax form to make data-sharing possible. This approach could get more attention in states and nationally if it proves successful in Maryland.

Despite reductions in Maryland's Medicaid budget, this outreach strategy continues to move forward. The existence of legislation requiring and appropriating funds for the effort, and the strong support of the comptroller and governor, help ensure that it will continue.

For more information Contact: Charles Milligan, executive director, The Hilltop Institute, cmilligan@hilltop.umbc.edu About the Maryland Kids First Act evaluation, see: Hilltop Institute Presentation

 

 

Maryland: Increasing Adult Eligibility While Cutting the Budget

In addition to using innovative outreach strategies to enroll children in Medicaid and CHIP, Maryland recently began expanding Medicaid coverage to low-income parents and expanding health benefits to low-income childless adults as part of a larger set of health reforms aimed at reducing the number of uninsured, improving the quality of care, and containing costs. However, the economic crisis and Medicaid budget cuts have resulted in delays in some expansions as well as rate cuts to providers.

"Expanding coverage is a top priority of the governor and the legislature," said Tricia Roddy, director of the Planning Administration for the Medicaid program, Maryland Department of Health. "When the revenues are there again, there is a commitment to move forward."

Through Maryland's 2007 Working Families and Small Business Health Coverage Act and with Medicaid Section 1115 waiver approval, the state increased Medicaid eligibility for parents from about 40 percent up to 116 percent of the FPL ($21,240 for a family of three in 2009) in July 2008. In its first year (through June 2009), an estimated 48,000 parents enrolled.

The Act also called for expanding benefits in its Primary Adult Care Program (PAC), which had provided limited pharmacy, primary care, and some mental health services to childless adults up to 116 percent of the FPL (about $12,000 annual income). This expansion is covered by the same waiver as the eligibility increase for parents. In January 2009, PAC added emergency room and substance abuse services. The planned addition of a broader range of physician services has been delayed due to severe budget pressures. The Act also calls for adding outpatient hospital services benefits in year two and inpatient services in year three, although implementation will depend on economic conditions. PAC currently enrolls about 30,000 adults, far from the program's cap of about 58,000. "We expect real growth when the program adds the complete complement of services," said Roddy.

The state also began offering premium subsidies to small business employers and workers to enroll in private plans. Employers with two to nine employees whose average wages are below about $50,000, and that have not offered their employees insurance coverage in the past year, are eligible for subsidies that are shared between the employer and employee based on each one's contribution to premiums. Subsidies are provided up to $2,000 per employee or half the insurance premium, whichever is lower, and enrollment is being capped to limit the state's overall spending to $15 million. In order to participate, employers must be willing to provide health insurance that includes benefits encouraging wellness and prevention, and that meet requirements to ensure that employees' contributions are not taxed.

As part of a set of health system reforms, Maryland created the Maryland Health Care Quality and Cost Council to coordinate and make recommendations on health care quality improvement and cost containment initiatives, and to promote medical homes and health information technology.

Financing Challenges
The Act's coverage expansions were financed in part with a one-time transfer of $75 million from surpluses in the Maryland Health Insurance Plan (the state's high-risk pool) and a 2 percent tax on managed care organizations. To fund the expansions on an ongoing basis, the state is using a hospital assessment that is intended to capture savings to hospitals as uncompensated care declines. The assessment provided $40.7 million for FY 2009.

At the same time, the economic crisis has led to reductions in the state's Medicaid budget by about $89 million in FY 2009, and more than $200 million in FY 2010. Because coverage levels must be maintained as a condition to receive federal stimulus funds under the American Recovery and Reinvestment Act of 2009, the state has been forced to cut Medicaid provider payment rates. The rate cuts are affecting a variety of providers, including physicians, hospitals, and nursing homes.

The rate cuts for physicians are not haphazard or across-the-board. Rather, an existing advisory group that examines rates each year has identified Medicaid codes that are expected to be able to sustain cuts. (This advisory group is separate from the Cost Council discussed above.) Medicaid continues to maintain higher rates for pediatric and obstetric services (100% of Medicare rates), as well as for areas with limited numbers of specialists. Providers expect to return to prior levels once the economic situation improves. So far, there is no evidence of erosion in access to services resulting from the rate cuts, although it is difficult to tell whether providers in networks are not taking on new Medicaid patients. The state will continue to closely monitor Medicaid office visit wait times and member hot lines for any negative effects.

For more information Contact: Tricia Roddy, director of the Planning Administration for the Medicaid program, Maryland Department of Health, RoddyT@dhmh.state.md.us For information about the Working Families and Small Business Health Coverage Act, see: http://www.dhmh.state.md.us/workingfamilies/

State Concerns About Federal Health Reform

Governors are increasingly concerned that federal health reform will hand them expensive new Medicaid obligations without money to pay for them. As reported by the New York Times on July 19, during a private meeting with the health and human services secretary and former Kansas governor Kathleen Sebelius, both Democratic and Republican governors voiced fears about overloading states at a time when they are already struggling financially.

All of the major health reform bills currently pending in Congress propose to expand Medicaid eligibility. The House bill (America's Affordable Health Choices Act of 2009, HR 3200) would expand Medicaid eligibility up to 133 percent of the federal poverty level (FPL) and could add 10 to 11 million new Medicaid enrollees in the later part of the 2010–19 period, according to the CBO. The Senate Health, Education, Labor and Pensions (HELP) Committee bill (Affordable Health Choices Act) would expand Medicaid eligibility up to 150 percent of the FPL. A draft Senate Finance Committee proposal in mid-June set Medicaid eligibility for children and pregnant women to 133 percent of FPL and 100 percent of FPL for parents and childless adults, with the expansion gradually phased in between 2010–12 (this committee has not yet released a bill).

The Senate Finance Committee draft proposal included a temporary (five-year) increase in federal funding to fully cover the costs for newly eligible populations, followed by a phase-out period to return to previous levels. The House bill would provide full federal funding for the eligibility expansion until 2015, and increase Medicaid payment rates for primary care providers to 100 percent of Medicare rates. The CBO analysis of the House bill (as of July 26) estimates these new federal outlays at $438 billion over 2010–19.

The full House and Senate did not vote on separate health reform bills before lawmakers left for the August recess. Both will reconvene on September 8th. The House may wait to see what form the Senate Finance Committee's bill takes before voting on its own legislation. The Finance Committee is working toward a bipartisan compromise, and its formal negotiations are on hold over the recess.

Commission Corner

As Congress deliberates the specifics of health reform, The Commonwealth Fund Commission on a High Performance Health System continues to provide critical leadership and analysis of key issues.

 In July, with the Alliance for Health Reform, The Commonwealth Fund sponsored a briefing on options for financing health reform and bending the health care cost curve on Capitol Hill for an audience of over 300 stakeholders, including congressional and agency staff and the press. The event featured panelists Uwe Reinhardt of Princeton University's Woodrow Wilson School of Public and International Affairs, Bill Hoagland, a former Congressional Budget Office (CBO) economist and adviser to Senator Bill Frist, Mark McClellan, the former head of the Centers for Medicare and Medicaid Services, and Chris Jennings, a senior health care adviser in the Clinton administration. The panel was moderated by Ed Howard of the Alliance for Health Reform and Rachel Nuzum of The Commonwealth Fund. Ms. Nuzum framed the briefing by discussing the current, unsustainable rate of health care cost growth and encouraged policymakers to consider the impact that policy options have on national health expenditures—not only on federal budget costs. Mr. Hoagland discussed how the CBO scoring process works and the impact of the scores on the legislative process. Dr. Reinhardt presented broad options for financing reform, emphasizing the role of new taxes and discussing how the American tax system compares with that in other countries. Dr. McClellan described what he sees as the three most pressing issues in health reform: bending the cost curve, ensuring access without disrupting coverage for those who are happy with the current system, and personal responsibility. Dr. McClellan noted the need for an individual mandate and corresponding subsidies to achieve affordable, accessible, and available health insurance with minimal disruption to the current system. Finally, Mr. Jennings reflected on the politics of health reform, drawing on his experiences both with the Clinton administration and co-directing the Bipartisan Leaders’ Project, a group of former Senate Majority Leaders who have released a set of bipartisan recommendations. For more information on the briefing, you may visit the Commonwealth Fund’s Web site in September for a online e-forum of the event. Additionally, a report comparing various options for financing reform can be found here.

The Commonwealth Fund’s Commission on a High Performance Health System held its summer meeting in Park City, Utah, in July. The group used the opportunity to discuss the status of health reform and develop priorities for future work. As always, the Commission took advantage of its setting to learn from local innovators such as Intermountain Health Care and discussed their approach to achieving high-quality, low-cost care. The Commission was honored to be joined by former Utah governor and Secretary of Health and Human Services, Michael Leavitt, for a lively dinner discussion.

In the fall the Commission will release its second State Scorecard on Health System Performance, which will assess state variation across key dimensions of health system performance: access, prevention and treatment, avoidable hospital use and costs, equity, and healthy lives.

For more information, please visit our Web site.

Related Publications

Fund Publications

V. K. Smith, J. N. Edwards, E. Reagan and D. Roberts, Medicaid and CHIP Strategies for Improving Child Health, The Commonwealth Fund, July 2009.

S. R. Collins, R. Nuzum, S. Rustgi, S. Mika, C. Schoen, and K. Davis, How Health Care Reform Can Lower the Costs of Insurance Administration, The Commonwealth Fund, July 2009. 

S. Mika and R. Nuzum, Alternative Paths to a High Performance U.S. Health System: Impact of Three Approaches on Health Care Spending, The Commonwealth Fund, July 2009.

M. M. Doty, S. R. Collins, J. L. Nicholson, and S. D. Rustgi, Failure to Protect: Why the Individual Insurance Market Is Not a Viable Option for Most U.S. Families, The Commonwealth Fund, July 2009.

T. Baldwin, Seizing the Moment, Modern Healthcare and The Commonwealth Fund, July 2009.

M. Burgess, Tweaks, Not Overhaul: A Responsible Approach to Health Reform, Modern Healthcare and The Commonwealth Fund, July 2009.

K. Stremikis, K. Davis, S. Collins, and C. Schoen, Health Care Opinion Leaders' Views on Health Reform, The Commonwealth Fund, July 2009.

Related Publications

Key Questions About Changes for Medicaid and Low-Income Individuals, Kaiser Commission on Medicaid and the Uninsured, July 2009.

S. T. Napel, D. Cohn, and E. Martinez-Vidal, State Reform Efforts in the Small Group Market: Past, Present and Future, State Coverage Initiatives, July 2009.

A. McKethan, J. King, N. Nguyen, and A. M. Lischko, Evolving State Approaches to Expand Coverage in the Current Wave of State Access Reform, State Coverage Initiatives, July 2009.

J. Rosenthal and C. Hanlon, State Partnerships to Improve Quality: Models and Practices from Leading States, National Academy for State Health Policy, June 2009.

S. Jaffe, Health Policy Brief: A Public Health Insurance Plan, Health Affairs and Robert Wood Johnson Foundation, June 2009.

S. Jaffe, Health Policy Brief: Coverage for Low-Income People, Health Affairs and Robert Wood Johnson Foundation, July 2009.

J. Moon, R. Weiser, N. Highsmith, and S. Somers, The Relationship between Practice Size and Quality of Care in Medicaid, Center for Health Care Strategies, Inc, July 2009.

Supporting Integrated Care for Dual Eligibles, Center for Health Care Strategies, Inc., July 2009.

E. McNichol and I. J. Lav, New Fiscal Year Brings No Relief From Unprecedented State Budget Problems, Center on Budget and Policy Priorities, July 2009.

N. Johnson and P. Oliff, Myths and Realities About How States Are Using Economic Recovery Act Funds, Center on Budget and Policy Priorities, July 2009.

N. Johnson, A. C. Nicholas, and S. Pennington, Tax Measures Help Balance State Budgets, Center on Budget and Policy Priorities, July 2009.

E. Park, J. Angeles, and S. Lueck, Reducing Medicaid and Medicare Drug Costs Could Help Pay for Health Reform, Center on Budget and Policy Priorities, June 2009.


Multimedia and Interactive Resources

Webinar: Opportunities for Medicaid in the Aligning Forces for Quality Initiative, Center for Health Care Strategies, Inc., July 2009.

Podcast: Step One: Pass Health Reform Legislation. Step Two: Administer Reforms, Urban Institute, July 2009.

Web Resource and Chartbook: State Variation and Health Reform, Kaiser Commission on Medicaid and the Uninsured,  July 2009.

Upcoming Meetings

Agency for Healthcare Research and Quality 2009 Annual Conference
Bethesda, MD
September 13–16, 2009
http://www.ahrq.gov/about/annlconf09.htm

America’s Health Insurance Plans Medicare and Medicaid Conferences
Washington, DC
September 13–17, 2009
http://www.ahip.org/links/mcmc2009/

National Association of Public Hospitals and Health Systems Fall Legislative Event
Washington, DC
September 22–23, 2009
http://www.naph.org/Main-Menu-Category/Calendar/NAPH-CEO-ForumFall-Legislative-Event.aspx

National Academy for State Health Policy 22nd Annual Conference
Long Beach, CA
October 5–7, 2009 
http://nashpconference.org/

National Quality Forum Fall Policy Conference
National Harbor, MD
October 14–15, 2009
http://www.qualityforum.org/Events/2009_Fall_Conference.aspx

National Association of Health Data Organizations 24th Annual Conference
Alexandria, VA
October 15–16, 2009
http://www.nahdo.org/Meetings/tabid/55/Default.aspx

Association of State and Territorial Health Officials 2009 Annual Meeting
Vienna, VA
October 14–16, 2009
http://www.astho.org/?template=2009_astho_annual_meeting.html

AcademyHealth Policy Orientation
Washington, DC
October 26–29, 209
http://www.academyhealth.org/content.cfm?ItemNumber=1600&navItemNumber=530

Improvement Partnerships Webinar

Practices and providers often need help redesigning care systems and improving the quality of care. Developing successful quality improvement initiatives at the regional or state levels can be daunting, due to the complexity of the current health care delivery system and the range of stakeholder interests. The Vermont Child Health Improvement Program (VCHIP) is a public–private partnership that has conducted successful child health quality improvement projects on a number of topics since 1999. This “improvement partnership” is a sustainable collaboration of public and private partners that uses measurement-based efforts and a systems approach to improve the quality of health care for children. With support from The Commonwealth Fund, the improvement partnership model has now been replicated in 15 states.

We encourage you to learn more about improvement partnerships by joining us for a Commonwealth Fund webinar, “Improving Health Care Quality Through State Partnerships,” on Wednesday, September 30, 2009, at 2:00pm. Registration is available at https://commonwealthfundevents.webex.com/mw0306l/mywebex/default.do?siteurl=commonwealthfundevents.

Also available online is a free podcast, “Help for Health Care Providers Putting Policy into Practice,” in which representatives from New Mexico, Vermont, and Ohio discuss their successful improvement partnership initiatives.

About the Newsletter

The States in Action bimonthly newsletter describes innovative state health programs from across the country. It is intended to help policymakers, administrators, and researchers as they work to stretch health care dollars and meet the needs of their residents.

States in Action is part of a Commonwealth Fund program on state high performance health systems. For more information, contact Ed Schor, Vice President, State High Performance Health Systems, at els@cmwf.org. We welcome those involved in state efforts to expand coverage and improve care and efficiency to send an e-mail about their efforts to statesinaction@cmwf.org..

Authors: Sharon Silow-Carroll, M.B.A., M.S.W.,  Greg Moody, M.A., and Diana Rodin, M.P.H., Health Management Associates
Editor(s): Ed Schor, M.D., Vice President, State High Performance Health  Systems, and Gretchen Hagelow, M.P.A., Associate Program Officer, State High Performance Health Systems 
Managing Editor: Martha Hostetter, M.F.A.

Editorial Advisory Board

The States in Action Editorial Advisory Board comprises experts from various aspects of state health policy. Members of the Editorial Advisory Board help to shape the newsletter by providing technical expertise, suggesting state innovations for inclusion, and by assisting in the reviewing of each issue. Special thanks to Melanie Bella and Scott Leitz for reviewing this issue.

Melanie Bella Senior Vice President Center for Health Care Strategies Susan Besio Director, Health Care Reform Implementation Vermont Agency of Administration John Colmers Secretary of Health and Mental Hygiene Maryland Department of Health and Mental Hygiene Isabel Friedenzohn Senior Associate State Coverage Initiatives, AcademyHealth Anne Gauthier Senior Fellow National Academy for State Health Policy Paul Jarris Executive Director Association of State and Territorial Health Officials Chris Koller Health Insurance Commissioner State of Rhode Island JoAnn Lamphere National Coordinator for State Affairs American Association of Retired Persons Scott Leitz Assistant Commissioner Minnesota Department of Health Sandra Shewry President and CEO California Center for Connected Health Robert St. Peter President and Chief Executive Officer Kansas Health Institute Molly Voris Senior Policy Analyst, Health Division Center for Best Practices National Governors Association