Health Care Reform

(from Maine Townsman, July 2003)
by Stephen Gove, Director of Health Trust Services, MMA

On June 18, Governor Baldacci signed into law L.D. 1611, “An Act to Provide Affordable Health Insurance to Small Businesses and Individuals and To Control Health Care Costs” (P.L. 2003, Chapter 469).   The omnibus piece of legislation is designed to address Maine’s growing health care crisis by focusing on three key areas:  health care access, cost and quality.  This article provides an overview of the major components of the new health care reform law. 

The new law results from weeks of work by the Governor’s Office of Health Policy and Finance, input from a Health Action Team and numerous work sessions of a Special Joint Select Committee on Health Care Reform.  Legislators from the Insurance and Financial Services Committee, the Appropriations Committee and the Health and Human Services Committee comprised the Select Committee.  Insurance companies, consumers, employers, hospitals and health care providers all weighed in on the effort to craft several key compromises to the original proposal.  These compromises paved the way for the bill’s unanimous support of the Select Committee that reported it out to the full Legislature.

The seventy-page legislation is sweeping in its scope and fulfills the Governor’s campaign pledge to address health care issues during the first few weeks of his administration.  It also addresses the Governor’s goal of moving toward universal access to health care coverage for Maine citizens over the next five years.

Health Care Access

The health care reform act is designed to provide greater access to affordable health care insurance for Maine citizens and help reduce the costs of uncompensated care in the health care delivery system.  The cornerstone of the act is Dirigo Health, an independent executive agency, governed by an eight member Board of Directors appointed by the Governor that will arrange for the provision of health coverage for individuals and employees of small employers in the state.  Dirigo Health is designed to expand access to health coverage.  Health coverage through Dirigo Health will be voluntary and available to eligible small employers, including municipalities, with 50 or fewer employees.  The Dirigo Health Board will establish minimum levels for employer contributions toward payment of employee and dependent premiums.  These mandated employer contributions cannot exceed 60% of the cost of coverage (though individual employers may choose to contribute more). Employers must offer coverage to those employees who work at least 20 hours per week.  75% of eligible employees who work 30 hours or more per week must enroll in Dirigo Health, in order for an employer to participate in the program. 

The act does not spell out details such as the benefit plan or premium cost offered through Dirigo Health.  The Dirigo Health Board will establish the services and benefits covered by the Dirigo Health Insurance plan.  The Board will set premiums or rates as well as the employees’ or individuals’ out of pocket costs through plan copays, coinsurance and deductibles.  The Dirigo Health Insurance plan will be provided through a contract with a private insurance carrier, such as Anthem Blue Cross and Blue Shield.  If no private insurance company bids on the Dirigo Health product, the new law allows the Dirigo Board to submit legislation to allow the state to establish a non-profit health insurer.  An Executive Director who may employ a number of other professional and nonprofessional staff members will direct Dirigo Health.

The act expands the MaineCare (Medicaid) program to include children and parents with family incomes up to 200% of the Federal Poverty Level (FPL).  Sliding scale premium subsidies through Dirigo Health will also be available to eligible individuals and employees with incomes up to 300% of the FPL.  Both these measures are designed to expand access to coverage for uninsured individuals and self-employed persons and to make coverage more affordable to working Mainers and small employers. 

Dirigo Health will be funded in its first year, which begins on July 1, 2004, with $53 million in up front monies from federal fiscal relief funds, federal Medicaid matching funds and individual, employee and employer premium contributions.  Beginning in July 2005, Dirigo Health will be funded by a combination of individual and employee premium contributions, employer premium contributions, matching federal monies for MaineCare and “Savings Offset Payments” or assessments on health insurance carriers and third party administrators.  The employer paid premiums collected by Dirigo Health will be transferred to another state agency.  This will classify those premium payments as “state funds” that then qualify for federal Medicaid matching monies to be used for newly MaineCare eligible individuals and for the subsidies to individuals whose incomes are up to 300% of the FPL.

At the end of the first year of operations, the Dirigo Health Board will be required to determine the amount of savings realized in the Maine health care system through the reduction of bad debt and charity care, and the implementation of cost containment measures contained in the new law.  Savings are presumed to result from the decrease in bad debt and charity care costs that hospitals and doctors assume because of the large number of uninsured Mainers.  More Mainers will have health insurance under Dirigo Health thus reducing the amount of bad debt and charity care and, in turn, reducing the fees hospitals and physicians charge insurance carriers for their services.  This generates the necessary savings in the system.  The Dirigo Board will determine the “Savings Offset Payment” amount (not to exceed 4% of premium) health insurance carriers will be required to pay to help fund Dirigo Health.  The Dirigo Board is also directed to submit legislation during the next session that will develop a methodology for assessing third party administrators (who administer health coverage for self-insured employers) for the “Savings Offset Payments.”

Health Care Cost Containment

In addition to expanding access to health insurance coverage, a second goal of Public Law Chapter 469 is to control dramatically rising health care costs.  The act approaches cost containment from a number of angles. 

Under the terms of the act, the Governor is required to issue a biennial State Health Plan that will include the establishment of a capital investment fund (a cap on resources allocated under the Certificate of Need program) for each year of the plan.  The State Health Plan will also prioritize capital investment needs; assess health care quality and availability; address cost, quality and access goals for the state and develop strategies to maintain affordable preventive health care.  The Plan will address health care workforce needs, establish spending benchmarks and set goals to address health care cost drivers.  A new eleven member Advisory Council on Health Systems Development will assist the Governor in the development of the State Health Plan. 

The act strengthens the Certificate of Need (CON) process.  The CON is the state application process hospitals and other health care facilities must undertake when proposing certain new capital and technology expenditures.  The act requires CON approvals to be consistent with the State Health Plan and to be within the limits of the capital investment fund set by the Governor.  CON thresholds will be automatically adjusted for medical inflation on an annual basis.  The Commissioner of Human Services, who oversees the CON process and makes the final application decisions, is granted an expanded base upon which to make CON decisions and is allowed to receive reports from a panel of experts on CON applications and assessments from the Bureau of Health and Superintendent of Insurance.  The Commissioner may also reference the quality of health care outcomes in the CON decision. 

The act also requires hospitals to prepare a list of average prices and make the lists available to the public.  Health care practitioners will be required to notify patients in writing of the common charges for their health care services.  These measures are designed to provide health care consumers with information they can use when making care decisions. 

Voluntary limits to control the growth of health care costs and insurance are part of the new health care reform act.  Hospitals are asked to voluntarily hold consolidated operating margins to increases of no more than 3% and hold cost increases (not prices) to 3.5% for a year.  The act asks health care practitioners to cap service price increases and establishes voluntary constraints on health insurers’ financial growth for one year.  The act requires the Governor’s Office of Health Policy and Finance and the Maine Hospital Association to agree on a timetable, format and methodology for reporting hospital charges, cost efficiency and consolidated operating margins.  The act also provides $500,000 in General Fund money to increase the physician incentive payment program within the MaineCare program.

The act requires that small group health insurance rates be subject to rate approval and rate hearings before the Superintendent of Insurance in certain instances and makes these filings and supporting information subject to the Freedom of Access laws.   Insurance carriers who provide large group plans must also make annual filings to the Superintendent, stating that their rating methods and practices are in accordance with generally accepted actuarial standards.  The act also allows managed care health plans to apply to the Superintendent of Insurance for permission to offer plans with financial incentives provisions to encourage the use of designated specialty care doctors and hospitals that demonstrate better quality services and improvements.  However, the health plan may not exceed patient travel standards as set out in the new law and regulations.

Under the act, health care providers are required to submit all health claims electronically using standardized claim forms.  This requirement is subject to exceptions and waivers for doctors’ offices with fewer than ten staff members. 

Health Care Quality

The third major objective of the health care reform act is to improve the quality of health care being delivered in the state.  Better quality health care means improved patient outcomes that, over the long term, result in less costly care. 

The act creates a new Maine Quality Forum under the direction of the Board of Directors of Dirigo Health.  The Quality Forum is charged with collecting and disseminating health care quality research and adopting measures to evaluate and compare health care quality as well as provider performance   The Forum is required to issue annual reports and make recommendations for the State Health Plan.  It must also conduct consumer education campaigns and conduct health care technology assessments. 

A seventeen member Maine Quality Forum Advisory Council comprised of individuals representing hospitals, physicians, employers, insurers and consumers will advise the Forum and the Dirigo Board on issues of health care quality. 

The new law also makes changes to an existing state agency, the Maine Health Data Organization (MHDO), which collects health claims data.  The MHDO must create rules to collect data on health care quality based upon the measures adopted by the Maine Quality Forum.  MHDO must also issue public reports on health care services, costs and quality.   These reports must be “consumer friendly” and provide pricing information comparing the charges for the fifteen most common diagnosis-related groups and outpatient procedures in Maine to those in other states. 

By all accounts, the health care reform act is an ambitious measure.  A great deal of work must take place over the next ten months to make Dirigo Health and other components of the act operational.  Time will tell if the act’s three major objectives of expanding Maine citizens’ access to affordable health care insurance, controlling escalating health care costs and improving the quality of health care delivered in our state are met.