By Mary Agnes Carey, CQ HealthBeat Associate Editor

September 26, 2008 -- When Massachusetts' health care overhaul was enacted two years ago, it was held up as both a model for the nation and as proof that liberals and conservatives can agree on a way to cut costs and expand coverage. As the state's then-Gov. Mitt Romney, a conservative, signed the bill into law, the liberal Sen. Edward M. Kennedy said his home state "may well have fired the shot heard round the world on health care in America."

Indeed, the Massachusetts experiment—as well as those of other states attempting to implement plans to bring about broad-based health care coverage—shows that it is possible to find compromise on an issue that has divided the two parties for more than a decade.

On a practical level, however, these state efforts also show that attempts to achieve universal coverage have serious limitations, many of them having to do with the same problem that currently afflicts all health care policy nationwide: the inability to get rising costs under control. The experience in California is an example. There, a major overhaul effort failed earlier this year under the weight of cost questions and long-term financing problems.

But the Massachusetts experience, and that of states that have either proposed or implemented health care overhauls, will be key as lawmakers on Capitol Hill prepare for what is expected to be a major legislative debate next year on how to overhaul the national health care system—although the Iraq war, the troubled economy, and a proposed $700 billion government bailout plan of Wall Street firms may complicate efforts for any sweeping change. Congress may not have the amount of time and money necessary to move a major health care bill and may instead focus on smaller, more incremental changes.

According to the Kaiser Commission on Medicaid and the Uninsured, 14 states have proposed universal health care coverage plans while three—Massachusetts, Vermont, and Maine—have begun to implement such proposals. The overhaul in Massachusetts has tested many of the concepts health care analysts say are the best way to achieve universal coverage, such as requiring that individuals have health care insurance and forcing employers to either provide health coverage to their workers or pay into a fund to accomplish that goal. Universal health care plans in Maine and Vermont include subsidies to help workers purchase health care insurance on their jobs. In addition, Iowa has taken steps to expand health care coverage for children and strengthen consumer protections in the private insurance market.

These states' approaches show it's possible to find the middle ground on health care, which usually includes a combination of expanding public programs, subsidizing families and businesses to help make insurance more affordable, and focusing on cost control, said Alan Weil of the National Academy for State Health Policy.

"States have eschewed policies at either extreme: avoiding approaches that rely on a single payer approach or that expect unregulated markets to solve the problems of the health care system," he told the House Ways and Means Health Subcommittee this summer.

Weil also told the panel that states cannot go it alone. "States need a national framework in order to achieve the promise of health reform—a framework of federal support, assistance and guidance," he said.

A Window Into What Works
One of the architects of the Massachusetts plan, John McDonough, said the plan has provided Washington with a window into how many overhaul concepts could be included in federal health care overhaul legislation, such as an individual mandate, broader employer responsibilities, insurance market changes, and a connector-like entity to help individuals purchase health care coverage. McDonough is now a senior adviser for national health reform for Kennedy, who chairs the Senate Health, Education, Labor and Pensions Committee and has been laying the groundwork for comprehensive health care legislation.

The Massachusetts law required state residents (with some exceptions) to have health insurance coverage by July 1, 2007 or face penalties. Individuals who did enroll in coverage by Dec. 31, 2007, lost their state personal tax exemption of $219. For 2008, tax penalties began accruing on a monthly basis beginning Jan. 1 and may be as high as $912. Employers who have 11 or more full-time workers are required to contribute $295 for every employee they do not insure to a state fund that provides care to those who cannot afford coverage.

Among its provisions, the law called for state funds that had been spent to pay providers for uncompensated care be redirected to help low-income residents purchase insurance. The state would also help pay the premiums of low-income individuals and the plan also included a "connector" to help individuals and small employers purchase coverage for workers.

Early analyses of the plan show that it has reduced the number of the state's uninsured while increasing the number of employers offering health insurance. According to an August report prepared by Massachusetts state officials for Gov. Deval Patrick, the number of people enrolled in private or subsidized health insurance plans has increased 439,000 between June 30, 2006, when the program was launched, and March 31, 2008. During that same time, community health care centers and safety net hospitals have seen a 37 percent drop in visits, while the state's uncompensated care pool payments have declined 41 percent, or $68 million. Those figures suggest that greater rates of health insurance have meant fewer visits to those facilities for routine medical care that could otherwise be delivered in a physician's office in a more efficient and cost-effective manner.

Separately, an Urban Institute analysis of the first year of the Massachusetts plan found that the uninsured rate among adults had dropped by almost half, from 13 percent to 7.1 percent. The report, published in the June issue of the journal Health Affairs, also found that access to care for low-income adults had increased and the number of adults with high out-of-pocket health care costs and difficulties paying medical bills had dropped.

Another key finding of the Urban Institute analysis was that the Massachusetts plan found no evidence that employers were less likely to offer coverage to their workers than before the Massachusetts plan went into effect. According to another study, prepared by the state's Division of Health Care Finance and Policy, found that nearly half of the growth in insured people has been in private group coverage, or through employers, or via individuals purchasing health policies on their own.

Unexpected Costs
Despite its success, there are problems with the Massachusetts plan that could give federal regulators pause. An analysis published in the Annals of Internal Medicine points to a shortage of primary care physicians to care for newly insured residents. A study in the June 26 New England Journal of Medicine also noted the physician shortage as well as high limits on annual deductibles (capped at $2,000 for an individual and $4,000 for a family) and out-of-pocket spending (capped at $5,000 for an individual and $10,000 for a family). In addition, 62,000 state residents were exempted from the mandate as of March 30 because they cannot afford to purchase coverage but make too much money to qualify for subsidized coverage, according to the Massachusetts Department of Revenue.

The cost of the program has exceeded initial cost projections because the number of uninsured adults exceeded initial state projections, although some analysts have said the plan intentionally contained artificially low estimates to make the proposal's cost more appealing to lawmakers and the public.

"The long-run success of Massachusetts's efforts will hinge in part on sustaining support for the new policies in face of these higher costs," wrote Urban Institute researcher Sharon K. Long. Another unknown is what impact the higher penalties will have on individuals who have not yet purchased coverage.

Grace-Marie Turner, president of the Galen Institute, a conservative think tank, said financing continues to be a major concern as the Massachusetts law evolves. "Being able to make this coverage and this care affordable is really going to be the critical issue and whether or not people are going to be able to continue to increase the number of people that do have coverage in the state," she said at an Alliance for Health Reform forum in May.

Massachusetts may not be able to be duplicated nationally for a variety of other reasons. Before enactment of the law, the state already had a high number of insured individuals and employers offering health care coverage to workers. In the mid-1990s, it had implemented a number of insurance market changes, such as no medical underwriting and guaranteed renewal of coverage, and it had $385 million in federal Medicaid funds that the state was allowed to use as part of a Medicaid waiver to reduce the number of uninsured. The waiver, which expired June 30, is currently being negotiated with the Centers for Medicare and Medicaid Services (CMS), and federal funding is needed to help the Massachusetts plan continue.

Finding Financing
Massachusetts isn't the only state struggling with financing a health care plan. In Maine, lawmakers voted to increase taxes on soft drinks, beer, and wine to help finance the state's universal health care program, although the new taxes have drawn heavy opposition and a measure to overturn them may be on the state's November ballot. The law signed by Democratic Gov. John Baldacci also allows the state to borrow from its tobacco settlement fund and general fund and assess a 1.8 percent surcharge on health insurance claims.

In Vermont, state officials had hoped to use federal funds to help finance coverage for uninsured individuals with incomes of up to 300 percent of the federal poverty level, but CMS allowed matching funds only for individuals up to 200 percent of the federal poverty level, so state officials increased tobacco taxes to raise an additional $15.8 million and assessed employers (with some smaller firms exempted) $365 for every full-time worker who either is not covered by an employer's insurance or who chooses not to enroll in an employer's coverage and is uninsured.

Financing woes were the main reason the California state Senate Health Committee in January rejected a $14.9 billion proposal Republican Gov. Arnold Schwarzenegger had negotiated with Democratic leaders.

The California plan, which would have required individuals to have health insurance but gave subsidies to those who could not afford coverage, was thought to be too expensive at a time when the state faced a $14.5 billion budget gap. News accounts point to opposition from tobacco companies—who opposed higher cigarette taxes to fund the proposal—as well as from some insurers and employers, which would have also faced new financial obligations as part of the plan. Some lawmakers feared that consumers might be forced to purchase health insurance they could not afford.

The proposal would have covered an estimated 3.6 million uninsured California residents, with fees assessed on employers and hospitals to fund the program. A series of insurance market overhauls, including requiring guaranteed issue by 2010 and caps on premium increases, were also included. Some elements of the plan, such as a requirement that insurers spend at least 85 percent of their earnings on patient care and tougher restrictions on canceling health insurance policies for individuals who need extensive medical care, advanced through the state legislature and have been sent to the governor's desk.

The same financial hurdles that California has faced will make health care overhaul difficult to achieve on the national level. "Democrats want to be fiscally responsible," said Rep. John D. Dingell, D-Mich., and they will want funding offsets for any health care legislation. "This is going to be a huge problem" that Congress faces when it considers health care, said Dingell, who chairs the House Energy and Commerce Committee.

Rep. Dave Camp, R-Mich., called financing "the single greatest challenge facing health care reform, at both the state and federal levels ... How can you create a system that finally makes health insurance available to all Americans that is financially sustainable for both the patient and the taxpayer?" Camp asked at the July Ways and Means Health Subcommittee hearing on states' efforts to cover the uninsured.

Differences in the Details
While finding enough money to fund health care overhaul efforts is a challenge for states and the federal government, finding consensus on legislation may prove just as difficult.

Peter Harbage, a California-based health care consultant who helped advise Schwarzenegger's team that assembled the state's health care legislation, said the legislative process relied too heavily on the top leaders of the state's Assembly and Senate. The assumption was that if those leaders were on board with the plan—already under fire from some insurers, employers, and health care providers for its provisions to assess new taxes for financing—the proposal would succeed. "It would have benefited by a broader-based legislative strategy that included a range of lawmakers," Harbage said.

Other obstacles included Republican opposition to new taxes to fund the program—and Republican support was needed to attain the two-thirds vote required by state law to raise taxes. "As the year went on, it became very clear no Republican was going to break ranks" and back the governor's health plan, Harbage said.

California's struggles also illustrate the complexity of the issue. "We've spent 40 years building a dysfunctional system. We can't fix it overnight," Harbage said. "It was just a big hill to climb. It was hard to do."

Federal lawmakers will face much of the same issues if they try to pass sweeping health care legislation. Some favor legislation (S 334) from Sens. Ron Wyden, D-Ore., and Robert F. Bennett, R-Utah, that would replace the current employer-based health insurance system with a system in which people would buy coverage directly from insurers through new state-run "purchasing pools." Another measure (S 2795, HR 6210) would allow small businesses and the self-employed to band together across state lines to buy health care coverage for their workers. Its sponsors include Sen. Richard J. Durbin, D-Ill., and Rep. Jo Ann Emerson, R-Mo. In the House, Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., has introduced legislation (HR 1841) that focuses on prevention, lowering administrative costs, and providing health care to all Americans.

Another obstacle to congressional attempts to pass comprehensive health care legislation may be the Employee Retirement Income Security Act (ERISA), a 1974 law that pre-empts state laws that govern private employer-based health plans. The law, which covers more than 140 million Americans who receive health insurance through their employers, permits individuals covered by the law to sue their insurers only in federal court and generally limits damages to the cost of denied care and does not allow for punitive damages that result from the denial of care. ERISA was a major focus in Congress during the late 1990s when it debated whether to give patients broad rights to sue their health plans, known as the "patients' rights" debate.

Some state health care laws have run afoul of ERISA. For example, the U.S. 4th Circuit Court of Appeals ruled that ERISA pre-empts a Maryland law requiring companies with more than 10,000 employees spend at least 8 percent of their payroll costs on medical benefits or pay into a state fund to provide health coverage to the poor. Similar laws in Suffolk County, N.Y., and the city of San Francisco have also been preempted by ERISA. In 2004, the Supreme Court ruled that ERISA mandates such suits must be heard in federal court.

There have been no ERISA challenges yet to Massachusetts' law, but that could change. In 1983, Hawaii secured a legislative exemption for its health plan that required health coverage for all employed people who work more than 19 hours a week, but the exemption "contained a warning that other states should not consider this a precedent for future exemption" and the ERISA law itself does not allow for exemptions, according to the Employee Benefits Research Institute.

While ERISA has prevailed so far, some business leaders fear a federal health care overhaul effort may interfere with the law. Since ERISA allows multi-state employers an exemption from many state mandates governing insurance, changes in that exemption could make it more difficult—and more importantly more expensive—for employers to operate in several states.

"ERISA is in our minds at all time. Preservation of ERISA is one of our top priorities," said Maria Ghazal, director of public policy for the Business Roundtable.

Urban Institute President Robert D. Reischauer said "a reasonable fear" is that lawmakers could amend ERISA to mandate a minimum benefits package that "over time would get richer and richer." But he doubts that will happen. "I think that was a bigger fear a decade ago than it should be now because everybody is so cost conscious," he said.

Advocates for sweeping health care overhaul say it is just as important for the federal government to set standards for health insurance policies for all Americans, so the type of health care individuals receive does not depend on the state in which they live.

John C. Lewin, now CEO of the American College of Cardiology who formerly was an architect of Hawaii's health plan when he served as the state's director of health, said Hawaii continues to struggle to provide health care to its residents.

"While every full-time worker in Hawaii still has coverage—and that is no small thing—increasing numbers of dependents are not covered," Lewin told the Ways and Means Health Subcommittee in July. "The unemployed, self-employed, and part-time employed have the same difficulties getting coverage now as anywhere else in America. Hawaii's accomplishments will further unravel in the absence of national reforms."

Health care's importance to the nation's economy may spur lawmakers to work harder to reach consensus. In an address at a "Health Reform Summit" sponsored by the Senate Finance Committee in June, Federal Reserve Chairman Ben S. Bernanke said decisions made about changes to the health care system "will affect many aspects of our economy, including the pace of economic growth, wages and living standards, and government budgets, to name a few."

Dingell believes the high cost of health care for both employers and workers will push Congress to pass legislation that will address the issue. "There will be new opportunities for reform, largely because the debate in the country over health care has shifted," he said. "Support for comprehensive reform . . . is now widespread."

But it remains to be seen whether Massachusetts, or any other state, will be the model for Washington.

By John Reichard, CQ HealthBeat

September 26, 2008 -- Language in a Senate economic stimulus package boosting federal matching payments to state Medicaid programs by $19.6 billion over 15 months helped provoke a White House veto threat Friday, adding to doubts that any added congressional infusion of funds to head off state Medicaid budget cuts would take place this year.

The language was in trouble in any event because it was part of a larger supplemental spending package (S 3604) that failed to attract enough votes Friday to win a cloture vote needed to get it to the Senate floor. The cloture motion required 60 votes to succeed, but only attracted 52.

Meanwhile, Congress was heading into the weekend without wrapping up work on a stopgap spending measure needed to keep health-related and other federal agencies operating once the current fiscal year expires Sept. 30. But the Senate could take up the measure, which includes some added health-related spending, on Saturday.

Senate Finance Committee Chairman Max Baucus, D-Mont., urged lawmakers to bolster Medicaid spending in a floor statement Friday, noting that "during the last economic downturn, Congress increased the federal matching rate for the Medicaid program by about three percentage points for five quarters. This freed up $10 billion for the states so that they did not have to cut Medicaid benefits. And that helped states to avoid cutting other expenditures or raising taxes."

"This bill contains an across-the-board temporary increase of four percentage points in the federal Medicaid matching rate. That would provide every state with much-needed help." In its pitch for the money, the National Conference of State Legislatures (NCSL) said it would help counter the economic downturn, which typically brings rising Medicaid enrollment as the ranks of the unemployed swell.

But in a "State of Administration Policy" Friday, the White House said that S 3604 "will not provide short term stimulus or long term growth for the economy. Instead, the bill would simply increase government spending including self-perpetuating entitlement spending by tens of billions of dollars." The statement added that "if this bill were presented to the President, he would veto it." The statement said that the added Medicaid money "will not stimulate the U.S. economy, but instead shift additional costs from state governments to the federal taxpayer."

Medicaid advocates weren't giving up on the spending boost, despite the failure of the measure to get to the Senate floor, said Joy Johnson Wilson, health policy director at NCSL. She noted that the House had yet to act on its own economic stimulus package containing added federal Medicaid money. According to a House Appropriations Committee summary, the House stimulus package would temporarily increase the percentage of federal Medicaid matching funds to the states by one to four percent, to assist with rising costs at a time of increasing enrollment.

"These funds will prevent cuts to health insurance and health care services for low-income children and families, as well as generate business activities, jobs, wages, and state sales tax revenues that sates would otherwise not see," the committee summary said. The House was expected to vote on the measure late Friday afternoon.

But with a veto threat hanging over economic stimulus legislation and lawmakers trying to wrap up business for the year, options available to Medicaid advocates were limited.

Wilson nevertheless said "we're hopeful and we want it. We're hanging in there." She said other potential legislative vehicles remain for the Medicaid money, including the stopgap spending measure needed to keep the federal government operating and a Senate version of legislation extending certain tax provisions.

But Senate leaders will be under pressure to keep the stopgap measure free of economic stimulus language to avoid a protracted battle over funding needed to keep the government going.

The version of the stopgap spending measure passed by the House Wednesday, which took the form of House amendments to Senate amendments to HR 2638, funds most government programs at fiscal 2008 levels until March 6. There are some exceptions, however.

It provides $41 billion for Veterans Health Administration, $4.1 billion more than the current level and $1.8 billion more than was sought by the White House. Much of the added spending would go to medical services for veterans.

The VHA also would receive more money to provide next-generation prosthetics to disfigured veterans. The bill would provide roughly $1.6 billion, $250 million above the amount enacted in fiscal 2008 and $116 million more than the White House sought for prosthetic support and sensory aids.

An additional $510 million would be allocated for trauma and mental health research and other studies that aim to improve the quality of life for injured and aging veterans.

The stopgap measure also would include $150 million in additional funding designated as emergency spending for salaries and expenses of the Food and Drug Administration. Advocates for increased funding for the agency said the boost is not nearly enough in light of increasing public health threats facing the agency.

By Rebecca Adams and John Reichard, CQ Staff

September 23, 2008 --Two congressional panels kept their focus Tuesday on overhauling the health care system despite the massive revenue drain likely to result from an expected congressional bailout of the nation's stricken financial system.

At least one key health lawmaker in the House was in denial about the impact on plans to widen coverage of the uninsured, but reality seemed to be settling in at the Senate Finance Committee, which held a wide-ranging hearing into problems with the nation's health insurance system.

The challenges of moving a comprehensive health care overhaul bill through Congress have become even greater with the troubled economy and the proposed $700 billion government bailout of Wall Street firms, committee members said Tuesday.

On the House side, the Ways and Means Health Subcommittee conducted its own inquiry into the ills of the insurance system, notably policies sold to individuals or individual families. But Chairman Pete Stark, D-Calif., cheerfully acknowledged after the hearing that he was in denial about the bailout's impact on his plans for the scope and timing of a health overhaul.

"I'm going to pretend that never happened," a smiling Stark said of the sudden likelihood that lawmakers will commit to several hundred billion dollars in new spending this year.

Moving Step by Step
Congress may not have the huge amount of time and money that would be needed to move a major health care bill and may instead turn to a series of incremental legislative steps to improve the nation's health care system, Finance Committee members said.

Sen. John D. Rockefeller, IV, D-W.Va., said even though the presidential candidates have not retreated from proposals to pass a major overhaul of the nation's health care system next year, "there's no way that's going to happen, financially or otherwise," in 2009.

Rockefeller then asked witnesses at the hearing, which was aimed at proposals to cover the uninsured, whether lawmakers would slow down momentum behind major health care legislation if they took a step-by-step approach, starting with a reauthorization of the State Children's Health Insurance Program (SCHIP), a state and federal grant program for low-income children, which expires in March.

Rockefeller said moving bills that chip away at the uninsured problem would actually build momentum for a larger overhaul by showing the public that Congress can take proactive steps that have a positive impact.

Other senators also expressed doubts about whether Congress could pass a major health care overhaul that would aim to tackle the problems of the 47 million people who don't have insurance, reduce costs, encourage the use of health information technology, boost payments for physicians, and deal with other health care issues in one fell swoop.

Sen. Ken Salazar, D-Colo., lamented that the Finance Committee might spend a great deal of time exploring the issues of the health care system "yet this ominous cloud" of a $700 billion bailout "may end up creating huge challenges for us as we try to deal with health care reform."

The comments came at a hearing featuring an academic, insurers, and an insurance regulator who discussed the best ways to update the health care system.

Challenges Abound
Finance Chairman Max Baucus, D-Mont., started the day with a grim checklist of challenges facing the panel other than health care, but nevertheless insisted it would be his top legislative priority next year. Speaking at a forum sponsored by U.S. News and World Report, Baucus said health care is a "deep concern" but "right now I hear more about gasoline prices. Iraq is a bit of an issue." The bailout "is a big issue." Tackling global warming is another costly problem that must be confronted by the committee.

But the health care problem is much worse than people think, with the United States paying much more for health care than other nations. "If this current trend continues we're going to be in a very, very deep hole," he said.

"That's the deck of cards we've been dealt—we're going to have to play [them] as best we can."

Baucus nonetheless pronounced himself an optimist and predicted a "renaissance" next year drawing on American ingenuity and creativity and "a can-do spirit—we kind of like to solve problems," he said.

Baucus said he will release a "white paper" by the end of the year listing principles he will embody in health legislation next year he plans to introduce next year. The legislation will include the goal of attaining universal coverage, a major effort to improve preventive care, and a cost control plan, he said.

Asked afterward what impact the Wall Street bailout would have on his legislative timetable for attaining universal coverage, Baucus said. "We're going to have to look and see. I don't know. It's a good question to ask today."

He joined other lawmakers in saying that a step-by-step approach may be necessary. Massachusetts' landmark law to provide near-universal coverage is being ushered in incrementally, he said.

The bailout "makes everything more challenging," said Senate Budget Chairman Kent Conrad, D-N.D. He agreed that one likely approach could be for Congress to pass a health care overhaul in a piecemeal way, starting with SCHIP reauthorization next year and increases for Medicare payments for physicians.

Witnesses at the Finance hearing discussed how health care overhaul is working on a state level in Massachusetts, but as Sen. Ron Wyden, D-Ore., noted, all of the major tools for dramatically revising health coverage in America are federal programs and mechanisms, including taxes, programs like Medicare, and the Employee Retirement Income Security Act.

Oklahoma Insurance Commissioner Kim Holland said business owners in her state are keenly aware of the costs that hospitals and providers pass on to people with insurance in order to pay for care for the uninsured. That amounts to a "hidden tax" in the system, she said, which may be one factor that could drive momentum for a larger overhaul in the future.

As Rockefeller asked witnesses about a more incremental approach, some said that method allows participants in the health system time to adjust to changes. Massachusetts Blue Cross Blue Shield executive vice president Andrew Dreyfus noted that one reason why revamping health care was easier to establish in Massachusetts than in some other states is because the state had undertaken a series of legislative changes over the years.

Pam MacEwan, executive vice president of an integrated health coverage and delivery system, Group Health Cooperative in Seattle, said that incremental changes involve "sometimes the more courageous" approach.

Health and Taxes
Testimony and remarks by lawmakers at the Ways and Means Health Subcommittee hearing suggested one of the key battles in the overhaul debate next year will be equalizing tax breaks to pay coverage costs. Panel Republicans showed strong interest in giving people who buy insurance on their own the same breaks received by those with job-based coverage.

"By equalizing the tax treatment, we can give millions of Americans in the individual market the ability to purchase quality health insurance," said Dave Camp of Michigan, the panel's top Republican.

"The tax subsidy for employer-sponsored insurance is seriously flawed," testified University of Minnesota professor Roger Feldman. "It distorts the choices of where people work; it encourages them to purchase insurance policies that are too generous, thereby subsidizing the purchase of too much medical care; and it is grossly unfair" because it subsidizes high earners more and because people who buy on their own go without subsidies. He said ending the tax subsidy for employer-sponsored coverage would get at the root of rising costs by having people pay more out of their own pockets for health care.

But Mila Kofman, Maine's insurance superintendent, warned against sending people to buy coverage on their own with new tax breaks in an individual market that has not been overhauled. "In most states, it is inaccessible, unaffordable, and inadequate," she declared.

With few exceptions, states do not guarantee that customers will be issued policies in the individual market, she said. "Insurers are allowed to deny coverage to people with past, present, or perceived future medical needs," she said. "In fact, people with relatively minor needs, like hay fever, have had insurance applications rejected."

Insurers "do not voluntarily make copies of policies available before a person enrolls. Imagine buying a car and being told you can't see the car, you can only look at the brochure of the car," said Kofman. Insurers also can drop benefits at any time and severely restrict what they pay even for covered services. In Maine, 72 percent of policies sold in the individual market in 2006 had deductibles of $5,000 or higher, she said.

In many instances people can't obtain coverage, she said. And "high-risk pools" for the uninsurable cover few people nationwide, have funding problems, unaffordable premiums, waiting lists, and inadequate benefits, she said.

Separately, the National Women's Law Center released a report Tuesday detailing problems women have finding coverage in the individual market. Women often face higher premiums than men, the study said, adding that the vast majority of policies examined by the center did not cover maternity care.

Bruce Bodaken, CEO of Blue Shield of California, acknowledged the flaws of individual policies but said insurers can't stay in business without "medically underwriting"—excluding coverage of certain conditions. The only way to fix the individual and small group market is to require everyone to have coverage and provide them financial help to do so. That approach would ensure that lower-cost enrollees are mixed in the same risk pools as higher cost enrollees.

Feldman said state requirements that applicants can't be denied individual coverage or have their coverage canceled should go hand in hand with new tax breaks to help people buy coverage on their own. And Camp acknowledged that "in order to make this work, we must study the shortcomings of the private health insurance market."

Commonwealth Fund President Karen Davis called for "setting national rules for the operation of individual health insurance markets" or creating an national insurance exchange making policies available to those without access to employer coverage.

Whether all the analysis and advice will come to anything anytime soon is unclear, however. One thing is certain though—talk of an overhaul won't fade away, even if its prospects may be dimming. Democratic presidential candidate Barack Obama said in a press conference Tuesday that even with a Wall Street bailout, the nation's health care system is still going to need adjusting. "We're going to have to make sure we deal with these issues," he said. There are priorities "we have to move on in order to strengthen the underlying economy."

By Ben Weyl, CQ Staff

September 26, 2008 -- In what could serve as a model for future public–private partnerships, a leading insurance company says it has successfully teamed up with two state governments to provide health insurance for small businesses.

At a Capitol Hill briefing this week, Blue Cross Blue Shield Association (BCBSA) unveiled a study showing that premium subsidy programs it has developed in Oklahoma and Arizona have increased the number of insured workers.

"Innovative solutions such as programs in Arizona and Oklahoma have increased access for thousands of workers in small firms who otherwise would not be able to afford coverage," said BCBSA president and CEO Scott P. Serota in a press release. "Small businesses and their workers are the backbone of our nation's economy and addressing their needs must be a top priority for health care reform."

The Oklahoma initiative—Insure Oklahoma—allows self-employed individuals and employers with 50 or fewer employees to sign up for the subsidized premiums. Nearly 10,000 people have signed up since the program was enacted in 2004, particularly in the last year when enrollment increased by 234 percent.

Most of those who have signed up previously lacked health insurance. According to the BCBSA survey, 56 percent of all Insure Oklahoma enrollees had previously been uninsured. Nearly four of 10 of the employers offering health insurance through Insure Oklahoma were doing so for the first time, mostly, they reported, because their employees were now able to afford it.

The program has also helped workers who previously could not afford the coverage employers had offered. Since the program's implementation, 36 percent of new enrollees who had previously declined coverage now have it.

Oklahoma Insurance Commissioner Kim Holland said the program was working very well. "I am delighted with the growth we've seen in the past year," she said in an interview. "That's a big jump that we're very excited about."

Oklahoma has one of the highest rates of uninsured in the nation—18.5 percent of its population—but Holland believes Insure Oklahoma could all but eliminate that. "Our limitations are really only funding," she said. "We really look at Insure Oklahoma as the key to addressing our uninsured."

A somewhat similar, though smaller, program has been introduced in Arizona, which also has one of the country's highest uninsured rates, 18.1 percent of the population. Enacted by the state legislature in 2006, 4,745 people have gained coverage so far.

"We're pleased with the numbers," said Chuck Bassett, vice president for government relations and public policy at Blue Cross Blue Shield of Arizona, in an interview. "There's a line to participate," the program having reached its limit in terms of state funding.

"Employers are looking for ways to help them offer affordable coverage for their employees," Bassett said in a press release. "While this program is small by Washington standards, it serves an important role as an example of how creative public-private partnerships can work to solve problems."

By Shweta Jha, CQ Staff

September 24, 2008 -- More than 57 million Americans experienced problems paying their medical bills in 2007, and 42.5 million of them had insurance coverage, according to a study released Wednesday by the Center for Studying Health System Change (HSC).

The number of Americans in families who had difficulties paying medical bills increased to 19.4 percent last year, higher than the 15.1 percent of people who faced the same difficulty in 2003, the study found. The rate of problems with medical bills remained stable for elderly Americans, but non-elderly people who were insured and uninsured also faced such problems in 2007, according to the study, which was funded by The Commonwealth Fund.

"Increases in problems paying medical bills are affecting not only those who have always struggled with medical costs—low-income and uninsured people—but also an increasing number of insured middle-income families," study author Peter J. Cunningham, an HSC senior fellow, said in a news release. The national survey contains information on 18,000 people and had a 43 percent response rate.

The study found that approximately 2.2 million people with medical bill problems came from families that filed for bankruptcy as a result of their medical bills. A larger group said they experienced other financial consequences, such as problems paying for food and housing.

Sixty percent of people said family members' illnesses caused problems with medical bills, while 28.6 percent of bill problems were because of an accident or injury. About 8 percent of respondents said their medical bill problems were caused by the birth of a child, according to the study.

It found that uninsured non-elderly individuals were more likely to be in families with medical bill problems (34.4 percent) compared with people who were insured and non-elderly (18.3 percent). Medical bills problems were reported by 28.4 percent of enrollees in Medicaid or other state coverage programs.

The amount of medical debt that people carried varied, the study found. Approximately one-fourth of respondents said they had less than $800 in debt while another one-fourth said they had debt of about $5,000 or more. About 10 percent carried a debt of $12,000 or more, it found.

The study found that people with medical debt in 2003 and in 2007 had to make hard compromises in terms of paying for other necessities. Sixty-two percent said they were contacted by a collection agency, and more than half said they had to borrow money to pay medical bills, according to the study.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

September 24, 2008 -- The cost of employer-sponsored health insurance averaged $12,680 this year for family coverage and $4,704 for individuals, reflecting a five percent increase in premiums, according to an analysis released Wednesday. Although the premium hike was relatively modest, many workers faced rising deductibles, with 18 percent of all covered workers paying annual deductibles of at least $1,000.

The 18 percent figure was up from 12 percent in 2007, according to the survey, a joint effort of the Kaiser Family Foundation and the Health Research and Education Trust. Premiums have more than doubled since 1999 while during the same nine-year period workers' wages increased 34 percent and general inflation rose 29 percent.

On average, employees paid $3,354 for premiums for family coverage in 2008 while individuals paid $721. Those costs are expected to continue to increase next year, with 14 percent of firms saying they are "very likely" to raise workers' premium contributions and 12 percent "very likely" to raise deductibles.

For workers, "paying for health care and health care insurance is one of their top economic problems today," Kaiser Family Foundation President and CEO Drew Altman said at a Washington, D.C. news conference. Firms, in particular smaller ones, may also be offering less generous coverage to reduce costs. "Less comprehensive, skimpier insurance is cheaper but it does shift more of the burden to working people," he said.

The survey also found that more firms—especially with those with fewer than 200 workers—are offering "consumer-directed" health plans such as a health savings account (HSA) or a health reimbursement arrangement (HRA) to their employees, with six of 10 companies offering the plans because they cost less, and more than four of 10 saying the plans have helped lower health care costs. An estimated 5.5 million covered workers are enrolled in these plans, the survey found.

Among small firms, enrollment in consumer-directed plans is 13 percent this year compared with 8 percent a year ago. In firms with at least 200 employees, 5 percent of workers are enrolled in such plans, which feature high deductibles. The average annual deductible for single coverage is $2,010 for an HSA-qualified plan and $1,552 for an HRAs.

Karen Ignagni, president and CEO of America's Health Insurance Plans, said in a statement that "the slowing rate of growth in health insurance premiums shows we are moving in the right direction, but much more needs to be done to make health care coverage more affordable for consumers and employers."

House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., said the report should push Congress to overhaul the nation's health care system. "Unless we enact significant reforms, people will continue to fall through the cracks of insurance company rules, employers will continue to drop coverage, and out-of-pocket costs will continue to rise faster than wages. Until we have universal coverage, these cost shifts away from insurers to consumers will continue."

Altman predicted Wednesday that the already difficult task of passing comprehensive health care legislation would be complicated by the expected passage of a $700 billion plan to rescue the nation's financial system. "Recent developments have made it tougher if not impossible," he said. "It might ... take elected officials off the hook to do something sweeping and comprehensive."