Maines Dirigo Health Reform: Leading the Way to Universal Coverage? Academy Health State Health Research & Policy Interest Group June 2, 2007 Debra J. Lipson Academy Health State Health Research & Policy Interest Group June 2, 2007 Debra J. Lipson

2 Dirigo Health Reform Goals Make affordable health care coverage available to every Maine citizen by 2009 (~ 140,000 uninsured in 2003) Make affordable health care coverage available to every Maine citizen by 2009 (~ 140,000 uninsured in 2003) Slow the growth of health care costs through cost containment Slow the growth of health care costs through cost containment Improve quality of carefor example, by comparing provider performance to quality measures Improve quality of carefor example, by comparing provider performance to quality measures Make affordable health care coverage available to every Maine citizen by 2009 (~ 140,000 uninsured in 2003) Make affordable health care coverage available to every Maine citizen by 2009 (~ 140,000 uninsured in 2003) Slow the growth of health care costs through cost containment Slow the growth of health care costs through cost containment Improve quality of carefor example, by comparing provider performance to quality measures Improve quality of carefor example, by comparing provider performance to quality measures

3 OverviewOverview Evaluation questions Evaluation questions Study design, methods, and data sources Study design, methods, and data sources Preliminary findings Preliminary findings Lessons for other states Lessons for other states Caveats and challenges Caveats and challenges Evaluation questions Evaluation questions Study design, methods, and data sources Study design, methods, and data sources Preliminary findings Preliminary findings Lessons for other states Lessons for other states Caveats and challenges Caveats and challenges

4 Evaluation Questions Are low-income uninsured people gaining coverage under DirigoChoice or Medicaid? Are low-income uninsured people gaining coverage under DirigoChoice or Medicaid? How have small employers responded to the availability of DirigoChoice? How have small employers responded to the availability of DirigoChoice? Are the DirigoChoice subsidy financing sources adequate and sustainable to cover many more low- income uninsured? Are the DirigoChoice subsidy financing sources adequate and sustainable to cover many more low- income uninsured? Is Maines approach to health coverage expansion relevant elsewhere? What can other states learn from its experience? Is Maines approach to health coverage expansion relevant elsewhere? What can other states learn from its experience? Are low-income uninsured people gaining coverage under DirigoChoice or Medicaid? Are low-income uninsured people gaining coverage under DirigoChoice or Medicaid? How have small employers responded to the availability of DirigoChoice? How have small employers responded to the availability of DirigoChoice? Are the DirigoChoice subsidy financing sources adequate and sustainable to cover many more low- income uninsured? Are the DirigoChoice subsidy financing sources adequate and sustainable to cover many more low- income uninsured? Is Maines approach to health coverage expansion relevant elsewhere? What can other states learn from its experience? Is Maines approach to health coverage expansion relevant elsewhere? What can other states learn from its experience?

5 Study Design & Methods Mixed Methods: Qualitative & Quantitative Mixed Methods: Qualitative & Quantitative –Analysis of DirigoChoice administrative data on enrolled firms and individuals –Survey of small businesses in Maine –Key stakeholder interviews –Systematic comparison of Maine to other states vis-a-vis: health insurance coverage, small group and individual market regulations, health care delivery system, Medicaid policies Mixed Methods: Qualitative & Quantitative Mixed Methods: Qualitative & Quantitative –Analysis of DirigoChoice administrative data on enrolled firms and individuals –Survey of small businesses in Maine –Key stakeholder interviews –Systematic comparison of Maine to other states vis-a-vis: health insurance coverage, small group and individual market regulations, health care delivery system, Medicaid policies

6 Data Sources & Analyses Policy goals Financing Financing Regulatory & market context Regulatory & market context Policy goals Financing Financing Regulatory & market context Regulatory & market context Dirigo Choice Comparison to Other States Key stakeholders views of progress, problems Key stakeholders views of progress, problems Small employer survey Small employer survey DirigoChoice & Medicaid enrollment DirigoChoice & Medicaid enrollment

7 Dirigo Choice Enrollment January 2005–September , ,000 12,000 Jan 05 Feb 05 Mar 05 Apr 05 May 05 Jun 05 Jul 05 Aug 05 Sep 05 Oct 05 Nov 05 Dec 05 Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep 06 Members Small groupSole proprietorIndividual Sole prop/individual enrollment cap lifted Freeze on childless adult MaineCare enrollment MaineCare expansion to parents 150% FPL - 200% FPL Individual enrollment begins Sole prop/ individual enrollment cap reached 6,000 4,000 10,000 8,000

8 Net Monthly Enrollment of Small-Firm Workers JanFebMa-AprMayJunJulAugSepOctNovDecJanFebMarAprMayJunJulAugSep

9 Enrollment in Dirigo Health Medicaid Expansion Groups Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Date Monthly Caseload Childless Adults ("Non-categoricals")Medicaid Expansion to Parents January 05: DirigoChoice began March 05: Childless adult "non-categorical" freeze instituted July 06: Non- categorical freeze lifted April 05: Parent Expansion ( % FPL)

10 Dirigo Choice Subsidy Levels Distribution of Enrollment by Member Type Small Group Small group Sole proprietor Individual Percent of enrollees A (MaineCare ) No discount B C D E

11 Enrollment in DirigoChoice by Uninsured–2006 Enrollees 4% 3%9% Response not usable 31%28%30%37%Uninsured 65%68%67%54% Prior coverage TotalIndividuals Sole proprietors Small firm workers

12 Small Employer Survey Firm Characteristics by Offer Type (17%) (30%) (17%) 149 (19%) Professional services & management (industry type) Average wage 12%* 32%**17%18% Mean percent who earn more than $18 per hour 33%*43%**39%38% Mean percent who earn $12 to $18 per hour 55%**26%**45%44% Mean percent who earn less than $12 per hour 5.0**17.7**6.78.1Mean number of employees 143 (18%) 121 (16%) 509 (66%) 773 (100%) All firms Coverage offered NoneAnother planDirigoChoice All firms responding Firm characteristics *p <.05 ** or ++ p <.01

13 Change in Employer Premiums Dirigo Choice vs. Prior Coverage

14 Why Firms That Considered DirigoChoice Did Not Enroll (n = 78 Why Firms That Considered DirigoChoice Did Not Enroll (n = 78) Too costly or not affordable Too costly or not affordable Benefits offered do not fit employees needs Benefits offered do not fit employees needs Did not qualify for DirigoChoice Did not qualify for DirigoChoice Other reasons Other reasons Too costly or not affordable Too costly or not affordable Benefits offered do not fit employees needs Benefits offered do not fit employees needs Did not qualify for DirigoChoice Did not qualify for DirigoChoice Other reasons Other reasons 45 (58%) 45 (58%) 19 (25%) 6 (8%) 8 (10%) 8 (10%)

15 Key Stakeholder Views of DirigoChoice Strengths Strengths –Benefits are more comprehensive than most small group and individual policies in the market –Subsidies for premiums and deductibles made the product affordable for low-income individuals Strengths Strengths –Benefits are more comprehensive than most small group and individual policies in the market –Subsidies for premiums and deductibles made the product affordable for low-income individuals

16 Stakeholder Views, contd Weaknesses Weaknesses –Small firm enrollment depressed by high premiums, 60% employer contribution requirement, weak incentives, administrative burdens, and marketing problems –Merger of individual and small groups into one pool created untenable cross-subsidies –Legal and political clashes over SOP undermined support for program Weaknesses Weaknesses –Small firm enrollment depressed by high premiums, 60% employer contribution requirement, weak incentives, administrative burdens, and marketing problems –Merger of individual and small groups into one pool created untenable cross-subsidies –Legal and political clashes over SOP undermined support for program

17 Planned Financing Sources for DirigoChoice Monthly premium payments by employers, employees, and individuals Monthly premium payments by employers, employees, and individuals For low-income subsidies: For low-income subsidies: –State general revenues (in the first year) –Federal Medicaid funds to match employer premiums paid on behalf of Medicaid-eligible employees in DirigoChoice –Annual savings offset paymentassessments on insurers and third-party administrators equal to the estimated savings from Dirigo Health –Annual savings offset paymentassessments on insurers and third-party administrators equal to the estimated savings from Dirigo Health initiatives Monthly premium payments by employers, employees, and individuals Monthly premium payments by employers, employees, and individuals For low-income subsidies: For low-income subsidies: –State general revenues (in the first year) –Federal Medicaid funds to match employer premiums paid on behalf of Medicaid-eligible employees in DirigoChoice –Annual savings offset paymentassessments on insurers and third-party administrators equal to the estimated savings from Dirigo Health –Annual savings offset paymentassessments on insurers and third-party administrators equal to the estimated savings from Dirigo Health initiatives

18 Savings Offset Payment (SOP): A Financing Innovation? Extract savings from current spending Extract savings from current spending –Fewer uninsured Reduce bad debt/charity care Reduce bad debt/charity care Medicaid expansion to childless adults Medicaid expansion to childless adults –Lower rate of hospital cost growth via voluntary cost controls –CON and capital investment fund savings –Less cost shifting to other payers via increased Medicaid rates for providers Extract savings from current spending Extract savings from current spending –Fewer uninsured Reduce bad debt/charity care Reduce bad debt/charity care Medicaid expansion to childless adults Medicaid expansion to childless adults –Lower rate of hospital cost growth via voluntary cost controls –CON and capital investment fund savings –Less cost shifting to other payers via increased Medicaid rates for providers

19 Actual DirigoChoice Financing Few Medicaid enrollees in DirigoChoice, so federal matching funds are minimal Few Medicaid enrollees in DirigoChoice, so federal matching funds are minimal Insurers were expected to recover SOP by reducing provider payments and passing on the savings to consumers in the form of lower premiums, but they did not Insurers were expected to recover SOP by reducing provider payments and passing on the savings to consumers in the form of lower premiums, but they did not Insurers and employers filed legal challenge to SOP Insurers and employers filed legal challenge to SOP Maine now considering alternatives to SOP Maine now considering alternatives to SOP Few Medicaid enrollees in DirigoChoice, so federal matching funds are minimal Few Medicaid enrollees in DirigoChoice, so federal matching funds are minimal Insurers were expected to recover SOP by reducing provider payments and passing on the savings to consumers in the form of lower premiums, but they did not Insurers were expected to recover SOP by reducing provider payments and passing on the savings to consumers in the form of lower premiums, but they did not Insurers and employers filed legal challenge to SOP Insurers and employers filed legal challenge to SOP Maine now considering alternatives to SOP Maine now considering alternatives to SOP

20 Lessons for Other States ME = MA + 2? Voluntary enrollment limits participation Trade-off between benefits and affordability Financing expanded coverage still a holy grail ME = MA + 2? Voluntary enrollment limits participation Trade-off between benefits and affordability Financing expanded coverage still a holy grail

21 Translating Lessons to Other States Problem ESI, offer rates, uninsured Design of coverage strategies Implementation Policy goals & focus Coverage expansion Cost containment Quality Market & regulatory context Insurance markets HC delivery system Insurance regulation Financing sources FMAP State tax policies UCC pool Evaluate

22 Caveats and Challenges Findings still preliminary Program changing during evaluation Discrepancies between findings from 3 sets of data & analyseshow to reconcile? State officials will have chance to review and commenthow to separate fact from interpretation? Findings still preliminary Program changing during evaluation Discrepancies between findings from 3 sets of data & analyseshow to reconcile? State officials will have chance to review and commenthow to separate fact from interpretation?

23 Credits and Acknowledgments Co-authors –Jim Verdier, Lynn Taylor, Shanna Shulman, Elizabeth Seif, Matt Sloan, Bob Hurley Sponsors –The Commonwealth Fund –The Robert Wood Johnson Foundation, Changes in Health Care Financing and Organization Co-authors –Jim Verdier, Lynn Taylor, Shanna Shulman, Elizabeth Seif, Matt Sloan, Bob Hurley Sponsors –The Commonwealth Fund –The Robert Wood Johnson Foundation, Changes in Health Care Financing and Organization