States lead with health care reform

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EPs skeptical as more states move forward with their own reforms. 

Pollsters and handicappers may have done their homework in the run-up to Feb. 5’s Super Tuesday presidential primaries, but the fate of national health care reform is still anyone’s guess. One thing is certain: individual states aren’t waiting for Washington to make up its mind.

California joins a growing list of states that have taken on health care reform, a list that includes. In addition to the Golden State, Vermont, Massachusetts, Maryland, Maine, Oregon, and Pennsylvania have all proposed or passed key health care reform legislation. While the methods vary and results have been mixed, each state is hopeful that they may have hit upon the holy grail of reform solutions.

“What states are doing on the ground is no longer just expanding access. They’re also looking at ways to contain costs while making significant system improvements that will benefit quality [of care],” says Enrique Martinez-Vidal, a health policy analyst in Washington, DC and an expert on health reform.


Absent from the discussion is a national, single-payer program. Instead, states are taking a variety of approaches mostly involving novel ways to help finance expanded coverage while getting medical providers and insurers to buy in. Maryland, for instance, passed HB 6 in 2007. The legislation expanded Medicaid eligibility and helped small employers by subsidizing the cost of their health insurance in part by imposing an assessment on hospitals’ future savings.

That approach hasn’t gone far enough, says Jon Mark Hirshon, MD, a working EP and associate professor of emergency medicine at the University of Maryland’s School of Medicine in Baltimore. Hirshon would rather see more drastic steps taken.

“All we’re doing in most states is simply to nibble around the edges of the problem,” Hirshon stated. “We need to look for more radical solutions.” But even Dr. Hirshon stopped short of calling for a federal single-payer plan, as favored by Democrats, or mandatory private insurance, the favorite approach of Republicans.


Promisory note: Who funds reform?

Most reform-minded states have so far only promised EPs and their hospitals increased payments on the theory that eventually more monies will be freed up as the number of the uninsured go down. But additional funds to pay the increased payments would likely come from either taxes on tobacco or special fees collected from participating insurers, employers, or hospitals.

As the burden on EDs begins to dwindle, the theory goes, EPs and hospitals should see lower levels of uncompensated care and a higher number of paying patients. Health care reform, supporters say, will eventually benefit everyone involved.

States test the water

California, which has some 5 million uninsured, the largest number in the country, is wading into health reform in the face of a stupendous state budget deficit and growing public opposition to tax-supported health care financing.    

The state’s proposal, AB 1X1 would provide basic health care to millions (up to 70 percent of uninsured) through insurance subsidies that will cover all residents earning up to 400 percent of the federal poverty line, or $43,000 a year.


Nearly everyone would be required to obtain health insurance either through their employer, the government, or independently. Those not covered by Medi-Cal but below the 400% poverty mark would be covered for free or nearly for free. Others who make more would get tax credits for their premiums. (Undocumented immigrants are excluded) The measure does not affect Medicaid enrollments or fees.

Employers would be required to provide their workers with coverage or help subsidize it. The actual amount of the subsidy is yet to be determined. To help finance the measure, hospitals and EPs indirectly would have to pay a fee averaging 4 percent of annual revenue.  But supporters of the bill claim that most providers would likely get it back through increased revenues from federal matching dollars.

Overall, the plan would be financed through a combination of fees and increased taxes, including a $1.50 tax on tobacco. Introduced last year, the proposal underwent a series of changes under California Gov. Arnold Schwarzenegger and has yet to clear both houses of the legislature. Possibly fearing the fall out from a catastrophic budgetary crisis, the state legislators have sought cover from the voters by putting the issue to a state wide referendum in November.

Critics have given AB 1X1 a poor outlook. California faces a $14.4 billion budget deficit, most voters oppose new taxes to pay for the plan, and a host of interest groups, including the influential California Nurses Association, have rejected the bill on the grounds that the proposal doesn’t offer universal coverage. Most EPs in the state have neither opposed nor endorsed the proposal.

Supporters of the bill claim that the plan would raise overall reimbursement from Medicaid payments.  That would be a welcome development. Hospitals and physicians currently lose money on Medi-Cal, the state’s Medicaid program, and many have already cancelled their state contracts.
In a best case scenario, EDs would benefit as more patients, covered by insurance, would shift to primary care thereby reducing waiting times and overcrowding. The number of paying patients would also rise and more EDs could remain open and solvent. More than 70 California hospitals have closed their departments since 1990 due to losses.

But the facts suggest otherwise. “Studies show when people go from having no insurance to having insurance they utilize the ER even more” than before, says Michael Salomon, MD, president of the California chapter of the American College of Emergency Physicians.

If California offers a test arena for the future of national health care reform, Maine has demonstrated that the best intentions can often go dismally wrong. In 2004, the state began enrolling the working uninsured through Dirigo, a state-sponsored program designed to cover the working poor. It also expanded Medicaid services to children by increasing their family income eligibility.

As an incentive, the state was willing to pay the uninsured a subsidy to get them to obtain coverage. But within months, the plan began to go awry, according to some providers.

“When the state analyzed who was enrolling, they found it wasn’t the uninsured,” says Mary Mayhew, vice president of the Maine Hospital Association in Augusta. “Most [of the new enrollees] were already covered through their employers but switched to Dirigo to qualify for the subsidy.”

The subsidy was to come from a special assessment imposed on the state’s insurers based on whatever cost savings they realized through with the expanded enrollments. Insurers, it was presumed, would pay less to physicians and hospitals as less cost shifting occurred.  Again, it was assumed that cost savings could be recouped from shunting patients from high cost ERs to lower cost settings and fewer overall hospitalizations from better preventive care.

However, the amount of cost savings overall has fallen far short of expectations, Mayhew says. In the most recent analysis the amount in reduced uncompensated care to hospitals was only about $4 million, while the amount needed to cover the subsidy was forecast at more than $40 million per year.   
And for reasons as yet unclear to Scott Kemmerer, MD, an EP at Maine General Medical Center in Augusta, the number of Medicaid patients presenting to the state’s 39 emergency departments has jumped by some 10 percent since well before the program began in 2005.   The net effect appears to be that those with minimal insurance have shifted to Medicaid and many with employer based insurance have shifted into state funded insurance.

The increase comes at a bad time. When Dirigo was first implemented, the state believed that employers would help offset the cost of Medicaid. Maine would then apply for federal matching funds, which would help bank roll Medicaid payment increases to providers.

“The program was expecting hundreds of millions of dollars in federal matching funds that they haven’t gotten,” Mayhew says.

Worse yet, the state is reportedly headed toward a budget shortfall this year. It already owes Maine’s 39 private hospitals some $300 million in unpaid Medicaid fees going back to 2005. “The system’s just not working,” says Kemmerer, “Its original intent was to find people with a decent wage but no insurance. What’s really happening is that the working poor are shifting into Medicaid.”

But that seems to be exactly the intent of the Governor.  Trish Reiley, director of the state’s Governor’s Office for Health Policy and Finance in Augusta, says fattening the Medicaid rolls was part of Dirigo’s original intent. “There was a three-pronged approach to the law, part of which included expanding Medicaid,” Reiley says. The Medicaid increases, she says, included covering residents who didn’t qualify for Dirigo.

As to the claim that Dirigo has led to coverage switching, Reiley claims many employees switched because they were originally under-insured. “The program wasn’t intended just to cover the uninsured,” Reiley says. So far, Dirigo has realized a $100 million per-year savings, which has gone back into the subsidy program, she adds.  However, this cost savings may simply be cost shifting as more people shift into federally subsidized Medicaid.

So far, physicians aren’t sure what health reform will ultimately bring. Yet, states are likely to continue moving towards something like it, says Martinez-Vidal. The learning curve will ultimately prove invaluable, he says.

“Having states acting on their own in no way impedes the advent of a national health plan,” which is very likely to happen some day, Martinez-Vidal says.

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