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State of the States January 2009

Charting a Course:
Preparing for the Future,
Learning from the Past

State of the States 1


State of the States

About SCI
The State Coverage Initiatives (SCI) program provides
timely, experience-based information and assistance
to state leaders in order to help them move health
care reform forward at the state level. SCI offers an
integrated array of policy and technical assistance
services and products to help state leaders with
coverage expansion efforts as well as with broader
health care reform. Our team of policy experts tailors
its approach to meeting state decision makers’ needs
within the context of each state’s unique fiscal and
political environment. SCI is a national program of
the Robert Wood Johnson Foundation administered
by AcademyHealth. For more information about SCI,
please visit our Web site www.statecoverage.org.

State Coverage Initiatives Program Staff


Enrique Martinez-Vidal, Director
Isabel Friedenzohn, Deputy Director
Shelly Ten Napel, Senior Associate
Anne Bulchis, Associate
State of the States Colin McGlynn, Program Coordinator
table of contents

4 Executive Summary

6 Surveying the Landscape

14 State and National Health Care Reform: A Case for Federalism

20 Lessons Learned from State Reform Efforts

26 State Coverage Strategies: Evolving with Time and Effort

28 State Coverage Strategies: Success Varies; Vision Remains


46 SCHIP Moves Forward in the Face of Uncertainty

48 State Reform Efforts Target Small Employers


54 Cost Containment and Quality Improvement Prioritized by States

60 Looking Forward

61 Endnotes

Written By: Shelly Ten Napel, Anne Bulchis, Margaret Trinity, Enrique Martinez-Vidal,
Colin McGlynn and Isabel Friedenzohn
Managing Editor: Shelly Ten Napel
Contributing Editors: Enrique Martinez-Vidal, Isabel Friedenzohn, Anne Bulchis,
and Kristin Rosengren
External Reviewers: Bob Carey, Deb Faulkner, Barb Langner, and Scott Leitz
Art Direction: Ed Brown

State of the States 3


State of the States

Executive Summary
Charting a Course:
Preparing for the Future,
Learning from the Past
This year’s State of the States will review the full range of state activity on health reform during 2008 while also look-
ing to the future, particularly in light of the expected impact of the economic downturn and the possibility of federal
action. This is a time of both challenge and possibility for policymakers, and the nation. The experience of states
can inform the ongoing discussion.

With the election of Barack Obama to the recently, in part, because there has been The analysis in this report explores these
Presidency, Congressional leaders have begun little to no federal action, there is a wealth of challenging issues. It also provides the
to set ambitious goals for the 111th Congress, experience and lessons that can inform the necessary context for readers as they learn
including comprehensive coverage and national discussion regarding health reform. about state-level innovations and reforms.
systemic reforms to promote quality care and Perhaps the two most significant themes
cost containment. For this reason, this year’s As the discussion continues in 2009, some that emerge from a review of 2008 state-
report not only analyzes the experience of critical questions will need to be resolved: level health reforms are: 1) the impact of
states in the past year, but also explores the recent economic downturn; and 2) the
the relationship between states and the n How can the states and the federal
emerging trend among states to address
federal government. government best work together in the cost and quality together with access as they
context of national reform? consider comprehensive reforms.
The states will be watching reform efforts
n How can the federal government provide
at the national level, first for their possible Surveying the Landscape. This section
leadership that empowers the states to be
immediate impacts (for example, a short- analyzes trends in health care cost and
effective partners?
term boost in the federal Medicaid matching coverage. It notes that while employer
n Which tasks are best undertaken at which
rate to address the states’ budget shortfalls) coverage rates have held relatively steady in
and then to see how broader federal level of government? the last few years, declines will be inevitable
reform may impact their particular states. Given the large variation between states in as the current recession takes hold. While
Particularly in light of severe budget deficits,
coverage rates, health care delivery system many people will lose their employer-
some states may choose not to act in 2009 inmodels, insurance market structures, income sponsored coverage as the unemployment
the hopes that federal coverage expansions levels, and a variety of other aspects, federal rate climbs, more will become eligible for
and other reforms will be forthcoming. reform will certainly impact states differently. state Medicaid programs. This will further
How can states and the federal government pressure already burdened state budgets. By
Federal health policymakers can learn from work together to reduce undesirable December 2008, at least 41 states and the
the experience of states that have pursued variation while still allowing for creativity District of Columbia were reporting mid-
innovations in both coverage expansions and and innovation at the state and local levels? year budget gaps, amounting to an estimated
delivery and payment systems reforms. Since $43 billion shortfall.1 Forecasters predict
state efforts have dominated reform efforts that these budget gaps will only worsen as
states struggle with declining revenues.2

4 State of the States


State Coverage Strategies. While health care discussion in their states. Cost Containment and Quality
election year politics slowed the rate of Finally, a handful of states used 2008 as a Improvement. The U.S. health care system
state reforms relative to 2007, significant consensus-building year, putting together has seen dramatically rising costs in recent
progress was accomplished in several states. comprehensive plans for health care reform years. These increases have impacted the
Massachusetts and Vermont continued in the coming years. These states include budgets of individuals, employers, states,
implementation of their comprehensive Arkansas, Connecticut, Ohio, Oregon, and and the federal government. The quality
reforms, with Massachusetts reporting Utah. While the economic picture in each of care, unfortunately, is not improving
that 97.4 percent of its residents are now of those states has darkened considerably at a commensurate rate; indeed, high
insured and Vermont launching two of three during recent months, there are still spending does not correlate with high
coordinated community pilots under its hopes of enacting at least some of the quality. There is a growing consensus that
Blueprint for Health. recommendations being proposed. payers—including states—are not getting
good value for their health care dollar.
Minnesota, Iowa, and New Jersey all passed State Children’s Health Insurance
significant health reform legislation in Program. Ten states passed legislation in States have undertaken a series of strategies
2008. Minnesota’s legislation was broad 2008 to expand children’s health coverage, to improve value by containing costs and
in scope and included major provisions either through increased eligibility levels or improving quality. These include: 1)
that address improved health care coverage stepped up enrollment efforts. The failure of investing in primary care through medical
and affordability, payment reform and federal lawmakers to pass a reauthorization homes and care coordination; 2) wellness
price/quality transparency, chronic care of the State Children’s Health Insurance initiatives; 3) efforts to promote patient
management, administrative efficiency, and Program (SCHIP) in late 2007 and the safety and prevent medical errors; 4)
public health.3 Iowa lawmakers expanded impact of a restrictive federal directive price and quality transparency initiatives;
children’s coverage to 300 percent of the limiting the use of federal funds to expand 5) health information technology and
Federal Poverty Level (FPL), called for a coverage above 250 percent FPL had a exchange; and 6) efforts to reduce
medical homes program and several other dampening effect on SCHIP expansions. preventable hospital readmissions.
quality and transparency initiatives, and set
up a task force to develop a plan to provide State Reform Efforts Target Small Looking Forward. The immediate future
comprehensive coverage to all Iowans in Businesses. Because of declining coverage in health care policy is uncertain. While
five years. New Jersey also expanded health rates in the small business market and the many states have laid the groundwork for
coverage for kids and passed a mandate that difficulty of finding affordable small business significant reform in the last few years,
all kids be covered; they also expanded health coverage, many states have developed budget shortfalls and the potential for
coverage for parents up to 200 percent FPL. interventions to bolster the small business federal reform are likely to dampen state
market. These include providing premium efforts. Nevertheless, the coming year
Several other states attempted major health subsidies, offering reinsurance programs, will put the spotlight on health reform as
reforms—most notably California and New restructuring benefit plans, providing tax federal lawmakers consider the issue and
Mexico. While their ambitious goals were cuts and credits, or some combination of more businesses and individuals feel the
not achieved in 2008, they advanced the these approaches. pinch caused by the economic downturn.
It remains to be seen whether the national
discussion around health reform excites or
dampens state efforts and what role states
might play in a changing federal system.

State of the States 5


State of the States

surveying the landscape

Finding ways to expand coverage to the uninsured continued to


dominate state policy agendas in 2008. The year saw a multitude
of state efforts aimed at developing, legislating, and implementing
reforms. While forecasters projected that 2009 would bring renewed
energy to many states’ coverage efforts, the nation’s serious eco-
nomic ills are causing an about-face such that state officials are now
concerned whether progress by states can continue to be made.4
Declining economic conditions have considerably darkened the
outlook for 2009 and will perhaps thwart many states’ reform efforts.

6 State of the States


During the current economic downturn, This section uses various data sources to Furthermore, given the economic
ordinary citizens will feel the crunch of explore the current landscape. Despite some downturn, the 2007 decline in the number
high health care costs—for premiums, cost variation in data across sources, the overall of uninsured may prove to be a minor
sharing, and the out-of-pocket cost of care. trend is consistent. Moreover, given that data aberration in an otherwise upward trajectory
Health care reform consistently polled as sources typically lag current conditions by a that has prevailed since 2000. The U.S.
one of the top three issues for voters in 2008, year, the numbers (particularly the national unemployment rate reached a 16-year
and, if the issue can be linked to economic rates of uninsurance) paint a rosier picture high of 7.2 percent in December 2008,12 an
worries, its relevance could increase even than the reality faced by many states. This increase that will almost certainly lead to a
more.5 As states face tightly constrained section looks behind the numbers to project drop in employer-sponsored coverage and
budgets, they may need to respond to the potential impact of the nation’s altered an increase in the number of uninsured. In
low- and middle-income voters who find economy on states—their budgets, public fact, forecasters predict that the number of
themselves swamped by health care bills and programs, and efforts to expand coverage to uninsured will jump by at least 2 million in
worried about loss of coverage. the uninsured. 2008, and might go even higher given the
unemployment outlook in late 2008.13
The national election attested to voters’ Uninsured Decline in 2007
growing concerns with the economy and For the first time since 2004, the number State Fiscal Conditions
especially about the cost of health care. of uninsured declined, dropping from 47 Darken
Wage growth has failed to keep pace with million in 2006 to 45.7 million in 2007.8 After several years of fiscal stability, states
increases in out-of-pocket health care costs.6 Several factors contributed to the decrease. are navigating a bleak economic landscape.
In spring 2008, a Kaiser Health tracking poll First, the rate of employer coverage remained Undoubtedly, declining state revenues
found that more people reported difficulty relatively stable between 2006 and 2007 will severely undermine future spending
in paying for health care than paying for (although there were modest declines), and coverage plans. As the impact of the
food or housing. As the new president most likely because of the continuation nation’s worst financial crisis since the Great
and Congress respond to calls for relief by into 2007 of the economic improvements Depression ripples through state economies,
enacting a stimulus package, the poll data experienced between 2004 and 2006, a period many states are already experiencing
provide an important reminder that many in which real median income increased as difficulties. The collapse of the housing
Americans are seeking relief from a range of the poverty rate dropped.9 Second, public market and growing cost of energy have taken
economic burdens.7 coverage expanded between 2006 and 2007. a toll on state revenues, creating budget gaps
Health insurance reform implemented in and the urgency for short-term borrowing.
Massachusetts during 2007 also significantly
contributed to the decline in the number of States routinely borrow to meet short-term
uninsured nationally.10 spending obligations, particularly given
calendar fluctuations in incoming revenues;
But the decline in the uninsured masks a accordingly, lenders typically count on states
sobering reality: an estimated 50 million to repay their loans.14 In fall 2008, however,
people were uninsured for some time during a slump in the credit markets caused lenders
2007. And nearly two-thirds of adults— to restrict access to loans, causing many
116 million people—were uninsured for businesses and states to worry about their
part of the year, were underinsured, ability to borrow short-term cash. California
experienced problems paying their medical and Massachusetts were the first states to
bills, or deferred needed health care because raise the alarm that a credit freeze might
of its cost.11 jeopardize their short-term borrowing needs.
Like others, these two states may need to
turn to the federal government as a lender of
last resort.

State of the States 7


Uninsured in america: The facts

Figure 1 Average Annual Firm and Worker Contribution to Premiums and Total Premiums for Covered Workers
for Single and Family Coverage, All Plans, 2008

Family $3,354 $9,325 $12,680

Worker Contribution
Single $721 $3,983 $4,704

Firm Contribution

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000


Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2008

Number and Percent of Uninsured Employer Offer Rates Level Off in 2008 Health Insurance Premiums Go Up, Move
Decreases15 after Long Decline17 Toward High Deductible Health Plans19
n Since 1999, health premiums have increased a
n The total number of uninsured decreased in n In 2008, 63 percent of employers offered
2007 to 45.7 million from 47 million in 2006. health benefits to their employees, although staggering 119 percent. That is more than three
The percentage of uninsured also decreased this is not statistically different from the times the rate of increase in employee wages
from 15.8 percent to 15.3 percent. 60 percent of employers who offered (34 percent), and is more than four times the
coverage in 2007. This is down from rate of increase in inflation (29 percent) over the
n This is only the fourth time since 1994 that an
69 percent in 2000. same period of time.
increase in health insurance coverage among
the non-elderly population has been recorded. n Employer-sponsored coverage varies
n Despite this increase, the percent of dramatically by firm size. Nearly all (99 n Health insurance premiums continued to
people covered by private health insurance percent) of large firms with 200 or more increase in 2008, rising 5 percent in 2008.
decreased from 67.9 percent in 2006 to employees offered coverage, but only The average annual premium for single
67.5 percent in 2007. 49 percent of firms with three to nine coverage in 2008 was $4,704 and the
employees did so. average annual premium for family coverage
n Rates of uninsurance continue to differ
n Firm size is not the only factor that affects was $12,680.
significantly across the country. On a
regional level, the Midwest and Northeast whether an employer offers coverage. Firms
had the lowest rates of uninsurance (11.4 with no union workers as well as those with n Workers with both single and family coverage
percent for each), followed by the West a higher proportion of lower-wage workers paid for a significant share of their premiums.
(16.9 percent), and the South (18.4 percent). (defined as a firm where more than 35 Single coverage workers paid more than
States with the lowest uninsurance rates percent of workers earn less than $22,000 15 percent and family coverage workers
include Hawaii (8.3 percent), Massachusetts annually) are less likely to offer coverage. paid more than 26 percent of their health
(8.3 percent), and Minnesota (8.5 percent), insurance premiums. There was significant
while states with the highest rates of Rise in Public Program Enrollment variation within this group, with more than
uninsurance rates include Texas (24.4 n More people were covered by Medicaid in one-fifth of single coverage workers and 47
percent), New Mexico (21.9 percent), and 2007. The percentage of people covered percent of family coverage workers paying
Florida (20.5 percent). by Medicaid increased to 13.2 percent more than 25 percent of their premium.
n Nine states had statistically significant from 12.9 percent in 2006.18
increases in uninsurance: Kansas, Kentucky, n Much of the increase in health insurance n While the rise in health insurance premiums
Louisiana, Nebraska, New Jersey, New coverage can be attributed to an increase was relatively modest, more employers are
Mexico, New York, North Carolina, and Texas. in the number of people covered by turning to health plans with high deductibles
n Five states showed statistically significant government programs. The number and fewer benefits to keep premiums down.
decreases in uninsurance: Connecticut, of people enrolled in these programs The percentage of workers enrolled in high-
Indiana, Massachusetts, West Virginia, increased from 27 percent in 2006 to deductible insurance plans (defined as having
and Wisconsin, as did the District of 27.8 percent in 2007. a deductible of $1,000 or more) jumped from
Columbia. Massachusetts alone accounted 12 percent in 2007 to 18 percent in 2008.
for 22 percent of the decline in nonelderly Among firms with 3 to 199 employees, the
uninsured.16 rate more than doubled from 16 percent to
35 percent.

8 State of the States


Figure 2 The Nonelderly Uninsured As a Share of the Population and by Poverty Levels, 2007

10% >400% FPL


8% 300 – 399% FPL

17% 200 – 299% FPL


Employer-Sponsored 61%

Uninsured 17% 29% 100 – 199% FPL

Medicaid/Other Public 16%

Private Non-Group 5%
37% <100% FPL
Source: “The Uninsured: A Primer,”
Kaiser Commission on Medicaid
and the Uninsured, October 2008.

 Increasingly, these high-deductible with 6.6 percent of individuals in families with Hispanics, 20.9 percent of African Americans,
plans are being coupled with a health annual incomes of $75,000 or more. and 17.7 percent of other ethinicities (primarily
savings account, where an employee Asians) were uninsured.
(and employer, if so inclined) can set Uninsurance varies considerably by industry.
aside a portion of their income on a Those employed in blue-collar jobs such Country of birth also impacts insurance
pretax basis and then use that to cover
coverage with 33.2 percent of foreign-born
In 2008, 13
individuals being uninsured as opposed
percent of employers offered plans with
a savings option. While this does not share of the uninsured (36.5 percent). to only 12.7 percent of native-born
differ statistically from the 10 percent that individuals.21
In 2007, minority groups were more likely to be
than the 7 percent of employers that uninsured than whites. While 12.7 percent of Young adults continue to have the highest
offered them in 2006. whites were uninsured in 2007, 33.5 percent of uninsured rates; those aged 18-24 and
25-34 have uninsured rates at 28.1 percent
Who are the Non-Elderly Uninsured?20 and 25.7 percent, respectively.22
Although the number and percentage of
uninsured dropped in 2007, there continues
to be marked economic and social disparity
within the non-elderly uninsured population.

A majority of the uninsured are members of


families with a family head who works during
the year (almost 83 percent). Only 17.4
percent of the uninsured are members of the
families where the family head did not work
at any point during the year.

Those with low incomes represent a


disproportionate share of the uninsured.
Nearly one-third (32.5 percent) of the
uninsured in 2007 live in families with
incomes below $20,000. More than 35
percent of individuals in families making less
than $10,000 were uninsured as compared

STATE OF THE STATES 9


Figure 3 Percentage of People Without Health Insurance by State, 2006-2007 Average

WA VT
11.6 10.7
MT ME
ND
16.4 9.1
11.1 NH 11.0
OR MN
17.3 8.8 MA 7.9
ID WI NY
SD
14.6 8.5 13.6
WY 11.0 RI 9.7
14.1 MI
11.0 CT 9.4
IA PA
NV NE 9.9 NJ 15.6
9.8
18.4 12.8 IL OH
UT IN DE 11.7
CA 13.7 10.9
15.1 11.6
CO WV MD 13.8
18.5
16.8 13.8 VA DC 10.6
KS MO KY 14.1
12.5 12.9 14.6
NC
TN 17.2
AZ OK 14.0
19.6 NM AR
18.4 SC
22.7 17.5 16.2
MS AL GA
19.8 13.6 17.6
LA less than 11%
TX
24.8 20.2
11% to 13.9%
FL
20.7
AK
14% to 17%
17.4
more than 17%

HI
8.2

Source: DeNavas-Walt, Carmen, Bernadette D. Proctor, and Jessica Smith, U.S. Census Bureau, Current Population Reports, P60-235, Income, Poverty,
and Health Insurance Coverage in the United States: 2007. U.S. Government Printing Office, Washington, DC, 2008.

Even before the financial crisis, many states By law, most states must balance their only a portion of the state’s budget
were facing budget deficits that forced budgets. When the economy sours, states gap, necessitating further spending
them to raise taxes, cut spending, or both. cannot run deficits and must close budget reductions.26
In fact, in early 2008, 29 states had already gaps by cutting expenditures, raising tax
confronted budget shortfalls totaling $48 revenues, or drawing from rainy day funds Medicaid Enrollment,
billion as they prepared their fiscal year or reserves. For many states, the worst Spending Set to Swell
(FY) 2009 budgets. which typical begin on financial crisis in recent times will mean In FY 2008, state Medicaid rolls
July 1.23 By December 2008, new mid-year layoffs and program cuts. Virginia is one increased by 2.1 percent as states began
budget gaps emerged, leading to budget such example. Faced with a $2.5 billion experiencing the effects of a weakening
gaps in at least 41 states and the District shortfall for its two-year budget, Virginia is economy. With a deteriorating economy,
of Columbia, amounting to an estimated laying off 570 state workers, leaving vacant unemployment rises and people face
$43 billion shortfall totaling 8.8 percent an additional 800 unfilled positions, and the loss of both employment-based
of state budgets.24 The projected gaps for instituting a hiring freeze. The state also coverage and wages, making them more
fiscal year 2010 total 16.8 percent, based on plans to close several older correctional likely to be eligible for public programs
states that are already reporting projections. facilities and will reduce the budgets of such as Medicaid. As a result, Medicaid
Forecasters predict that these budget gaps higher education institutions by 5 or 7 enrollment is expected to jump even
will only worsen as states struggle with percent. These cuts, however, address higher (by 3.6 percent) in FY 2009.27
declining revenues.25

10 State of the States


Figure 4 Size of FY 2009 Budget Gaps: Total Gap As Percent of FY 2009 General Fund

WA VT
3.4 10.3
MT ME
ND
8.6
NH 8.0
OR MN
2.1 7.9 MA 11.5
ID WI NY
SD
4.4 7.1 11.7
WY 2.2 RI 24.5
MI
2.7 CT 3.2
IA PA
NV NE 7.0 NJ 14.2
6.0
19.6 IL OH DE 10.1
UT IN
CA 13.4 6.8
10.4 5.8
CO WV MD 10.0
35.5
7.7 VA DC 3.6
KS MO KY 13.8
2.9 3.8 7.8
NC
TN 3.7
AZ OK 12.0
32.8 NM AR
1.7 SC
7.5 2.4 11.7
MS AL GA No Budget Gap
2.2 15.0 12.9
LA less than 8%
TX
3.7
8% to 15.9%
FL
22.2
AK
16% to 24%

more than 24%

HI
4.0

Source: Center on Budget and Policy Priorities, State Budget Troubles Worsen. Table 3. http://www.cbpp.org/9-8-08sfp.htm
Note: These numbers are based on the estimated revenue shortfall before the FY 2009 budget was adopted, plus the mid-year gap for FY 2009.

Total Medicaid spending increased by uninsured and would increase Medicaid and 59.3 percent in 2007, down from 59.7
5.3 percent in FY 2008; for FY 2009, state State Children’s Health Insurance Program percent in 2006.32 The decline continues a
legislatures adopted Medicaid appropriations (SCHIP) enrollment by 1 million adults trend of decreasing employer-sponsored
that are 5.8 percent higher than Medicaid and children, resulting in an additional coverage that began in 2000. Furthermore,
expenditures in FY 2008.28 Increases $1.4 billion in state Medicaid spending.30 the percentage of employers offering
in Medicaid enrollment and spending Given that the unemployment rate increased health insurance coverage has fallen from
combined with budget constraints raise the by 1.5 percentage points from June 2007 69 percent in 2000 to 63 percent today,
strong possibility of Medicaid program cuts to August 2008, analysts expect to see an a worrisome drop given that employer-
as states try to manage growth in their public increase in Medicaid and SCHIP coverage of sponsored coverage is the primary source
programs with fewer resources. In fact, two- approximately 700,000 adults and 900,000 of coverage for most people under age 65.33
thirds of Medicaid directors project Medicaid children, barring cuts in eligibility.31 And, for small employers, the trend is more
budget shortfalls, which could translate into alarming; whereas 57 percent of firms with
decreased eligibility or provider payments or Employer Coverage three to nine workers offered coverage in
both.29 Continues its Slow Erosion 2000, the figure has dropped to less than
Although there were some signs of a brief half today (49 percent).34
A recent analysis found that a 1 percentage stability between 2006 and 2007, the number
point uptick in the nation’s unemployment of people covered by employer-sponsored Health insurance premiums continued
rate would result in 1.1 million additional insurance continued to decline, falling to their upward march in 2008, increasing by 5
percent from 2007 average premiums. The

State of the States 11


Figure 5 Percent Change in Medicaid Enrollment, FY 1999-2009

10.0% 9.5%

7.9%
8.0%

6.0% 5.6%

4.2%
4.0%
3.6%
3.2% 3.2%

2.1%
2.0%

0.5%
0.2%
-0.5%
0.0%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-2.0% projected
Source: Headed for A Crunch: An Update on Medicaid Spending, Coverage, and Policy Heading Into an Economic Downturn, Kaiser Commission on Medicaid and the Uninsured,
September 2008, http://www.kff.org/medicaid/upload/7815ES.pdf.

increase was relatively modest compared to Political and Economic Almost half of states included coverage
that of past years. Nonetheless, many workers Conditions Likely to expansions for the uninsured in their
face higher deductibles and out-of-pocket Impact 2009 Activity proposed FY 2009 budgets, but those
costs. A growing share of workers—now at In 2008, state activities to provide coverage plans now appear to be in jeopardy. States
18 percent—have insurance policies with to the uninsured continued to make may scale back these efforts or abandon
deductibles of at least $1,000, a significant headlines, most notably the Massachusetts them entirely as they struggle to close
increase over last year’s 12 percent of workers efforts to implement a near-universal budget gaps and maintain current levels
with deductibles of the same level. But the health coverage program. Massachusetts of coverage.37 Furthermore, current
increase is most noticeable among employees was able to decrease by half the state’s economic conditions will increase pressure
of small firms with 3 to 199 workers; more number of uninsured in 2007, resulting in on states to contain costs. For many states,
than one-third (35 percent) of these workers 300,000 fewer uninsured residents. In fact, controlling costs may prove more difficult
must pay at least $1,000 out of pocket before the Massachusetts efforts to implement than expanding access.
their insurance starts to pay, up from 21 universal coverage accounted for more
percent in 2007.35 than 20 percent of the decline in the Current economic conditions raise the
nation’s number of uninsured last year.36 specter of a recession more severe than the
one in 2001, which had a long-lasting

12 State of the States


Figure 6 Average Annual Premiums For Single and Family Coverage, 1999-2008

2008 $12,680
$4,704

2007 $12,106
$4,479

2006 $11,480
$4,242

2005 $10,880
$4,024

2004 $9,950
$3,695

2003 $9,068
$3,383

2002 $8,003
$3,083

2001 $7,061
$2,689

2000 $6,438
$2,471

1999 $5,791
$2,196

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000


Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2008

impact on states. Following that recession, on the current system of private and To what extent the dramatically altered
unemployment hit a high of 6.3 percent, public insurance. Some features of his economic outlook will affect the
a figure this recession surpassed in the proposed plan resemble the Massachusetts President’s health care reform plans
fall of 2008. Without the $20 billion in comprehensive reform plan. He has remains to be seen. He has signaled his
temporary federal relief provided to states proposed that all employers, except small intent to move quickly to repair the
in 2003, the impact of the 2001 recession employers, either offer health insurance economy, starting with an economic
would have been even harsher. Even now, to their workers or contribute to the cost stimulus package. At the same time, he has
of coverage. His campaign proposal called indicated that health care reform tops his
forecasters suggest that a similar federal
for a National Health Insurance Exchange agenda alongside clean energy, education,
intervention may be needed—sooner
that would allow individuals without and tax relief for the middle class.
rather than later.38
coverage to purchase a plan similar to Ambitious health care reform proposals
that offered to federal workers. President may wait until after Congress addresses
Health care reform was a major issue a stimulus package, although increased
Obama’s proposal also called for expanded
in the national election. President eligibility under Medicaid and SCHIP.39 funding for SCHIP and other smaller
Obama campaigned on the promise of agenda items with bipartisan support may
a universal coverage plan that builds see early action.40

State of the States 13


State of the States

State and National


Health Care Reform:
A Case for Federalism
Because the new U.S. President, Barack Obama, campaigned on a
platform that prominently featured health reform, and is welcomed to
Washington by a Congress that has put health care near the top of its
agenda, interest in and energy around broad federal health reform is
gaining momentum. A sense of optimism by reform advocates has
remained, even in the face of the nation’s dismal economic situation.
If health reform does move forward, policymakers will need to find
a balance between the role of states, who have traditionally led the
movement to reduce costs, expand access and improve quality, and
the federal government, which has provided the policy setting and
financial foundation for such reforms.

14 State of the States


Within our structure of federalism and States play a critical role in advancing some states have moved forward and will
given the complexity of the health care coverage expansions and other health continue to try to expand or maintain
system, it is imperative to build upon reforms by testing new ideas, both politically coverage rates, there are a large number of
the respective strengths of both state and and practically. Because health care delivery states that need significant federal support.
federal governance to fashion health reform is largely local, states are closer to the action
solutions with the greatest potential for when it comes to implementing some of the It is extremely difficult, if not impossible,
success.41 This section looks at the strengths delivery and payment systems changes that to construct an effective and efficient
of states and the federal government, and are needed to truly transform the health care national health system one state at a time.42
outlines a potential framework for merging system. This proximity and flexibility Importantly, as currently evidenced by the
the two, informed by a growing body of in system redesign is a key strength for states. varying levels of public program eligibility,
research based on state reform efforts. In addition, states have first-hand knowledge investments in public health, and quality
of their local landscape and relationships measures, a state-by-state approach
Implementation, System with the stakeholders that will be necessary without sufficient national standards and
Redesign, and Other State to change the system. Much of the work support leads to inequity in the overall
Strengths related to implementing insurance reforms, system.43 Many states will not achieve
In recent years, a lack of national consensus delivery system redesign, and public universal coverage without a national
about how to address the growing number of health strategies traditionally have been framework and federal funding. This is a
uninsured people has prompted work at the led by states. key argument for some federal reforms.
state level to enact incremental, substantial, Differences in the way that state and federal
and comprehensive coverage reforms as On the other hand, there are numerous governments are able to address budgetary
well as other initiatives that address cost limitations for states in these areas as well, issues also suggest advantages to federal
and quality. These states could not wait; including some structural and financial leadership on reform:
due to the immediacy of constituent constraints that keep certain potential levers
concerns—of individuals, employers, out of their reach. In these areas, the federal n Counter-cyclical Budgeting: The federal

and other stakeholders in the health care government offers key advantages. government is able to maintain spending
system—state governors and legislatures levels during times of recession because
felt compelled to act. Results were mixed. Financing, Continuity, and they are not constitutionally mandated
States have experienced both important Other Federal Strengths to balance their budget every year.
successes and enlightening failures that can While many states are attempting to move Almost all states have annual or biennial
help inform a national plan and help frame ahead with reform, they are not all equal budgets that must balance, which makes
the best structure for any new federal-state in their capacity to address these large and coverage expansions more challenging
partnership. complex problems. Significant variation for states as they may not be able to
exists across states in terms of resources, afford to maintain benefit and eligibility
capacity, demographics, number of levels during economic downturns.
uninsured, insurance market structures, n Multi-year Budgets: Because the federal

public programs, state funds available to government does multi-year budgets,


invest in reform, employment base, political they have the capacity to score savings
priorities, and a host of other relevant factors in the Medicare and Medicaid program
that must be considered if health reform is that will be realized in future years.
to succeed. For example, state uninsured This makes it easier for federal
rates vary from just under 8 percent to policymakers to find resources for
almost 25 percent and, generally, where program expansions from cost-saving
those rates are the highest, the states have approaches because the savings from
the least resources in terms of a tax base or these programs are often realized several
population income levels to support funding years in the future.
for needed coverage expansions. So while

State of the States 15


Revenue Raising Capacity: In addition,
n States are limited in their ability to engage Several clear federal changes would allow
the federal government has the capacity with employers regarding the provision of states to require ERISA-protected health
to raise revenues in a broader fashion. In health insurance. States can regulate insurers care purchasers to participate in payment
a hypothetical example, if $100 billion and the business of insurance but ERISA reform collaboratives, quality improvement
was needed to cover all of the uninsured is often an issue when state law appears to efforts, Medicaid premium assistance
nationally, each state would have to affect whether and how employers offer programs, and all-payer databases. States
increase their taxes by more than 13 worker health coverage. The federal law could be allowed to collect enrollment
percent. The federal government, on its tax preempts state laws that “relate to” private and benefit information from ERISA
base, would only need to increase taxes by sector employer-sponsored benefit plans. In plans. An explicit allowance could permit
about 4 percent to raise the same funds. 44 effect, health benefits offered by self-funded states to apply premium taxes to employer
This example demonstrates the important employers have been exempted from any plans. Due to federal preemption, states
difference in the scope of revenue-raising state regulatory oversight. This exemption are not able to define the scope of benefits
capacity at the two levels of government. limits the scope of cost-containment, quality provided by ERISA plans; the federal
improvement, and coverage expansion government therefore could also set a
A Federal-State Partnership efforts of states. national floor on benefits. Finally, while
Given the respective strengths and challenges consumer protections for those covered
of either an all state or all federal approach States recognize the need for large multi-state by ERISA plans are currently provided
to health reform, a strong federal-state employers to have national standards within at the federal level, states have more
partnership that builds upon the best of which they can operate more efficiently. infrastructure and experience in these
both could be a useful approach. In this However, states who seek to innovate, areas. Oversight responsibility, using
scenario, the federal government would especially through the use of public-private federal standards, could be shifted to the
use its leverage as the largest purchaser in partnerships, are hampered by their lack state level.
the country to set minimum standards and of oversight and ability to engage. Tension
between these two legitimate concerns is Public Programs—Medicaid and the
guidelines upon which states can build; it
inevitable. State Children’s Health Insurance
would also provide the necessary resources
Program (SCHIP): Medicaid and SCHIP
to the states to facilitate reform. States would
then be responsible for implementing the Federal policy steps could be taken to address are currently based on a federal-state
programmatic aspects of health reform employer concerns while still allowing for partnership. Overall, the Medicaid program
within an overall framework established state innovation. For example, two states provides more than 59 million Americans
at the national level. Key features of this have recently imposed assessments on with health coverage and long-term care
approach are outlined below. employers to help fund health care access services.47 The federal government provides
initiatives but, because the question about broad guidelines within which each state
Regulating Insurance Markets. States
whether they are subject to federal ERISA must operate and the states are responsible
have significant and lengthy experience with preemption has only been tested through for implementing the programs on the
insurance market oversight and consumer the judicial system, other states have been ground. These programs allow, to a certain
protection.45 However, while they have the reluctant to even consider such a financing extent, variation in eligibility levels, benefit
advantage of being more directly accountable mechanism.46 While Massachusetts managed structures, payment parameters, and
to consumers and providers, their purview to enact a very limited employer mandate breadth of optional populations covered.
over some employers is limited by federal that requires certain employers to offer
law (e.g., Employment Retirement Income coverage to employees or pay into a state In recent years, this partnership has been
Security Act of 1974 [ERISA]). In addition, fund to support public health programs, strained. The allowance for flexibility
many of their residents are covered by federal states have mostly felt the need to steer clear through the waiver process has been
insurance programs such as Medicare, of requirements on employers to contribute granted by Congress in several laws
the Veterans Health Administration, the to the financing of coverage expansions. The governing these programs. However,
Indian Health Services, and the Federal federal government could provide clarity many states believe that federal regulatory
Employee Health Benefit Plan (FEHBP), on permissible state actions and/or allow oversight has become too inflexible and
and are therefore also beyond the reach of safe harbors. administratively cumbersome, and that
state regulation.

16 State of the States


proposed federal changes to the program capita than other Medicaid beneficiaries, In addition, in a directive dated August
have been taken unilaterally with little or no both state and federal governments need 17, 2007, the Centers for Medicare &
consultation with states nor with any regard to be concerned about the impact of these Medicaid Services (CMS) announced that
to the impacts those changes will have to the individuals on both public programs. states would be barred from extending
program on the ground.48 National reform The federal government could support SCHIP coverage to children in families
should address these tensions, particularly efforts to integrate care to overcome with incomes above 250 percent of the
with regard to waivers, dual eligibles, administrative and operational hurdles Federal Poverty Level (FPL) unless the
citizenship requirements and other Medicaid and financial misalignments between the state can demonstrate that 95 percent of
policy changes, and SCHIP limitations. Medicare and Medicaid programs through their residents who are eligible under 200
a single delivery system.51 percent FPL are enrolled in the program.56
While there are currently processes for That directive impacted 23 states—10 that
approving State Plan Amendments and While both states and the federal had already increased eligibility beyond 250
also for granting waivers that, ostensibly, government share the goal of maximizing percent FPL and 14 others had proposed
allow for state flexibility, those processes are public program enrollment and preventing doing so. (Washington State falls into both
now viewed as being too time-consuming ineligible individuals from taking advantage categories.)57 This directive has not been
(often years), adversarial, and capricious. of benefits to which they are not entitled, modified nor rescinded.
Waiver parameters that had been granted the federal government added citizenship
to some states are denied to others, leaving verification guidelines to the program that Many Medicaid and SCHIP observers
states with no guidance as to what may be have proven to be severely burdensome to expressed frustration that the federal
acceptable. The waiver process needs to be states. Many state officials report that the government had not sought state input
more timely and collaborative. States are cost-saving benefit of trying to identify those or greater understanding of the potential
currently at the forefront of experimenting individuals who are not eligible for programs impact of these policy changes, which
with payment reforms to contain costs and is far outweighed by the administrative costs severely reduce the flexibility that states
improve the delivery system; they need a of implementing and maintaining such a have in their public programs and severely
better framework and an expedited approval verification effort.52 In addition, many states impact their budgets, before moving
process for payment reform demonstrations have reported that the requirements have forward. CMS’s statutory authority to
that allow them to experiment and move the unintended consequence of denying even issue the August 17 directive has also
from a fee-for-service system that incents benefits to those who otherwise would be been called into question.58 If the federal
quantity and disregards quality to one eligible but have no proof of citizenship. The government wants to continue to support
that pays for value by rewarding quality federal government should consider allowing innovation and coverage expansions by
improvement. a waiver from the citizenship requirement states, it will need to rescind the August 17
if the state can demonstrate it has effective directive and pursue a more collaborative
Another substantial change to the parameters verification standards in place.53 regulatory process.
of the federal-state program that should be
considered is related to the “dual eligibles”— Changes to federal Medicaid regulations System Redesign/Quality Improvement:
the almost 7.5 million individuals who designed to control the rate of growth in States have increasingly recognized that
receive both Medicare and Medicaid benefits. these programs have also caused concern coverage expansions must be accompanied
Currently, for dual eligibles, Medicaid pays for a number of states. States view these by value-enhancing strategies that
Medicare premiums and cost sharing and proposals as reversing long-standing contain costs and improve quality. The
clinical benefits such as long-term care that Medicaid policy. The regulations, most implementation of delivery system
Medicare does not cover.49 Dual eligibles of which are currently under a one-year redesign and payment reforms, as well as
represent more than 40 percent of all moratorium, also severely limit state efforts the integration of public health strategies
Medicaid spending and almost a quarter to use their public programs as a building into other health care reforms, happens
of Medicare spending.50 Some states have block for coverage expansions.54 A state primarily at the state and local level. States
argued that all health care for the duals survey noted that “a vast majority of states are able to convene stakeholders and help
should be the responsibility of the federal indicated that the regulations would have provide a framework for collaboration to
government. Because dual eligibles have a real and significant impact on states and move these efforts forward. State health
substantial medical needs and cost more per beneficiaries.”55 care system redesign efforts can provide

State of the States 17


lessons about how to take on this work and of uniform interoperability standards—that If it can be assumed that national reform
how to overcome challenges. In addition, separate data from software applications—so will occur in the near future and it will
most of the necessary health information that providers and health systems that have a federal-state partnership as its
technology (HIT) infrastructure needed to purchase electronic medical record systems foundation, it will be critical to recognize
support these redesign efforts must be built and other HIT can be assured that those that a national strategy will not lead to
on the ground—states have been playing an systems will be able to exchange key medical uniformity overnight. While working toward
extensive role in this area as well. information. While states are moving ahead equity and less unwarranted variation in
in this area in a somewhat limited fashion, the cost and quality of care across states is
While states have been moving ahead on it is difficult for them to proceed, in part, critical, equity should not necessarily be
these issues, the federal government has a because many health care systems, hospitals equated with uniformity in the way that
number of levers that allow it to have, in a and employers cross state lines and they do programs are implemented across all states.
certain way, substantially more impact on not want to invest in information systems Understanding the diversity across the
the health care system than any individual that will not operate across those borders country means that any uniform national
state. By leveraging and aligning the and across systems. States recognize that strategies, especially those targeting the
purchasing power of the federal programs it does not make sense for 50 states to set uninsured, will have varying impacts and do
of Medicare, Medicaid, the Veterans Health 50 different standards, so they are waiting not guarantee uniform national outcomes.61
Administration, the Indian Health Services for federal regulators to set the needed
as well as the FEHBP, payment reforms to benchmarks so that investment in HIT can One major area where extreme variation
encourage better processes and improved move forward. exists is in insurance market rating
outcomes could be accelerated. requirements; in essence, there are 50
There is a dearth of federal standards and different health insurance markets, so
Federal programs could provide the guidelines in the area of quality metrics. To it will be important to understand how
leadership to emphasize evidence-based reduce duplication of effort and capitalize a national plan will affect each of those
care and to use their claims data to establish on efforts underway, most states are using markets. As another example, focusing on
better baselines; set goals for improving quality measures that have been approved the variation in public program eligibility
population outcomes; improve risk- by the National Quality Forum or national levels, the effects of a federal policy to allow
adjustment methodologies; and reward accreditation organizations such as the all adults up to 133 percent FPL into the
results.59 The federal government could also National Committee on Quality Assurance Medicaid program will vary across states
promote the use of comparative effectiveness and the Joint Commission. However, depending on previous efforts to expand
research in benefit design, value-based variation in quality and efficiency across the coverage to adults. In addition, many
purchasing, and for determining best clinical country remains60 and a national strategy of the states that have not enacted prior
practices. The federal government could and national benchmarks coupled with the expansions may not have the financial
consider including state programs (e.g., necessary resources are needed to reduce this resources to provide the required state
Medicaid, public employees) in any Medicare variation and the unacceptable amount of match under such a requirement.
demonstration projects on payment reform poor quality.
and delivery system redesign. However, Three major possible solutions could
because states can move more quickly, the State Variation in the address this variation in impacts across
federal government could also assist states by Context of Federal Reform states; the federal government could: 1)
developing a new process to allow Medicare While there may be broad agreement among make no attempt to address the variation in
to participate in state-based all-payer the many stakeholders in the health care impact and let each state fend for itself; 2)
databases and other state pilots. system and across political parties about the provide variable assistance, both financial
overall objectives for health care reform— and technical, to the states based on each
Federal leadership and support to encourage expand access, improve quality, and contain state’s need; or 3) recognize that it may
the rapid adoption of HIT and the use of costs, there is substantial disagreement about need to allow states to comply with the
requisite interoperability standards are how to achieve these goals. federal guidelines in a sequenced way over
critical. The health care sector is in dire need

18 State of the States


time.62 A combination of variable assistance Conclusion: Building a Despite the need for collaboration between
and sequencing could be the best method Strong State-Federal federal and state governments, many state
to help states comply over time. Any federal Partnership officials fear that some federal reforms could
financial assistance should also aim to Many of the ideas related to essential have a negative impact on states. This is based
not penalize those states that have been elements of a federal-state partnership on the experience of the CMS August 17
able to expand coverage recently. While are not new—during the national reform directive, the citizenship requirements under
“maintenance of effort” is almost always discussions in the early 1990s, the Reforming DRA, the “clawback” provisions under the
encouraged when new programs are enacted, States Group provided recommendations Medicare Part D legislation64 and inflexible,
those states at the forefront should benefit that still hold true today, including the burdensome Medicaid regulations. The
in some way from any new federal funding establishment by the federal government federal government has often made changes
that may accompany requirements to of “a timetable for action, standard core to federal-state programs without appropriate
increase eligibility. benefits, and standards for access to consultation and communication with
and quality of care, cost containment, affected states. As a result, states have been
Arguably, states will always want more administrative efficiency, and portability of forced to shoulder additional financial burden
funding from the federal government coverage between states, …[and that] the in the context of ambiguous or conflicting
and also maximum flexibility; a huge federal government should grant the states directives from the federal government.
open question is what are the minimum flexibility to implement reforms that meet
requirements that should be expected from federal requirements and that equitably and While states may be skeptical about the
the states in exchange for this funding and efficiently address access, coverage, and cost possibility of national reform and anxious
flexibility? The variability between states containment...”63 about the parameters of such reform,
also impacts this tension between the need inaction is not an option. A collaborative
for both leadership and flexibility from the federal-state partnership that builds on
federal government. the respective strengths of each offers real
potential and should be considered.

State of the States 19


State of the States

Lessons learned from state


reform efforts

As national reform is discussed during the upcom-


ing year, current state reform efforts can provide
some guidance about the process and policies
of reform. Other states can also learn from the
efforts of those who have been pioneers in the
area of health reform.

20 State of the States


Comprehensive Reform is Compromise and Consensus n Find supporters wherever possible.

Possible: Massachusetts Building If it is difficult to get important


Sets the Standard with a As health reformers seek to learn from the stakeholder groups to support proposed
Public-Private Approach experience of states, it quickly becomes reforms, it may be possible to convince
When Massachusetts passed its health apparent that there are fundamental differences key leaders who represent those
reforms in 2006, the policy environment in the political possibilities in some states groups. For example, if support from
changed in a fundamental way: compared to others. While there is growing the statewide business organization is
Massachusetts demonstrated not only consensus around the policy of coverage difficult to obtain, it may be possible to
that comprehensive reform is possible but expansion, there are still huge hurdles to find support in a local chapter or a key
that it can be accomplished in a bipartisan surmount in working out the politics of reform, business leader.
manner. Throughout 2008 policymakers both in Statehouses and among the interested n Get supporters on the record.

watched uninsurance rates fall as various stakeholder groups. Specific reforms may be Initial support for reform can fade
aspects of the reform became effective stymied or suddenly become possible based through a long negotiating process.
(see page 30 for a full description of the on the personalities and influence of particular In addition, key allies may not deliver
progress of Massachusetts health reforms). groups in a given state. With that caveat, there the needed political and financial
Massachusetts succeeded by using a mixed are several “lessons learned” related to building assistance to gather support for reform.
public-private approach, representing a political support among stakeholders that can Gathering supporters early and getting
compromise between those who support a be observed across states. commitments for the ways they plan to
single payer plan and those who advocate help is critical.
for an entirely private model. This general n Leadership is essential. Leadership

in both the executive and legislative n Keep your eyes on the prize –

strategy was resoundingly accepted and
branches is critical for reforms to be Part I. While legislators or groups
incorporated by all the states that developed
enacted. If there is no strong political may have significant concerns about
or proposed serious plans for reform,
leadership behind a reform effort, it specific pieces of reform legislation,
including California, Colorado, Maine,
will likely founder as it encounters the it is important to not lose sight of the
New Jersey, Oregon, Pennsylvania, Vermont,
inevitable vested interests that would bigger picture in order to maintain
and others. All aimed for practical solutions
prefer the status quo. strong overall support for reform.
that build on the current system.
Reform efforts can easily fail in the
n Be inclusive. An inclusive consensus-

face of strong opposition if support is
building process is transparent and gives lackluster or begins to wane.
stakeholders real input. While it may not
be possible to gain the support of all the n Keep your eyes on the prize—

interested groups, a process that gives Part 2. The perfect should not be the
the relevant groups real influence and enemy of the good. There are states in
a seat at the table can prove helpful for which a moderate, bipartisan reform
gathering needed support. proposal was unable to pass due to
opposition from the right and the left.
n Build relationships early. It is important

Particularly for those who strongly
to start building trust and relationships support universal coverage, it may be
with stakeholders early. Once a reform worth supporting a plan that is not the
proposal begins to move, it may move preferred option in order to achieve a
quickly and there may not be time shared goal of expanding coverage.
to build the alliances that could help
support reform. Early relationship
While having an open and inclusive
building also contributes to a sense that
consensus-building process has been
reform is inevitable and participation is
important in several states, it is possible to
better than exclusion.
overstate its role and importance in health

State of the States 21


reform. There are examples of reform Financing Redirect Money Currently in the System:
proposals conceived by a few key individuals Finding sufficient and sustainable funding Peter Orzag, when he was director of the
in leadership (Maryland 2007) and also of for comprehensive reform has been a Congressional Budget Office, stated that,
failed state efforts where significant resources challenge for every state. The same will be “a variety of credible evidence suggests
were invested in promoting compromise true for the federal government. States have that health care contains the largest
between stakeholder groups (New Mexico taken several different approaches that may inefficiencies in our economy. As much as
2008). Comprehensive reforms have failed be instructive. $700 billion a year in health care services
and succeeded for a variety of reasons. are delivered in the United States that do
Consensus-building is no magic bullet, but Provider Taxes: A number of states have not improve health outcomes.”66 For this
key stakeholder opposition to proposed had provider taxes in place for some time. reason, it would seem attractive to attempt
legislation never helps either. For example, 43 states have some kind of to fund coverage expansions by redirecting
provider tax, and 30 states taxed more than money in the current system. The problem
States that have established a consensus- one category of providers.65 A majority of with this approach is that funding for
building process around comprehensive these taxes were used to increase provider coverage expansions is needed immediately,
health reform have done so for several reimbursement levels, but a few states while the savings garnered through delivery
reasons. These include: also used them to expand health coverage. system reform can often only be realized in
Minnesota, for example, established a tax the longer term. In addition, it is difficult
n Government leaders are seeking input
on health care providers in 1992 that has to quantify these savings and then funnel
and assistance putting a plan together. A proved to be a reliable source of funding for them back into paying for coverage.
given governor or legislative leader may their coverage efforts. This assessment on
make increased access to health coverage providers is broad-based, as opposed to a Maine attempted to fund their coverage
a priority, but needs time and help premium tax, in that it taxes everyone who subsidy through a Savings Offset Payment
putting a final plan together. uses health care, including those who are (SOP), which was designed to capture
self-insured. Funds collected through this and redistribute savings in the health care
n A stakeholder process may be a way

mechanism have risen with health system resulting from multiple reform
to educate key interest groups and
care inflation, a key consideration as health initiatives under the Dirigo Health Reform
government officials on the issues related
care inflation has continuously outpaced Act. These included limits on annual capital
to health reform. Informed leaders will
general inflation. investments and savings to providers from
make better decisions than those without
reduced uncompensated care. While it was
much exposure to the issues.
During the California reform effort, the enacted with more than two-thirds support
n If a leader has made health coverage a
final bill included a provider tax on hospital in 2003, in practice the SOP proved to
priority but does not have the political services, but not on physician services. be politically controversial—especially
ability to pass reform immediately, a Hospitals agreed to this assessment because regarding the methodology by which cost
stakeholder process may be a way of they found that—in general—hospitals savings are calculated—resulting in a
sustaining interest in the topic until the would recoup the cost of the tax through court challenge in 2007. Although Maine’s
political situation is more favorable. reductions in uncompensated care. Supreme Court upheld the SOP, nearly all
n Implementation is notoriously difficult
(Physicians, who are not required to serve parties have agreed for some time that a
and key stakeholders will be needed the uninsured in the same way that hospitals new funding source was needed to ensure
during the implementation stage to are, would see uneven benefits from the continued viability of the Dirigo
ensure that any reform proposal is expanded coverage based on the number of reforms.67
ultimately successful. A collaborative uninsured patients they see.) In this way, a
process builds support that will be hospital provider tax is a useful mechanism States that have pursued efforts aimed
needed when the program inevitably for the state to recoup some of the savings at lowering the growth of health care
encounters obstacles later in the process. to the health system that will result from spending over time have had some success.
reform. For more information on provider Minnesota Governor Tim Pawlenty set a
taxes, see the Provider Tax box on page 34. goal in 2007 of reducing health care costs

22 State of the States


by 20 percent (from projected spending most do have some disproportionate purchase insurance if they can afford it.
based on current rates of growth) by 2011. share hospital (DSH) funding that can Businesses are assessed a fee if they do
This emphasis on cost containment can be be redirected into coverage expansion. In not offer insurance to their employees.
seen in Minnesota’s 2008 health reform law. California’s plan, they sought to recoup Government also pays a portion. Of course,
The law contains a provision that requires funds that were being spent by counties Massachusetts is also an exception in that
the measurement and assessment of the on indigent care. States and the federal the state already had significant
cost savings effectiveness of the reforms. If government should use caution in tapping funds available in the form of their
certain cost containment targets are met, safety net funding, however. Safety net uncompensated care pool.
the repayment of a transfer of funds from providers—especially those providing care
Minnesota’s provider tax fund to its general in underserved areas—may need transitional A potential downside of this approach
fund is triggered. funding as they make the shift from caring is that “shared responsibility” also may
for those without insurance to the newly mean “shared pain.” It may result in more
The state is working toward that goal with insured. In addition, extra resources may opponents to a reform proposal than
several initiatives: still be needed to maintain services for hard- advocates, particularly if the necessary
to-serve populations. Finally, no coverage financial resources being spread to various
n Administrative simplification, which

expansion is likely to reach everyone, so stakeholders are large. California and New
requires all payers and providers
consideration must be given to continuing to Mexico also used the language of “shared
to conduct routine administrative
provide health care for residual populations responsibility” as a principle to guide their
transactions electronically by the end of
who may remain uninsured. ultimately unsuccessful efforts to fund
2009 and requires payers to use a single
comprehensive reform.
statewide implementation guide for
Sin taxes: Finally, many states have used
claims interpretation;
tobacco taxes to fund their coverage Sustained Effort
n Requiring electronic prescribing for all
expansions. This has proven to be a popular Many states are learning that health reform
prescriptions by 2011 and electronic funding source with state legislatures because takes sustained effort over several years.
health records (EHRs) by 2015 for all it promises to also achieve the public health This has played out in several ways:
providers; goal of reducing smoking, especially among
n Standardized statewide quality

younger smokers. The concern about this n Massachusetts did not pass

measurement of all providers and a funding source is that revenues are likely to comprehensive health reform until
transparent ranking of state health care decline over time while health care spending its third attempt. Both incremental
providers based on cost and quality of is likely to grow. States have also considered and failed attempts at health reform
care, using a newly established all-payer taxing soda, wine, and beer. Other unhealthy can be seen as laying the groundwork
database; foods—like candy or snacks—could be next. for future efforts. Either can be a
But such taxes are not without their critics. good educational process for both
n Transformation of the payment system

In both Oregon and Maine, these so-called government and stakeholder groups.
in the state through a statewide quality “sin” taxes failed in public ballot initiatives— They can also build momentum and
incentive payment system and payment Oregon failed to pass a tobacco tax to fund support for future efforts.
for baskets of care; and their children’s health program and Maine’s
n States like New Jersey, Iowa, and

n Public health initiatives and funding to
beverage tax was repealed when put to a
Wisconsin are taking a phased
reduce the disease burden in the state public vote.
approach, also referred to as sequential
over time, with a particular focus on reform—or incremental reforms with
those diseases linked to obesity and Shared Responsibility: The Massachusetts
a “vision.” Policymakers are developing
tobacco use. reform is the most notable example of a state
multi-year plans, enacting building
that explicitly aimed to have each group that
One source of current spending that is block reforms and planning to pass
would benefit from the reform contribute
being tapped by states is safety net spending. additional reforms in subsequent years.
to funding it. Individuals are required to
While few states have a large, well-funded
uncompensated care pool like Massachusetts,

State of the States 23


n Many states—like Oregon, Colorado,
will create this sense of urgency among state the amount of uncompensated care
and New Mexico—have developed a and federal leaders. In any case, states have that health care providers must offer.
stakeholder process for putting together learned that it is difficult to build and sustain The cost of these uninsured patients
a reform proposal over time. In Oregon support among affected stakeholders without currently is passed on to other health
this process was set in place by the a sense of urgency or inevitability, because care purchasers. Therefore, a mandate
legislature, and was led by multiple there are so many who are heavily invested in would reduce cost shifting from the
working groups. In New Mexico, the status quo. uninsured to the insured.
Governor Richardson led a three-year
n “System-ness.” A mandate reduces the

process of gathering input and putting Individual Mandate current fragmentation of care, with
together a plan. The individual mandate included in the uninsured patients currently seeking
Massachusetts reform has generated significant care from emergency rooms and
Sustained effort is also needed once interest nationally, yet the idea of making other safety net providers. In theory,
legislation has passed. States have learned insurance compulsory is a complex one. If if everyone had insurance, they could
that reform proposals can succeed or fail in the aim is to achieve near-universal coverage, maintain a continuous source of care
the implementation process. Programs must state experience so far has demonstrated that a with consistent preventive and primary
have simple, understandable rules. Outreach voluntary system is not sufficient. Nevertheless, care, which would improve their overall
and education are crucial. Government an individual requirement to buy insurance health and reduce long-term costs to the
officials must continue to work with raises serious political, administrative, and overall system.
stakeholder groups to ensure the programs policy questions.
meet their needs and do not have negative
From a policy perspective, those pursuing an Benefit Design and
unintended consequences. Plus, strong
individual mandate must consider: a) how Affordability
evaluation mechanisms must be put into
to make the policy affordable to those who The Massachusetts Connector Board
place at the outset. Evaluations allow policy
are being required to buy it; b) the richness was forced to grapple with both
makers to adapt the program as needed as it
of the package of benefits that people are affordability standards and benefit design
moves forward.
required to purchase; and c) how to enforce in the context of the Commonwealth’s
the requirement. In general, researchers have individual mandate. Massachusetts based
A Sense of Urgency Creates
found that “the effectiveness of a mandate their affordability standard on income,
Opportunity
depends critically on the cost of compliance, premiums, age, and geographic location.
One of the major reasons Massachusetts
the penalties for noncompliance, and the They then set minimum creditable
was ultimately able to pass their health
timely enforcement of compliance.”68 coverage standards to ensure that
reforms was the threat of losing significant
individuals have adequate coverage.69
federal funds that were—at the time—being
While the policy challenges are significant,
directed to care for the uninsured. The
the benefits are substantial. They include: Many advocates have argued that an
federal government told state officials that
affordability standard should include
they needed to convert their Medicaid safety
n Distribution of Risk. An individual out-of-pocket costs like deductibles,
net funds into an insurance model or risk
mandate requires everyone to be part of coinsurance levels, and co-payments.
losing federal financing for care of those
the risk pool, which prevents people from There is considerable debate about the
individuals. Reform was viewed as inevitable,
waiting until they get sick to buy coverage. appropriate levels for the cost of these
so all the relevant stakeholders had an
It more broadly spreads risk and allows the variables but, in general, there is agreement
incentive to stay at the table to improve the
premiums of healthy people to support the that levels of both premium and out-of-
bill rather than try to defeat it.
costs of those in need of medical services; pocket costs should be related to income
this is the very purpose of insurance. It also and the ability to afford those costs.
Reformers in other states have wondered
enables the government to require insurers
how to create a similar sense of urgency
to sell policies to everyone, regardless of States have grappled with benefit design in
in their own states and whether reform is
health risk. their Medicaid and SCHIP programs and
possible without a perceived crisis. It remains
also as they have regulated their private
an open question whether spiraling health n Fairness. Because a mandate brings

insurance markets. States have had to
care costs and the current economic crisis everyone into the system, it reduces

24 State of the States


address the question of benefit design in legislation in 2008 that will reform payment increases when the amount of money in
state-based programs that offer subsidies for policies, promote health (medical) homes, the system is decreasing under certain cost
private or public/private plans offered in the emphasize prevention and public health, containment strategies rather than when it
individual and small group markets. There is and lead to even greater cost and quality is increasing as it might under a coverage
significant variation on the approach states transparency.70 Of course, Minnesota has also expansion program.71 (Note: For additional
are taking. Some states are actively pursuing been a quiet leader in the area of expanding information on cost containment and
policies that promote a high level of choice coverage, boasting the lowest uninsurance quality improvement, see page 54.)
between plans while other states have rate in the nation after Massachusetts.
focused on ensuring that their residents are Conclusion
purchasing meaningful coverage. A majority While many coverage advocates are While there are clear differences in both
of states have begun to look at ways to ensure concerned that taking on cost containment, the policy and political environments at
that insurance policies promote wellness by systems improvement, and coverage the state and federal levels, there is much
removing barriers to preventive care and expansion at the same time will make that federal leaders can learn from states
chronic care management services. comprehensive reform politically impossible, as they turn their attention to national
the recent trend in states is to address these health reform. This section only begins to
The Relationship Between issues together. This may be particularly touch on all the state-level health reform
Reducing Costs, Improving important in the near future given the initiatives—both large and small—that can
Quality and Expanding economic downturn and the growing be instructive for federal policymakers. The
Coverage concern of Americans related to rising health upcoming sections on small group market
While Massachusetts has charted a path on care costs. Cost concerns are an impetus for reforms and quality and cost containment
health coverage reform, Minnesota has set reform, but cost-cutting initiatives (especially in particular include many additional
the standard on cost containment through those with short-term savings) are likely to “lessons learned” from state capitals across
collaborative efforts by public and private raise opposition from some provider groups. the nation.
health care purchasers and by passing major Opposition from affected stakeholders

State of the States 25


State Coverage Strategies: Evolving with
Minnesota passed comprehensive delivery system reform legislation. Maryland implemented Medicaid expansion and established
2008
a small business premium subsidy program. Several states pursued strategies to cover all children, including Iowa, New Jersey,

Alaska—Governor Sarah Palin established the Alaska Health Care Commis- Kansas—Passed a health reform bill that includes an expansion of Health-
sion to provide recommendations for and enable the development of a state- Wave (Medicaid and SCHIP) for children from the current level of 200 percent
wide plan to address the quality, accessibility, and availability of health care. FPL to 225 percent FPL beginning in 2009, and to 250 percent FPL by
2010—once federal funding becomes available.
Colorado—Enacted an SCHIP expansion to 225 percent FPL from 205
percent FPL for Colorado’s Child Health Plan Plus (CHP+). Louisiana—Enacted an SCHIP eligibility expansion for children up to 250
percent FPL from 200 percent FPL.
Connecticut—Released a draft report, authored by the HealthFirst Con-
necticut Authority, that makes recommendations for expanding coverage and Maryland—Implemented a Medicaid expansion from 30 percent FPL to 116
transforming the delivery system. percent FPL for parents and a premium subsidy program for small businesses.
This legislation is expected to cover approximately 100,000 previously unin-
Florida—Governor Charlie Crist signed into law Cover Florida and Florida sured Maryland residents.
Health Choices. Cover Florida calls for the state to negotiate with insurers
to provide a low-cost insurance product for the uninsured. Florida Health Massachusetts—Law enacted to promote cost containment, transparency
Choices expands the number and types of plans available to the uninsured. and efficiency in the delivery of quality health care. The uninsurance rate falls
to 2.6 percent.
Iowa—Enacted health reform legislation to address the quality and affordability
of health care among Iowans. The legislation expanded coverage for children Minnesota—Passed a broad and historic health reform bill focused on the
up to 300 percent FPL by 2010. It also created the Iowa Choice Health Care improvement of health care coverage and affordability. It included payment
Coverage Advisory Council to develop a plan to provide health coverage to all reform, expanded price and quality transparency, chronic care management,
state residents within five years. administrative efficiency, and public health. The reform requires that health

Both Massachusetts and Vermont began implementing their new reforms. California worked toward comprehensive reform
while a number of states continued developing proposals or refining models hoping to enact new reforms in 2008 and 2009.
2007

California—Governor Schwarzenegger announced a comprehensive health Indiana—Reforms enacted that increase tobacco taxes, providing funding for
care reform proposal, prompting significant state and national debate. Special immunization programs, Medicaid expansions, increased Medicaid reimburse-
session of the state legislature convened to address health care reform; ment rates, tax credits for employers that establish Section 125 plans, and
revised proposal introduced. Assembly passes reform bill. tobacco prevention and cessation programs. The state received federal waiver
approval for the Healthy Indiana Plan.
Colorado—The Blue Ribbon Commission for Health Care Reform approved
a set of recommendations, which would require state residents to purchase Kansas—Passed a bill that creates a phased-in premium assistance program
health insurance or face a tax penalty, and would expand eligibility for the that provides subsidies to Kansans who make below 100 percent FPL for pur-
state’s public programs. chasing private insurance actuarially equivalent to the state employee health
plan. The Kansas Health Policy Authority presented health reform recommen-
Connecticut—Passed reform bill increasing Medicaid reimbursements for dations to the legislature.
physicians and hospitals, expanding eligibility levels for pregnant women
and children, and requiring automatic enrollment of uninsured newborns in Maine—Governor Baldacci signed a bill allowing the DirigoChoice program to
HUSKY, the state’s Medicaid and SCHIP program. New Authorities charged be self-administered.
with developing recommendations for overall health care reform and for
strengthening the safety net. Maryland—Governor O’Malley signed into law a bill that will expand Medicaid
eligibility and offer subsidies to small businesses to offset the cost of providing
Hawaii—Passed several bills that expand health coverage to infants and coverage to employers.
children, raise the reimbursement rate for Medicaid providers, and reestablish
insurance rate regulation provisions. Massachusetts—Massachusetts’ individual mandate to obtain health
insurance took effect July 1. Minimum creditable coverage and affordability
Illinois—Following the collapse of agreement with the legislature, Governor standards were determined by the Connector board.
Blagojevich began implementing, through executive authority, an expansion of
the state’s FamilyCare plan and other reforms. Missouri—Passed a reconfigured state Medicaid system called MO Health-
Net. The Legislature restored coverage and benefits to some populations
whose services were eliminated two years ago.

Massachusetts and Vermont demonstrated that bi-partisan compromise and comprehensive reforms are possible at the state level.
2006

Several other states approved or began implementing coverage initiatives focused on children and working uninsured adults.

Arkansas – CMS approved a waiver to allow Arkansas to receive federal Kansas – Received federal approval for their reform proposal under the DRA.
Medicaid funds for a program that will provide low-cost health coverage to
small businesses. Kentucky – Moved forward on their Medicaid redesign plans after receiving
approval for their state plan amendment under the DRA.
Idaho – Taking advantage of the state plan amendment process provided
in the DRA, the state split the Medicaid and SCHIP population into three Maryland – Legislature over-rode Governor Ehrlich’s veto of the “Fair Share
major benefit plans. Act.” Later in the year, the U.S. District court struck down the bill, declaring the
measure was pre-empted by ERISA. The state has appealed the decision.
Illinois – All Kids program implemented. Many other states propose similar
plans to cover all children. Maine – Blue Ribbon Commission on Dirigo Health established to evaluate
For more information on state strategies, visit www.statecoverage.net/matrix.
26 State of the States
components of the state-subsidized coverage program for
the uninsured, particularly Dirigo’s funding mechanism.
Time and Effort * While this timeline aims to highlight the major activity in states; it is
not inclusive of everything that has occurred in the past few years.

New York, Wisconsin, Illinois (2006) and Pennsylvania (2007).

care cost savings be measured against projected costs without reform. The bill also Ohio—An advisory group appointed by Governor Ted Strickland produced a com-
expanded public coverage for childless adults from 215 percent FPL to 275 percent prehensive report that included recommendations to reduce the number of uninsured
FPL. Ohioans by half and to increase the number of small businesses able to offer coverage
to their workers.
New Hampshire—Enacted a health insurance plan designed to make coverage more
affordable to small businesses by emphasizing wellness programs and prevention. Oklahoma—The Oklahoma State Coverage Initiative team, a group of state leaders
representing the state legislature, government agencies, the private sector and tribal
New Jersey—Governor Jon Corzine signed into law a health reform bill which requires organizations, released their Blueprint for Oklahoma report with draft recommendations
all residents 18 years old or younger to have health insurance coverage and which for ensuring that all Oklahomans have access to high quality health care and affordable
legislative sponsors describe as the first phase in guaranteeing health coverage for all health insurance.
New Jersey residents. This bill also included an increase in eligibility for parents in the
FamilyCare program from 133 percent FPL to 200 percent FPL. Oregon—Released a comprehensive plan authored by the Oregon Health Fund Board
to create a world-class health system for Oregon.
New York— After CMS denied its waiver request, New York implemented an SCHIP
eligibility expansion from 250 percent FPL to 400 percent FPL with state funds alone. Utah—Early in the year, created a task force to develop recommendations for health
reform. Drafted recommendations included various insurance market reforms; stream-
North Dakota—CMS approved North Dakota’s request to expand SCHIP eligibility lining and standardizing various aspects of provider, insurer and consumer interactions
from 140 percent FPL to 150 percent FPL. and communications; and requiring certain contractors who do business with the state
to offer health insurance to their qualified employees.

Congress and the administration failed to reach agreement on the reauthorization of the State Children’s Health Insurance
Program (SCHIP).

Minnesota—Governor Pawlenty announced his Healthy Connections proposal to Rhode Island—Launched HealthPact RI plans that encourage small businesses to
make the state’s Medicaid program more affordable for children, and expand eligibility. offer health coverage to workers. Initiated a series of stakeholder meetings designed to
Other features include rewards for healthy behaviors, a requirement that small busi- result in recommendations to the 2008 General Assembly related to cost containment
nesses establish Section 125 plans, and a Massachusetts-style Connector. and affordable coverage for uninsured residents.

New Mexico—Governor Richardson unveiled a comprehensive reform proposal South Dakota—Legislatively created Zaniya Project Task Force, developed a plan,
that would require all state residents to purchase coverage. including action steps and timelines, to provide health insurance to uninsured South
Dakota residents.
New York—Finalized a budget that will expand health insurance coverage for children
by raising eligibility from 250 percent FPL to 400 percent FPL, the nation’s highest ceil- Tennessee—Launched Cover Tennessee program which includes several expansions
ing for SCHIP eligibility. to cover children, uninsurable adults, low income workers, and small businesses.

Oklahoma—Governor Henry signed legislation expanding income eligibility from 185 Vermont—Vermont began enrolling eligible residents into Catamount Health on
to 200 percent FPL under the Insure Oklahoma program, which provides health insur- October 1, 2007.
ance subsidies to businesses.
Washington—Passed several bills to provide access to coverage for all children in the
Oregon—Governor Kulongoski signed the Healthy Oregon Act, providing a timeline for state by 2010, and to create a Connector-like program called the Washington Health
comprehensive health reform recommendations, and establishing the Oregon Health Insurance Partnership (WHP).
Fund Board. Ballot Measure 50 failed, leaving in question funding for a children’s cover-
age expansion. Wisconsin—Increased the cigarette tax by $1 per pack, providing funding to expand
health care coverage to nearly all children in the state through the state’s new Badger-
Pennsylvania—Under his “Prescription for Pennsylvania” plan, Governor Rendell Care Plus program.
began pursuing an ambitious coverage expansion, alongside health systems
improvements and efforts to promote healthy behavior.

Several states also took advantage of the flexibility outlined in the DRA to redesign their Medicaid programs.

Massachusetts – Passed a landmark comprehensive bill designed Rhode Island – Legislature passed a number of new health initiatives including several
to cover 95 percent of the uninsured in the state within the next coverage expansions focused on providing premium relief for small businesses.
three years.
Tennessee – Legislature passed Cover Tennessee program, which
Oklahoma – Legislature approved expansion of O-EPIC program to cover busi- includes several expansions to cover children, uninsurable adults,
nesses with 50 or fewer employees. low-income workers, and small businesses.

Pennsylvania – Legislature approved funding for Cover All Kids, a program allow- Utah – Revamped its Covered at Work program and introduced the
ing families with incomes above the SCHIP eligibility level to purchase health insur- new Partnership for Health Insurance program, which provides
ance for their children on a sliding scale basis based on income. Implementation to subsidies for low-income workers who are enrolled in coverage
State of the States 27
begin January 1, 2007. provided through their employers.
State of the States

State strategies: success


varies; vision remains

This year’s summary of state strategies for health reform highlights the dramatic variation that has existed
among the states in 2008. Some states were attempting to enact sweeping reforms, others passed incremental
changes, while still others did not have health care high on their agenda. Despite the uncertainty caused by the
beginning of the economic downturn and with State Children’s Health Insurance Program (SCHIP) restrictions
from the Centers for Medicare & Medicaid Services (CMS), many states were able to make progress.

Northeastern states like Maine, Pennsylvania are examples of states that other states, such as Arkansas, Connecticut,
Massachusetts and Vermont continue to tried but failed to pass comprehensive Ohio, Oklahoma, Oregon and Utah,
advance implementation efforts, with health reform legislation in 2008. These used 2008 to build consensus and create
Massachusetts demonstrating particularly states will benefit in the coming years from recommendations ranging from increases
strong success in covering the uninsured the statewide dialogue that the proposals in coverage for specific populations to
and starting to focus more on tackling have stimulated. substantial system redesign.
unsustainably high health care costs.
Iowa, Minnesota, and New Jersey passed This section categorizes state reforms
Other states entered 2008 with comprehensive legislation during the year that will increase in order to reflect general similarities in
plans for health reform, ranging from coverage and, particularly in the case of trends and approaches. It organizes the
universal coverage for all state residents Iowa and Minnesota, will move the states wide range of steps taken and reforms
to system-wide reforms to address quality forward in containing health care costs and pursued.
improvement and cost containment. improving quality. Additionally, a handful of
California, New Mexico, Kansas, and

28 State of the States


Northeastern States While it was enacted with more than contribute to poor health was a sensible
Continue Implementation two-thirds legislative support in 2003, the way to fund a health program and that it
of Comprehensive SOP proved to be controversial in practice was necessary to help support the 18,000
—especially regarding the methodology by people who have coverage through Dirigo.
Reforms
which cost savings are calculated—resulting Baldacci urged Maine voters to oppose
In 2008, the three Northeastern states of
in a court challenge in 2007. Although Maine’s the repeal but Health Coverage for Maine
Maine, Vermont and Massachusetts continued
Supreme Court upheld the SOP, nearly all had just $440,000 to support a campaign
implementation of their comprehensive health
parties have agreed for some time that a new opposing the tax repeal. Voters opted, by
reforms. While Maine and Vermont included
funding source was needed to ensure the a wide margin, to repeal the new taxes.
measures to address cost containment and quality continued viability of DirigoChoice.73  This means that Dirigo will continue to be
improvement from the start, Massachusetts funded through the SOP system, although
is balancing continued implementation of its Further, the savings determined by the this funding mechanism for 2009 again has
original health reform initiatives focused on Superintendent of Insurance through the been challenged in court.77
access with more comprehensive measures to adjudicatory process each year has been
address cost and quality. lower than the DirigoHealth Agency’s Maine’s health care reform has
estimates of savings, resulting in reduced encountered obstacles along the way.
Maine revenue for the DirigoChoice subsidies. These include lower than expected
Maine enacted its Dirigo Health Reform in 2003. revenues, which resulted in lower
The legislation had three aims: to increase the In April, Maine Governor John E. Baldacci DirigoChoice enrollment numbers,
rate of health coverage, to improve quality, and signed into law a bill aimed, among an a cap being placed on the program
to control costs. This reform was the first of its array of other reforms, at changing the and controversy over funding sources.
kind in the nation.72 One piece of the Dirigo financing for DirigoChoice. Revenue would Nonetheless, the state has made
Health Reform is the DirigoChoice Health Plan, come from increased taxes on beer, wine, considerable progress in increasing its
which is intended to provide an affordable health and soda, and a flat surcharge on insurers.74 rate of insured residents, combating
insurance option to small businesses, the self- According to legislative fiscal analysis, malt escalating health care costs, and creating
employed, and eligible individuals who do not beverage and wine taxes were expected to the framework for a more cost-effective
have access to employer-sponsored insurance. raise $7.5 million in the first year, while and efficient health care system.
Using subsidies, DirigoChoice offers discounts on soda taxes were projected to provide $9.2
monthly premium payments and reductions in million.  The assessment on insurers would Among the six New England states, Maine
initially have raised $33 million, increasing had the highest rate of uninsured residents
deductibles and out-of-pocket costs on a sliding
to $37 million in 2010 and $38 million in prior to Dirigo, but by 2006 had the lowest
scale to enrollees with incomes below 300 percent
2011.75 The new taxes were to fund both rate among those states. Massachusetts
of the Federal Poverty Level (FPL).
DirigoChoice and long-debated insurance then replaced Maine as the New England
market reforms, with close to 20 percent state with the lowest rate of uninsured
The DirigoChoice subsidies have been funded
of the revenue to support a reinsurance after introducing its own health reform
through a Savings Offset Payment (SOP)
plan to provide rate relief in the individual legislation, but the rate of uninsured Maine
mechanism that was designed to capture and
market.76 residents continues to fall. Similarly,
redistribute savings in the health care system Maine had the highest average annual
resulting from multiple cost containment After Baldacci approved the new financing growth in premiums of any state in New
strategies, including: structure in April, a political action committee England before Dirigo, but has had the
n The “Capital Investment Fund,” an annual
backed by beverage companies and the Maine lowest in the region since enactment of
limit on capital investment under the state’s State Chamber of Commerce, called Fed Up their reforms.78
Certificate of Need program; With Taxes, ran an aggressive campaign to
repeal the taxes. The group gathered more Maine has made significant progress
n Rate regulation in the small-group

than 90,000 signatures to get the tax repeal in health reform but the positive
insurance market; on the ballot as a people’s veto question, and developments have largely been
n Voluntary targets on hospital expenditures; spent an estimated $3.5 million on their overshadowed by conflict over program
campaign. They focused their advocacy on financing, and it appears that Maine will
n An increase in physician and hospital taxes, not health coverage. The opposing enter 2009 with continued controversy in
payments to reduce cost shifting; and coalition, Health Coverage for Maine, argued this area.
n Uncompensated care cost savings resulting that a tax increase on beverages that can
from providing coverage to the previously
uninsured.
State of the States 29
Vermont 40 percent. By the end of February 2008, n Financial Reform
In 2005, Vermont was faced with a 3,344 individuals were enrolled in
– A common form of enhanced
situation where about 60,000 Vermonters Vermont premium assistance programs
provider payment across the three
(about 9.8 percent) lacked health out of the estimated 10,341 who are
major commercial insurers in
insurance. Three-quarters of these eligible. Vermont’s most recent survey in
Vermont and Medicaid (Medicare is
reported cost as the central reason for fall 2008 found its uninsured rate is now
not participating)
their uninsured status. About half of about 7.6 percent.81
the uninsured were eligible for existing – Shared costs across all payers
public programs but were not enrolled.79 Vermont’s health care reform is (except Medicare) for CCTs
In response, the Vermont legislature and financed by: n Health Information Technology
Governor Jim Douglas reached agreement
Individuals who pay sliding scale – Web-based clinical tracking system
on a series of health care reform bills n

premiums based on their income; called DocSite


aimed at achieving near-universal coverage
by 2010. n A contribution from employers based – DocSite supports age and gender
on the number of employees; appropriate health maintenance and
Since the first health care reform bills were care for chronic diseases
signed into law in 2006, Vermont has been n Revenue from an increase in tobacco
taxes; n Evaluation

working to implement a comprehensive
set of legislation to make health care n Medicaid savings due to employer- – Multi-payer claims database
affordable, accessible, and of high quality sponsored insurance enrollment; and – Clinical process measures
for all Vermont residents. Through Green
n Matching federal dollars under a federal – Health status measures84
Mountain Care, the state and its partners
Medicaid demonstration waiver.82
have made available a family of low-cost
and free health coverage programs. One Several communities throughout the
of these programs, the Catamount Health Vermont’s health reform efforts related state have begun piloting the Blueprint
Plan, offers a non-group insurance product to wellness, prevention, and chronic and states and communities around the
for uninsured Vermont residents and care management rely on the premise country are watching this model to see
began enrollment of eligible Vermonters in that improving the quality of care and if it reduces costs and improves chronic
2007. Catamount Health continues to be preventing disease are effective ways to condition management in the state.85
the centerpiece of the reforms. Vermont reduce overall health care costs in the long
also has several programs to address run. The Vermont Blueprint for Health Massachusetts
the affordability of health insurance is a plan involving a statewide partnership Massachusetts is still the only state that
through premium assistance programs. to provide information, tools, and support has implemented an individual mandate
The state provides premium assistance to Vermonters who suffer from chronic and therefore continues to draw much
for Catamount Health on a sliding scale conditions and to the providers who of the nation’s attention with its unique
basis to enrollees with incomes under 300 care for them.83 Some of the key and comprehensive reform plan. Enacted
percent FPL and also provides premium components of the Blueprint integrated in spring 2006, Massachusetts’ landmark
assistance to individuals and families pilot design include: health reform law seeks to cover nearly
in this same income category to enable all of its residents within three years.
enrollment through their employer- Enactment of the law represented the
n Multidisciplinary Community Care

sponsored insurance plan.80 culmination of more than a year of
Teams (CCTs)
negotiations and compromise between
Vermont set aside $1 million for the Green – Staffing mix designed by the lawmakers and former Governor Mitt
Mountain Care outreach campaign, which community to supplement existing Romney. Four major principles have
began in late 2007. The state contracted resources guided the state’s health care reform
with a media firm to create a campaign – CCTs in each community include initiative throughout its evolution:86
designed to get the word out about the prevention specialists
range of Vermont health programs, n A public/private partnership that

especially the new premium assistance – Integration of public health
requires the participation of a
programs. The media launch increased prevention and care delivery
wide range of stakeholders and the
visits to their Web site by about four times dedication of both federal and state
and calls to their toll-free number by about funds to ensure subsidized coverage.

30 State of the States


n Transparency around health care quality
Both the comprehensive benefit design On December 18, 2008, results from the
and costs with the 2012 goal of being of the Commonwealth Choice plans and 2008 Massachusetts Health Insurance Survey
a state that consistently ranks among the idea of a Connector helping residents were released revealing that—based on
those states achieving the highest levels obtain affordable health coverage have survey results from summer polling—the
of performance in health care. generated particularly strong interest uninsurance rate in the state had fallen even
among states.88 further to 2.6 percent of the total population.
n A shift from free-care safety net funding
to insurance funding by redirecting public Only 167,300 people remain uninsured.92
funds previously spent on uncompensated When the Massachusetts Division of Health
care into coverage for individuals in an Care Finance and Policy released its August While the Commonwealth Care cost per
insurance-based system. 2008 report, Health Care in Massachusetts: individual has been less than anticipated,
Key Indicators, an editorial in the New the unexpected success of enrollment has
n An emphasis on shared responsibility

York Times described the Massachusetts required funding adjustments. The first-
among the government, employers,
plan to provide health insurance to all its year cost of the program has grown from
individuals, health plans, and health
residents as “more and more successful an expected $472 million to $630 million.
care providers. Massachusetts is the
with each passing month.”89 The most
first state to attempt near-universal
significant finding from the report was that In late September, CMS granted
health coverage for its residents by
more than 439,000 people have acquired Massachusetts a three-year, $10.6 billion
issuing an individual mandate, in
health insurance since the reforms were Medicaid waiver that will enable the state
combination with a requirement that
implemented in mid-2006. That number to expand its landmark health reform
employers of 11 or more provide a
minimum amount of health insurance is two-thirds of the estimated 650,000 legislation. The waiver gives Massachusetts
or pay $295 annually per worker people who were without insurance at the the authority to spend about $21.2 billion
per year.87 time of the plan’s inception.90 Other key over the next three years. This amount is $4.3
figures for Massachusetts since the time of billion more than was permissible under the
States continue to follow with interest
implementation include: previous waiver agreement, which expired
the developments of the Massachusetts
on June 30. The federal government granted
health reform plan. The state’s four main
n The overall uninsured rate dropped
a number of waiver extensions during the
measures designed to expand health
from 6.4 percent in 2006 to 5.6 percent intervening months while negotiations were
insurance coverage are:
in 2007. Massachusetts is now the state occurring. This waiver agreement preserves
with the lowest rate in the nation. existing eligibility and benefit levels, along
n A mandate that nearly all adults 18 and

older obtain health insurance or face tax n More than 40 percent of the newly

with federal matching funds for all programs.
penalties; insured gained private coverage without It also enables Massachusetts to meet all of its
any government subsidies. Among the health care obligations for FY 2009.93
n The expansion of MassHealth (Medicaid)
for children up to 300 percent FPL and state’s insured population, 82 percent
have private insurance, 14 percent are The governor’s plan to pay for the higher
insurance subsidies for low-wage small
covered by Medicaid, and 3 percent costs includes increasing contributions
business employers and workers;
are enrolled in Commonwealth Care from businesses, insurers, and providers,
n The creation of Commonwealth Care,
and instituting a tobacco tax (amounting
subsidized plans.
a subsidized health insurance program to an increase of $1.00 per pack of 20 and
for adults up to 300 percent FPL who n The percentage of employers providing $1.25 per pack of 25). Furthermore, in an
are not eligible for MassHealth and do health insurance rose to 73 percent in 2007 effort to prevent crowd-out, premiums
not have access to employer-sponsored and increased to 79 percent in 2008. in the Commonwealth Care program
insurance; and
n The number of residents using free care
have been raised by 10 percent, with an
n The development of the Commonwealth from hospitals or community centers additional increase in co-payments for some
Health Insurance Connector which is a declined by 37 percent from the past beneficiaries, to make the plan more in line
health insurance purchasing mechanism year and the cost of uncompensated with private plans.94
with responsibility for Commonwealth care decreased from $166 million in the
Care as well as Commonwealth first quarter of the pool’s 2007 fiscal In September 2008, the Massachusetts
Choice—an unsubsidized health year (FY) to $98 million in the first Commonwealth Health Insurance
insurance program for uninsured adult quarter of FY 2008.91 Connector Authority Board voted
Massachusetts residents. unanimously to proceed with new
minimum standards for health coverage

State of the States 31


that were first drafted in 2007. The goal of this While Massachusetts has initially focused n Directs the MassHealth Payment Policy

requirement is to ensure that all Massachusetts on coverage and accessibility, there has been Advisory Board to study methods of
residents have sufficient coverage while still an increased focus on cost containment and improving reimbursement or bonuses
making the insurance affordable. In general, in quality improvement measures. In August, for those engaged in primary care.
order to meet the state’s minimum creditable the governor signed a bill (S.2863) intended
coverage standards, health benefit plans must to promote cost containment, transparency,
Measures to enhance quality and
offer coverage for prescription drugs, physician and efficiency in the delivery of quality
transparency of health care costs include:
services (including preventive and primary health care.
care), hospitalization, ambulatory patient
n Mandated reporting of “serious
services, mental health and substance abuse The bill includes measures that promote
reportable events,” adverse drug events,
services, and emergency services. efficiency in the health care system,
and hospital-acquired infections.
including:
The new rules also will mandate that effective n Regulation of marketing practices to
January 1, 2010, plans must provide coverage n Creating a Special Commission on
health care professionals from the
for radiation and chemotherapy, maternity Health Payment Reform to investigate pharmaceutical and medical device
and newborn care, medical/surgical care, restructuring the current payment industry based on an industry-accepted
and diagnostic imaging and screening tests. system to provide incentives for efficient code of conduct.
The board voted to delay until January 2010 and effective care.
n Regulation and oversight of the disposition
the implementation of the new standards
n Authorizing MassHealth (Medicaid)

of the reserves and surpluses of health
to give employers an opportunity to revise
to establish a “Medical Home” insurers and providers by the Division of
their policies, if necessary. Individuals will
demonstration program to promote Health Care Finance and Policy.
be responsible for making sure that their
coordinated, comprehensive patient care
coverage meets the state’s minimum standards
and strengthen the role of primary care
and will be personally assessed for failure to And finally, the bill encourages adoption of
providers.
comply. The tax penalty for not obtaining health information technology by:
coverage under the universal healthcare law in n Establishing a Pharmacy Academic

tax year 2008 ranges from $210 to $912 a year, Detailing Program to educate providers n Setting a goal of statewide adoption

depending on age and income; these penalties on the use of lower-cost brand names
of electronic health records by the year
are likely to increase in 2009. 95 and generic drugs in place of expensive
2015 to improve patient safety and
brand name drugs, where therapeutically
lower costs.
At the start of the program, Massachusetts appropriate.
employers were required to meet a premium n Dedicating $25 million to the new

n Authorizing the Department of Public

contribution standard by satisfying at least Massachusetts e-Health Institute
Health to establish a list of so-called
one of the following: contributing at least 33 to facilitate the financing and
“never-events” to be updated annually
percent of the cost of an employer-sponsored implementation of a statewide,
and that prohibits health providers
group health plan offered to all full-time from billing for costs related to a “never- compatible system of electronic health
employees or enrolling at least 25 percent of event.” records. 97
full-time employees in their health insurance
plan (to which the employer must be making To improve access to health care services
the bill: As Massachusetts introduces its adjusted
a financial contribution). Starting January 1,
financing schemes, states considering
2009, the determination of what it means to
n Creates a new Health Care Workforce
their own ambitions for state health
be a contributing employer will become more
Center within the Department of Public reform will continue to look to that state
stringent for employers with 50 or more full
Health to improve access to health care as an invaluable case study. In a written
time equivalent employees. Companies with
services in the Commonwealth, with a statement, Senator Edward M. Kennedy
more than 50 full-time equivalent employees
particular focus on primary care. noted that Massachusetts has “made major
will be required to meet both of the above
progress in the program’s first two years,
tests, while companies with 50 or fewer full n Institutes a new loan forgiveness

cutting the number of uninsured in half and
time employees will continue to satisfy the fair program for doctors and nurses who
increasing employer-sponsored coverage.
share requirement by meeting either of the commit to practicing certain specialties
in medically underserved areas. [The Massachusetts] experience with health
two tests.96 
reform…argues well for our debate on
n Requires health insurers to recognize and

national health reform next year.”98
reimburse nurse practitioners as primary
care providers.
32 State of the States
substantial Health Maryland: Medicaid Expansion and Small
Reforms passed in 2008 business assistance
In 2008, three states—Iowa, Minnesota, and In July, Maryland began implementing The law also creates the Health Insurance
New Jersey—enacted substantial reforms health reforms that were enacted in 2007. Partnership, a premium subsidy program
that expanded public coverage programs The aim of the reforms was to expand for small businesses that began enrollment
and included private sector reforms. The health insurance coverage under the in October 2008. A business is eligible to
Working Families and Small Business receive a subsidy of up to 50 percent of the
laws encompass several components that are
Health Coverage Act. The law mandated a premium from the Maryland Health Care
emerging as trends among states considering Medicaid expansion and a premium subsidy Commission if it meets the following criteria:
health reform. The Minnesota and Iowa program for small businesses in order
laws included both coverage expansions to provide health insurance coverage to n The business has between two and nine
and significant delivery system redesign. In approximately 100,000 previously uninsured employees;
Minnesota, the state enacted some of the Maryland residents.99
n The average employee wage is below
most innovative and wide-reaching payment $50,000;
Maryland will phase in its Medicaid
reforms of any state, including a “baskets of expansion over several years. The first n The employer establishes a Section 125
care” concept (described on page 37) and a phase, called the Medical Assistance to Plan; and
single statewide payment system to be used Families program, increases Medicaid
across payers. Both the Iowa and Minnesota eligibility for parents from 30 to 116 percent n The employer did not offer health
FPL ($20,500 for a family of three).100 insurance to employees during the 12
laws included public health and wellness
To date, more than 16,000 parents and months before applying for the subsidy.101
programs to promote healthier lifestyles
caretaker relatives have enrolled. The
among residents. The Maryland Health Care Commission is
second phase of the Medicaid expansion
responsible for administering the partnership
increases the services offered under the
program. It provides assistance to employers
The New Jersey and Iowa reforms represent Primary Adult Care (PAC) program. The
establishing Section 125 plans and expects
a sequential approach to health reform. program will continue to be available to any
to enroll more than 1,500 businesses in the
Neither bill aimed to achieve universal eligible individual, though the state may
program’s first year.102 As of December 1,
have to cap it at some point because of
coverage, but both explicitly pointed to 2008 more than 80 businesses had enrolled,
budget constraints. PAC, which for the past
future efforts to continue expanding access covering 420 lives. For a health plan to be
few years has provided basic primary care
eligible for a subsidy, it must encourage
to health insurance. The sponsors of the services to low-income adults, will—over
wellness by providing employees with a
New Jersey legislation have already prepared the next three years—add benefits such
health risk assessment and incentives for
a second phase of their proposed reforms, as hospitalization and low-cost or free
health-promoting activities, preventive care,
stating that the recently enacted law is only prescriptions. The goal is to increase the
and chronic care management.103
benefit package over a number of years
the first step in more comprehensive health
until PAC beneficiaries receive full Medicaid
reform efforts. Iowa’s law calls for several benefits. These benefits would be phased in
commissions charged with considering over a number of years.
options for future reforms. A legislatively-
created council will develop a plan to cover
all Iowa residents within five years.

Iowa and New Jersey set a goal of covering


all children in their states. They join
Massachusetts, Illinois, Wisconsin, and
New York, which have set similar goals. In
addition, Iowa and New Jersey are using state
tax return forms to check coverage rates.

Iowa
In May, Iowa enacted health reform
legislation (House File 2539) based on
recommendations developed by the
governor and the Legislative Commission
on Affordable Health Care Plans for Small
Businesses and Families. The commission
State of the States 33
Provider Taxes: Worth a second look consisted of 10 members of the General
Assembly and 19 members of stakeholder
As states pursue coverage expansions, they leave states with a gap in funding coverage groups, including consumers.105 The reform
are likely to consider a variety of means to programs. law includes a broad variety of provisions
raise the revenues needed to fund those regarding the affordability of health care
expansions. For states interested in taking While provider taxes have come under criticism for Iowans, including the following:
significant steps toward universal coverage, for unfairly burdening providers, they offer states
they face a substantial financial barrier. a strategy for recouping uncompensated care
Significant coverage expansions require new costs built into the current reimbursement
n Children’s Coverage—The law aims to
funding to support subsidies for making system—costs that would no longer be incurred extend health coverage to all children.
private insurance more affordable and to by providers under a universal coverage The state will cover children in families
help finance public program expansions. system. Furthermore, providers are able to pass with incomes up to 300 percent FPL
Most coverage expansions require states to the cost of a provider tax on to consumers, who beginning in FY 2010, pending CMS
raise funds by increasing existing taxes or tend to be less price-sensitive, particularly when
authorization and sufficient federal
imposing new ones. insurance partially covers costs. A one-time,
small increase in the price of medical services
funding. The law requires families
Some tax options are broad-based, and is unlikely to deter individuals from seeking earning above 200 percent FPL to
others are more targeted. Broad-based needed care. pay a premium. The expansion could
options such as increases in the retail sales extend coverage to approximately
or personal income tax have the power to A further question is whether insurers would 9,000 uninsured Iowa children. The
generate substantial revenues from relatively cover the price increase that would likely result
Department of Human Services will
small tax hikes. They also offer the advantage from a provider tax when providers pass on the
of spreading the burden across a broad extra cost to payers. A state Medicaid program,
receive more than $40 million in General
population. For this reason, however, broad- for example, would need to increase payment Fund appropriations from 2009 to 2011
based taxes are politically difficult and may rates to providers to make up for the tax to implement the expansion programs.
face steep opposition. In addition, with the increase. Providers may not be able to recoup The state intends to launch the program
economic outlook increasingly bleak, states the tax directly on Medicare services. on July 1, 2009, for FY 2010. One
may be reluctant to pursue tax increases.
significant provision of the law requires
Provider taxes also offer a broader revenue
With the recent economic downturn, states base than other “health” taxes such as premium
Iowans to indicate on their income tax
are already facing increasing demands taxes levied on insurers. While premium taxes forms if their dependent child has health
on public programs as they experience may generate less political opposition, only care coverage.
significant declines in revenues. As a result, non-self-insured plans pay the tax. With self-
most states would be well advised to insured plans exempt, a large segment of the
n Iowa Choice Health Care Coverage

consider a variety of revenue sources for population would not share the burden of a Advisory Council—The council
funding or maintaining health care coverage premium tax. In contrast, everyone who uses is charged with assisting the Iowa
expansions. While no tax increase is ever medical services would share the cost under a Comprehensive Health Insurance
popular, a health care sales tax—or provider provider tax scenario. Association (Iowa’s high-risk pool) with
tax—offers some economic advantages
development of a comprehensive plan to
to states looking for ways to maintain States have relied on provider taxes for some
current coverage levels or to fund coverage time: 43 states have levied some type of
provide health care coverage to all state
expansions. Under such a tax, providers provider tax, and 30 tax more than one type of residents within five years.
remit to the state a small percentage of the provider. Governor Arnold Schwarzenegger, for
n Continuous Eligibility—The Medicaid

payments they receive for patient services. example, included a hospital provider tax as a
program will provide continuous
mechanism to help finance the increased state
A provider tax offers a stable source of expenditures that would have resulted from his eligibility for 12 months for children
revenue that is largely immune to economic proposal for achieving near-universal coverage who might otherwise become ineligible
cycles, because the need for medical in California. because of changes in family income.
services is relatively stable in both good and
bad economic times. Given that the growth While any tax proposal raises issues of fairness, n Annual Report—The Department of

rate of health care costs has historically a provider tax offers some advantages such Revenue and the Department of Human
risen at a faster pace than the growth rate that it deserves consideration among the menu Services (DHS) must submit an annual
of the economy as a whole, a provider tax of state options for raising new funds to finance report to the governor and General
represents a largely recession-proof revenue coverage expansions.104
Assembly, providing: 1) the number
source. Revenues from other sources are
Adapted from Wicks, Elliot K., “Can a Sales Tax on of families claiming state income tax
not able to keep pace with the rapid growth
Medical Services Help Fund State Coverage Expan-
in health care costs and will eventually sions,” State Coverage Initiatives, July 2008

34 State of the States


exemptions for dependent children; 2) effect on January 1, 2009, and calls for a n Health Care Coverage to Caregivers—A
the number of families claiming state premium to be charged for those between two-year pilot program will offer premium
income tax exemptions for dependent 100 and 300 percent FPL. assistance for health care coverage to
children showing the presence or absence direct care workers. The program will help
n Healthy Communities Initiatives—A

of health care coverage for those children; determine if such assistance should be
grant program will promote healthy
and 3) the effect of the tax form reporting offered across the state.106
lifestyles, and the Governor’s Council on
requirements and subsequent outreach
Physical Fitness will develop a strategy Minnesota
and education activities on the number of
for the implementation of a statewide Minnesota passed a historic health care
uninsured children.
comprehensive plan to increase physical reform bill (Senate File 3780) in May at
n Enrollment—The DHS must develop
activity, improve nutrition, and promote the end of its 2008 legislative session. The
a plan to maximize enrollment and healthy behaviors. law is broad in scope and includes major
retention of eligible children in all public provisions that address improved health
n Medicaid Quality Improvement—A

coverage programs. care coverage and affordability, payment
Medicaid Quality Improvement Council
reform and price/quality transparency,
n Bureau of Health Insurance Oversight—
will be established to evaluate clinical
chronic care management, administrative
Located within the Insurance Division outcomes and consumer and provider
efficiency, and public health.107 Given
of the Department of Commerce, this satisfaction.
that the state has one of the nation’s
agency will assume responsibility for
n Transparency—A quality and
lowest uninsurance rates and a history of
ensuring uniformity and transparency of
transparency workgroup will develop collaboration and innovation in health
health insurance operations.
recommendations on cost and quality care delivery, Minnesota enters the
n Long-Term Living Planning and End-
measures in order to provide information current phase of health reform on strong
of-Life Care Education Campaign—The to consumers. footing. However, like every other state
Department of Elder Affairs must in the nation, it recognizes that its rising
n Reimbursement Accounts—The

implement a public education campaign health care costs are unsustainable. The
Commissioner of Insurance will
to inform state residents about long-term state is particularly focused on remedying
assist employers with 25 or fewer
care options and end-of-life care. misaligned incentives that reward the
employees with the implementation
n Medical Home System—The Department
and administration of Section 125 overuse, underuse, and misuse of care
of Public Health (DPH) must create and plans, including Medical Expense services. In addition, Minnesota is seeking
implement a system of medical homes Reimbursement Accounts and Dependent to improve quality relative to funds spent
focused on reducing health disparities, Care Accounts. (value) and to reduce variation of quality
improving quality, reducing costs, and relative to geography.108
n Pre-Existing Conditions—Pre-existing

promoting sustainability. The state’s
condition exclusions are prohibited To improve health care coverage and
Medical Home System Advisory Council
for consumers moving between plans, affordability, the law addresses several
will make recommendations to the
including to and from non-group policies. aspects of health reform:
DPH on the plan for implementing this
statewide system, which will coordinate n Dependent Coverage—Dependents under
health care services, monitor data age 25 or still full-time students may remain n Expand Eligibility for Adults—

collection on patient-centered medical on their parents’ or guardians’ health plans MinnesotaCare expands eligibility for
homes, and provide training and until they marry or leave the state. adults without children to 250 percent
education to health care professionals FPL, thereby increasing access to health
n Iowa Electronic Health Information
and families. The first phase of system care for an additional 12,000 residents.
Commission—The commission is
development will create a medical home It also reduces the MinnesotaCare
charged with developing a statewide health
for children eligible for Medicaid. sliding-scale premium to increase
information technology plan by January
affordability.
n Family Opportunity Act—The act
1, 2009. The system will expand the use of
provides a Medicaid buy-in option for electronic health records and improve health n Section 125 Plans—Employers who

individuals under the age of 19 with care quality to decrease costs. employ 11 or more full-time-equivalent
disabilities whose family income is at workers and do not offer group health
or below 300 percent FPL. The act takes insurance must establish and maintain
a Section 125 plan to allow employees

State of the States 35


Rhode island pursues health reforms in public and private sectors

Rhode Island Approved for Global Second, the state would build on current Rhode Island Follows Precedent Set by
Medicaid Waiver programs such as Rite Care to manage care Vermont
In August 2008, Rhode Island Governor approaches across all Medicaid populations. Rhode Island is not the first state to seek a
Donald Carcieri submitted the Rhode Island Third, the state would adopt approaches global Medicaid waiver that allows for greater
Consumer Choice Global Compact Waiver that link reimbursement to performance and flexibility in exchange for a cap on Medicaid
application to CMS. The Governor reported quality-of-care improvements. The waiver spending. In 2005, Vermont won approval
that it was approved by the agency on application also proposed greater care for a Section 1115 waiver known as the
December 22, 2008. The state legislature management across all Medicaid populations Global Commitment to Health Waiver, which
has 30 days to review and reject the plan to ensure better coordination of care and allowed the state to restructure its Medicaid
otherwise it is deemed approved. Rhode to establish Healthy Choice Accounts to program in exchange for a five-year, $4.7
Island’s global waiver application would encourage preventive care and healthy billion cap on Medicaid spending. The state
give the state significant authority to make lifestyles. Rhode Island estimates that the is financially at risk for keeping expenditures
changes to its Medicaid program in exchange waiver would save the state $358 million over below the target. The federal government
for a cap on federal funding of the program. five years, including savings that the state is pays 60 percent of the costs over the life of
already counting on to help close its FY 2009 the program.
The proposal calls for the state to operate its budget gap of $430 million.
Medicaid program under a Section 1115(a) Under its global waiver, Vermont established
demonstration waiver and would limit total Rhode Island’s waiver proposal has drawn its itself as a managed care organization, paying
Medicaid spending (state and federal) over share of criticism from both federal legislators itself a premium for each Medicaid beneficiary
the waiver period. CMS approved a $12.075 and advocacy groups. Lawmakers, including served. In addition, Vermont has the flexibility
billion spending cap through 2013, about the entire Rhode Island Congressional to use federal funds for non–Medicaid health
$350 million less that the state requested. delegation, have expressed alarm over an services and programs. Now that the waiver
apparent lack of transparency in negotiations is in its third year, state officials believe that
In exchange for the spending cap, the state between Governor Carcieri’s administration it has been extremely helpful in providing
would gain significant flexibility to change and CMS. Senate Finance Committee the flexibility needed to pursue financial
eligibility levels, services, and cost sharing. Chair Max Baucus (D-MT) and Senator Jay and organizational reforms. It has allowed
The waiver would use global budgeting as Rockefeller (D-WV) raised concern that the Vermont to maintain its expansion programs
the funding mechanism for all Medicaid waiver “could hurt” people and that the and to continue investing in other health-
populations in the state across all settings. “federal guarantee of health benefits for those related programs essential to the state. In
The state’s Medicaid reform plan focuses on in need” should not be “negotiated away.”109 the face of some of the same criticisms
three elements. First, the state would seek Advocacy groups are concerned that Rhode leveled against Rhode Island, the state
to enhance the availability of home- and Island’s waiver could lead to reduced access acknowledges that the waiver has not limited
community-based programs as alternatives to institutional long-term care and raise out- access or affected beneficiaries adversely.
to long-term care institutional settings. of-pocket costs for some beneficiaries. Like Rhode Island, Vermont’s Global

to purchase health insurance with pre- n Affordable Access—The law calls for a
To promote payment reform and price/
tax dollars. The law provides $1 million proposal to promote affordable access quality transparency, the law calls for the
in funding for grants to cover certain to employer-sponsored health insurance following:
employers’ cost of establishing Section through the use of direct subsidies and/or
125 plans. tax credits and deductions. n Quality Transparency—Increased
transparency and the development of a
n Value-based Benefit Redesign—A
n Administrative Streamlining—The law

single statewide system of quality-based
workgroup is charged with making intends to make it easier for people both
incentive payments for use by public
recommendations on the design of an to obtain information and applications
and private health care purchasers to
“essential benefit set” that provides for state public health care programs and
encourage quality improvement through:
coverage for a broad range of services to renew their enrollment. It also provides
and technologies. The benefit set must for more seamless transitions between – Public reporting of risk-adjusted
be based on scientific evidence of clinical programs and requires further study of quality measures based on health
effectiveness and cost-effectiveness and ways to improve coordination between outcomes, processes, and other
must require lower enrollee cost-sharing state health care programs and other measures such as care infrastructure
for certain services. programs such as the Women, Infant, and and patient satisfaction.
Children Nutrition Program (WIC).112

36 State of the States


Commitment to Health Waiver contains some workers at premiums 15 to 20 percent less supplemental fee per member per month,
elements of a block grant approach and than comparable products. fund a portion of a nurse care manager,
waives some federal rules related to benefits and provide the providers with consistent
and cost-sharing. Policymakers view the level Even though New Hampshire and Florida enrollment and utilization reporting.
of Vermont’s federal funding cap as relatively have already emulated HEALTHpact’s
generous, making the program difficult to program design, uptake of the plan in Rhode Rhode
n Island is revising its approach to
evaluate in terms of an alternative approach Island has been slow in the first year. Rhode rate factor review. The Office of the Health
to Medicaid’s traditional funding structure.110 Island has commissioned an evaluation Insurance Commissioner (OHIC) is authorized
In contrast, the proposed cap on Medicaid of the program to assess its impact and by statute to perform an annual review of the
spending in Rhode Island’s global waiver make recommendations for expanding rates that insurers propose to charge small
application has come under considerable its reach. The initial assessment indicates and large employers. Beginning in 2005,
scrutiny for fear that it is insufficient. that marketing has been a challenge given this authority was expanded to consider four
the various actors involved in health plan key factors: 1) solvency and soundness;
Rhode Island Pursues Additional Health decisions in the small group market, including 2) consumer protection; 3) fair treatment
Care Initiatives carriers, brokers, employers, and employees. of providers; and 4) improving affordability,
While pursuing its global waiver application, quality, and accessibility of medical care.
Rhode Island is also embarking on three The
n Chronic Care Sustainability Under its broadened authority, OHIC must
initiatives to improve the value and quality of Initiative is a collaboration among health evaluate whether the rate factors proposed
health care services in the state.111 plans and providers that builds on national by the health plans are built on sufficient
and local chronic care models and medical efforts to improve the affordability, quality, and
n HEALTHpact
plans are a new alternative home efforts. The initiative targets five accessibility of medical care. OHIC is working
to high premiums, high deductibles, or primary care pilot sites for a two-year to define the standards of evaluation to be
reduced health coverage faced by small pilot starting on October 1, 2008. Under used in the rate review process for assessing
businesses. All Rhode Island carriers offer the pilot, participating providers must the health plans’ affordability efforts. With the
HEALTHpact plans based on product agree to become certified as a Patient- evaluation, OHIC will establish a relationship
specifications outlined in regulations Centered Medical Home per National between premium rate approvals and
developed by the Office of the Health Committee for Quality Assurance (NCQA) expected system improvement priorities
Insurance Commissioner. The plans offer standards. The providers must also on the part of health plans, such as
wellness incentives to employees with cost participate in collaborative training (funded investment in health information technologies
consequences by targeting five behaviors by the Department of Health and Quality and efforts to encourage the use of primary
related to self-management. The plans Partners of Rhode Island and self-report care through payment reform and delivery
are available to all Rhode Island small on three chronic care conditions. In return, system redesign.
businesses (1 to 50 employees) and their participating health plans agree to pay a

– The inclusion of quality measures of incentives that: 1) motivate health n Means of Comparison—The
for primary care related to preventive care providers to deliver innovative, establishment of “baskets” or episodes of
services, coronary artery and heart high-quality/low-cost health care, and health care services promotes transparency
disease, diabetes, asthma, and depression. 2) motivate health care consumers to and accountability, allowing consumers to
patronize high-quality/low-cost providers. make relatively easy comparisons of cost
– Adjustments of quality incentive
The tools will be based on encounter-level and quality of care across providers while
payments to providers for variations
claims data and information on contracted motivating provider innovation on cost
in providers’ patient populations,
prices, with the Commissioner of Health and quality. In particular, providers will
based on a comparison of provider
developing both a method for calculating set their own prices for “baskets” of care to
performance against specified targets
providers’ relative cost and quality of care encourage greater transparency and price
and improvement over time.
and a combined measure incorporating competition.113
n Quality Measurement Tools—A powerful risk-adjusted cost and quality of care. The
To promote chronic care management, the
set of tools to allow consumers and health information will be disseminated to health
law requires:
care purchasers to compare providers care providers and the public. 
in terms of overall cost and quality of
n Coordination of Activities—Health
care. The tools will support the creation
care must be coordinated for people

State of the States 37


with complex or chronic conditions, and New Jersey The law includes several reforms to the
standards must be established for state In July, New Jersey signed into law a health individual and small employer markets.
certification of health care (medical) reform bill (S. 1557) described by legislative Major provisions pertain to:
homes. Health care homes will receive sponsors as the first phase in guaranteeing
care coordination payments from public health coverage for all New Jersey residents. n Expanded Rating Band in the Individual
and private health care purchasers. In sum, the law requires coverage for all Market—The difference in premium
residents 18 years old or younger, expands rates from one individual to the next will
To promote administrative efficiency, the law
eligibility for subsidized health insurance be expanded to 350 percent. With age
focuses on:
for adults, and introduces health insurance as the only basis for a premium rating
reforms designed to make individual and differential, plans will be more affordable
n Electronic Records—Electronic health
small employer health insurance more for the young and healthy. As a consumer
records must be consistent with federal
affordable.115 The health care coverage reform protection, rate increases for those already
standards for interoperability, and
law features the following components: covered under an individual policies will
all prescriptions should be ordered
be limited for the next five years to an
electronically by 2011.
n “Kids First” Mandate for Health Insurance amount no more than the lower of 15
n Uniform Claims Processing—A mandated Coverage—All children 18 years of age percent or the medical trend assumption
study and report will address how and younger must have health insurance used by the carrier to project claims.
uniform methods of processing claims coverage through an employer-sponsored n Greater Carrier Participation in the
can reduce claim adjudication costs for or an individual health benefits plan, Individual Market—A carrier must offer
health care providers and health plans. Medicaid, the NJ FamilyCare (SCHIP) individual market policies as a condition of
program, or the NJ FamilyCare Advantage participating in the small employer market.
To advance public health, the law requires a: buy-in program.
n Coverage for Dependents Age 30
n Increased Health Insurance Accessibility or Younger—Changes were made
n Statewide Health Improvement Plan—A for Low-Income Parents—Parents with to the eligibility criteria, terms, and
total of $47 million is appropriated for incomes up to 200 percent FPL are eligible administration of the law that had been
FY 2010 and 2011 to establish and fund a for the NJ FamilyCare program. enacted two years ago.
statewide health improvement program
in order to reduce the percentage of n Effective Use of State Charity Care n Minimum Loss Ratio for Individual and

Minnesotans who are obese or overweight Funds—Hospitals are prohibited from Small Employer Plans—Premiums must
and to reduce tobacco use. submitting charity care claims for be formulated such that the minimum
children under age 19 who present at loss ratio may be no less than 80 percent
hospitals for emergency care and are of the premium.
The reform requires health care cost savings eligible for NJ FamilyCare or Medicaid.
to be measured against projected costs in the n Greater Transparency of Insurance Broker
absence of reform. Estimates suggest that n Ongoing Enrollment Initiative— Fees—An insurance producer (agent
the reform measures will yield a possible Individual taxpayers must indicate on or broker) must notify an insurance
cost savings of about 12 percent by 2015, their tax returns the health insurance purchaser of the amount of any of the
representing a potential savings of about $6.9 coverage status of the taxpayer and following: commission, service fee,
billion compared to baseline projections.114 dependents, if applicable, as of the brokerage, and whatever other valuable
filing date. The taxpayer will receive consideration the insurance producer
an application for the Medicaid or NJ will receive from the sale, solicitation, or
FamilyCare program if the taxpayer or negotiation of the health insurance policy
dependents may be eligible for either or contract. A producer must also inform
program based on reported income. the Department of Banking and Insurance
how carriers compensate the producer for
the sale, solicitation, or negotiation of the
health insurance policy or contract.116

38 State of the States


Attempts to Enact n Subsidies and tax credits for low- and Given strong public support in California
Comprehensive moderate-income populations; for comprehensive health reform and
Health Reforms Face n Health plans required to meet an
the governor’s continued advocacy, it is
Obstacles possible that the unsuccessful attempts of
85 percent medical loss ratio and to
During 2008, state legislatures in California, 2007–2008 have laid the ground work for
guarantee issue by 2010; and
Kansas, New Mexico, and Pennsylvania future efforts. Unfortunately, California’s
n Cost containment and quality budget problems have worsened since
considered proposals for comprehensive
improvement measures, such as January 2008. Even though the health
health reform. Each state either failed to
implementation of health information reform legislation would not have relied
pass the reform proposals in their entirety
technology, significant cost and quality on the general budget for funding, budget
or considerably scaled back the proposals’
transparency efforts and value-based concerns are now the main focus among
reform provisions. Nevertheless, health
purchasing initiatives, and employers’ California policymakers.120
reform leaders in the four states acknowledge
required establishment of Section
that efforts to achieve comprehensive
125 plans.117 Kansas
health reform require a multi-year process
organized around education and activism In February, Daniel Weintraub of the In May, Governor Kathleen Sebelius signed
across several sectors. Thus, efforts in the Sacramento Bee wrote an opinion piece about into law a health care reform bill (S.B. 81)
four states should not be characterized as the state’s failure to pass comprehensive that will lead to modest gains in access to
failures but rather as near successes and reform. He argued that the bill died for many health care and delivery system reform. The
important first steps. These states are leading reasons but, in the end, was confounded law expands SCHIP eligibility for children
a critical national debate as they wrestle with by the reality of a legislature composed in households with income up to 225
some of the most important questions and of “leftist Democrats and right-leaning percent FPL beginning in 2009, and to 250
issues in health care. Republicans,” which made the passage of percent FPL by 2010—once federal funding
a centrist proposal remarkably difficult. In becomes available—from the current level
California addition, Weintraub noted that while “the of 200 percent FPL. In addition, the law
For California, 2007 was a year filled with bill did not suffer from a lack of public allocates $460,000 to expand eligibility for
high hopes and much preparation for support,” the process failed to keep the public pregnant Medicaid enrollees, $2.5 million
comprehensive health reform. The previous informed. to increase funding for safety net clinics,
State of the States noted that the outcome and $1.5 million for the Wichita Center
of negotiations involving Governor Arnold Although many meetings were held to garner for Graduate Medical Education to fund
Schwarzenegger, Assembly Speaker Fabian stakeholder support, failure to conduct rural rotations by physicians receiving
Nunez, and Senate President Don Perata enough public hearings limited general specialized training in Wichita.
on the compromise health reform bill (AB awareness of the proposal’s transformation
X1 1) was unclear. In mid-December, the into its final form. Even though Weintraub Under a 2007 legislative charge, the Kansas
California Assembly had approved AB and others have subjected California’s Health Policy Authority (KHPA) proposed
X1 1 during a special session, but the bill reform effort to considerable analysis, a 21-item health reform package with the
then failed to pass out of the Senate Health agreement is still elusive as to what factors goals of prevention, personal responsibility,
Committee in late January 2007 with a 1-to-7 most significantly contributed to the plan’s and providing and protecting affordable
vote against it. The bill would have provided rejection. Without doubt, concern over an health insurance. The legislature scaled back
health coverage for an estimated 3.6 million insufficient future funding stream was a the original, comprehensive health reform
Californians (about 70 percent of the state’s major factor.118 In any event, a significant package, leaving in place nine of the original
uninsured residents). The main components majority of Californians are concerned about policy recommendations as follows:
of AB X1 1 included the following: the state’s health care system and the need
for health reform legislation. A 2008 Field n Incorporating the medical home model
n Mandated coverage for all individuals; Health Policy Survey released in April found of delivery into Medicaid, SCHIP,
that 72 percent of voters supported the MediKan (a program covering the
n A financing mechanism shared across disabled before the receipt of federal
overall health reform plan.119
government, hospitals, employers, and disability payments), and the State
individuals; Employee Health Benefits Plan while
n Expansion of Medi-Cal and Healthy
Families for children, parents, and
childless adults;
State of the States 39
directing KHPA to develop systems Over the next year, KHPA will focus on “solid gains” toward achieving his main
and standards for implementing and securing legislative approval for several goal of health insurance coverage for all
administering a medical home by health reform recommendations, including children.126
February 1, 2009; a statewide smoking ban, an increase in the
tobacco products tax from $0.50 to $1.29 Pennsylvania
n Moving the Small Business Grant
per pack of cigarettes, and an expansion of In 2007, Pennsylvania Governor Ed Rendell
Program (created to help small businesses
Medicaid for parents and caretakers up to introduced his health care reform plan.
establish Section 125 plans) from the
100 percent FPL.123 Called Prescription for Pennsylvania,
Department of Commerce to KHPA;
the plan consisted of a comprehensive
n Standardizing insurance cards for New Mexico coverage expansion for adults age 19 to 64,
Medicaid enrollees; New Mexico undertook a multi-year health combined with programs to improve health
n Expanding the Community Health care reform process with recommendations care quality, contain health care costs, and
Record pilot project, which incorporates advanced by the governor that would have promote healthy behaviors.127 The first
claims data into patient electronic records; led to universal health coverage. Governor initiative under Rendell’s comprehensive
Bill Richardson’s HealthSOLUTIONS health care reform, announced even before
n Expanding HealthWave (Kansas SCHIP) proposal required state residents to purchase introduction of the full plan, was passage
outreach in order to enroll more eligible coverage—with lower-cost state-subsidized of a law to provide affordable health care
but non-enrolled children; plans available for eligible residents—and coverage to all Pennsylvania children. The
n Funding continuation of the Coordinated mandated employers to contribute to a state obtained federal approval in 2007 to
School Health Program with $500,000 fund in support of such coverage, with subsidize children with family incomes up
to continue bringing educational and the contribution offset by the amount to 300 percent FPL.
community resources into schools to help paid by any employer for employee health
with health education; benefits.124 After the legislature failed to pass Various components of Rendell’s broad
comprehensive health reform earlier in the health reform plan encountered significant
n Adding the Commissioner of Education
year, Richardson vowed to return to the opposition from the legislature. During
to the KHPA Board as a non-voting ex
issue in a special session. Before the special 2007 and 2008, the legislature offered
officio member as KHPA expands the
session, however, he set a scaled-back goal components of the health reform plan as
Coordinated School Health Program;
of expanding health coverage to all children. separate pieces of legislation. Although
n Providing dental coverage for pregnant He also proposed streamlining several state most components passed the Democratic-
Medicaid enrollees; and health programs to improve efficiency. controlled House, many of the reforms
n Providing tobacco cessation counseling In August, the governor called legislators failed in the Republican-controlled Senate.
services for pregnant Medicaid enrollees.121 into special session, with major health However, the legislature passed several
care reform a central priority. When the laws related to scope of practice for
In the end, out of these nine reforms, the special session concluded in late August, the physician assistants, certified registered
legislature funded only one—continuation legislature had agreed to the following: nurse practitioners, clinical nurse
of the Coordinated School Health specialists, nurse midwives, and dental
Program. Accordingly, KHPA Executive n To fund children’s health (including hygienists, all aimed at addressing serious
Director Marcia Nielsen stated that the behavioral health) at $22.5 million to workforce shortages. In addition, the
goal of comprehensive health reform “is a increase enrollment among eligible legislature passed a bill that, for the first
multiyear effort and the important debate children not already enrolled in Medicaid time, mandates hospital evidence-based
about reform in Kansas has begun.” She and SCHIP; and infection control plans, statewide infection
explained that “funding for health reform surveillance, and reporting of health care-
is a smart investment” and that “legislators n To fund $10 million to treat
associated infections.128
will need to hear the voices of Kansas developmentally disabled children.125
health care providers, patients, consumers Despite a state budget surplus accruing from One of the bills that the Senate passed
and businesses” if Kansas is to achieve oil and natural gas revenues, Richardson and the House amended is the proposed
comprehensive health reform.122 was unable to secure agreement on other Pennsylvania Access to Basic Care (PA
coverage expansions. He characterized the ABC); the bill is now awaiting action
outcome of the session as “modest” but with before the Senate Banking and Insurance

40 State of the States


Committee (SB 1137). PA ABC would and standardized benefit packages and give The second executive order created
provide health care access for the uninsured, the Insurance Commissioner greater power the Chronic Care Management,
help small businesses provide health care to review rates. Another bill passed by the Reimbursement and Cost Reduction
for employees, and move those enrolled in House would allow parents to continue Commission, which issued a strategic plan
the state’s current program for low-income, coverage on their policy for single children to transform how Pennsylvania provides
uninsured adults (adultBasic) into PA ABC. up to age 30. and pays for health care for people with
Pennsylvania has an estimated 900,000 chronic conditions. The Governor’s
uninsured residents, more than half of whom Governor Rendell was able to implement Office of Health Care Reform began
would be eligible for PA ABC. two measures in 2008 by using his power of implementing the strategic plan with a roll-
executive order. One measure created the out in southeastern Pennsylvania for more
Another bill passed by the House and now Pennsylvania Health Information Exchange, than 200,000 patients. Roll-out in south-
before the Senate (HB 2098) would allow which will provide the information central and southwestern Pennsylvania will
private insurance companies to refuse to pay technology architecture needed to support take place in winter 2009. 130
for serious, preventable adverse events.129 compatible statewide electronic health
Still another bill, HB 2005, passed the records and electronic subscribing by
House and would limit rating factors used sharing data collected in hospitals and health
for small group and individual coverage; it providers’ offices.
would require adjusted community rating

State of the States 41


States Establish reasonable per capita costs shared in an Cost containment and quality
n

Frameworks for equitable way by the entire population.132 improvement mechanisms—Improve


Health Reform the quality of care that Oregonians
A handful of states have either developed One of the central recommendations for receive and decrease costs using
recommendations for broad health system the 2009 legislative session is to create an various policy levers including: the
reform or are working toward the creation Oregon Health Authority to be a catalyst establishment of an all-payer/all-claims
of such recommendations. The Oregon for change by becoming the organizer and data collection system; development of a
Health Fund Board and the HealthFirst integrator of Oregon health care policy common set of measures and targets for
Connecticut Authority have spent the past and purchasing and the coordinator of quality improvement; increased use of
year constructing plans for health system the State’s investments in health service evidence-based practice; establishment
change with an eye toward immediate innovation. The Authority is to focus of an Oregon Quality Institute; and
legislative action. Ohio and Oklahoma on quality, costs, and the health of the simplification and standardization of
released similar recommendations on a population by using seven strategic administrative processes to decrease
smaller scale while the Utah legislative building blocks for change: administrative costs.
Task Force released draft bills. Arkansas is Purchasing strategies and insurance
n
on the path toward formulating a plan to n Improve access for children and
market reforms—Coordinate and align
rework its current health system. low-income adults—Provide health
the State’s purchasing policies across
insurance to all children in Oregon
public entities; create a health insurance
Oregon within the current delivery system by:
exchange/connector to consolidate the
The Healthy Oregon Act of June 2007 increasing public program eligibility
non-group market; consider developing
created the Oregon Health Fund Board, levels from 185 to 200 percent FPL
a publicly-owned health plan option;
a group of seven individuals supported with no cost-sharing requirements;
and use regulatory powers to monitor
by more than 150 Oregon volunteers, through sliding scale premium
and control increases in health insurer
who were tasked with reviewing research assistance to those children in families
administrative expenses as well as
and expert testimony and studying with access to employer-sponsored
provider charges.
successful models in other states and insurance (ESI); and, for children with
no access to ESI, the creation of a new Encourage new models of care
n
countries. In November 2008, the Board
program with sliding scale premiums delivery—Strategies include developing
released Aim High: Building a Healthy
for those between 200-300 percent integrated health homes (sometimes
Oregon, a comprehensive blueprint for
FPL and a full-cost buy-in for those called medical homes) and accountable
reforming Oregon’s health care system.
with higher incomes. Also, additional health communities to support them;
The blueprint’s recommendations were 14
low-income adults will be permitted integrating behavioral health with
months in the making and are the result
to join a reopened Oregon Health Plan physical health; preventing health
of the most extensive analysis of health
(enrollment is currently capped) which disparities through the use of culturally-
care in Oregon in 20 years—including
provides health coverage to low-income specific approaches to promote health
the collection of testimony from 1,500
Oregonians. and preventing chronic conditions;
Oregonians who submitted comments
restructuring payment systems to
during statewide town hall meetings. 131 These expansions will be financed using
encourage better organization of the
a restructured provider tax mechanism
delivery system; providing appropriate
The blueprint’s central message is that and possibly other revenue sources that
end-of-life care; linking population
Oregon’s health system is broken and that can leverage federal matching funds.
health and public health strategies
the pragmatic choice—not the idealist Future phases of coverage expansion
to the health care delivery system;
goal—is to transform the system by to approach near-universal coverage
and encouraging the development
aspiring to a new vision of world-class include a requirement that all residents
of interoperable health information
health and health care in Oregon. The obtain health insurance coverage,
technology and exchange.
overarching conclusion of the Board is that reforms to the non-group market, a
the Oregon health system should achieve “pay or play” employer payroll tax,
three objectives: a healthy population; and the development of an insurance
extraordinary patient care for all; and exchange/connector.

42 State of the States


n Ensure health equity for all—Focus was the work of the 12-member team who to help low-income individuals
strategies to address the social participated in the Coverage Institute hosted purchase private coverage; and
determinants of health through health by the State Coverage Initiatives (SCI)
– Create an insurance connector to
promotion, chronic disease prevention, program; a larger Healthcare Coverage
help implement coverage expansions.
reduced barriers to health care, and Advisory Committee that included nearly
improved quality of care. 50 representatives from stakeholder groups n The report also includes
aided in their work. recommendations to improve value
n Train new health care workers—
in the health care system and to
Develop a strategy to improve the
The recommendations in the report contain costs, including adoption
training, recruitment, and retention
include: of health information technology,
of all levels of health care providers
transparency and reporting
including assuring they are provided
n Employer Sponsored Coverage: requirements, and strategies that focus
the appropriate education to increase
on prevention, primary care, and
cultural competence. – Design a reinsurance program
chronic care management.
to reduce the cost of coverage by
n Federal-state relationship—Advocate
about 25 percent for eligible small n While not specified, the Advisory
for federal changes such as federal
businesses and individuals; Committee recommended that funding
waivers, additional funding and
for health reforms come from current
numerous other policy changes that – Provide premium assistance for
sources where possible and, where
support the health care goals of Oregon. low-wage workers;
this is not possible, from a broad
– Require employers to offer base of funding sources. The funding
The Board believes that access to health
Section 125 premium-only plans mechanism adopted should reflect the
and health care for all Oregon residents is
(see page 52); and principle of shared responsibility.
possible within a decade if the state builds
the infrastructure needed to deliver health – Extend coverage for dependents up
Ohio’s SCI team report is now in the hands
care with higher quality and at lower cost. to age 29.
of Governor Strickland and members of the
The report details a strategy for providing n Covering Lower Income Ohioans: Ohio General Assembly. Decisions about
universal access that includes building moving forward with the recommendations
– Employ outreach strategies for those
on the present insurance model while will be made as Ohio prepares for
individuals currently eligible but not
also developing a publicly financed consideration of its next biennial budget,
enrolled in public programs;
insurance plan to fit within the individual to be introduced in early 2009.134
market exchange. Currently, about – Increase Medicaid eligibility to 200
one in six Oregonians is without health percent FPL for parents; and Oklahoma
insurance coverage. In November, the Oklahoma State Coverage
– Allow childless adults up to 100
percent FPL to buy into Medicaid Initiative team, a group of state leaders
The blueprint stresses that investment representing the state legislature, government
managed care plans with state
in community clinics and public health agencies, the private sector, and tribal
subsidies.
initiatives are also crucial for providing organizations, released the latest version of
health services at the right point in time n Reforming the Ohio Insurance Market: their Blueprint for Oklahoma report.135
and for creating a healthier population.133 – Require those who can afford The report included draft recommendations
insurance to purchase it; for ensuring that all Oklahomans have access
Ohio to high quality health care and affordable
In July, an advisory group appointed – Guarantee issue in the non-group
health insurance by:
by Governor Ted Strickland produced market;
a comprehensive report that included – Adopt increasingly progressive n Lowering the cost of private health
recommendations for meeting two goals set rating rules to reduce the variance insurance;
by the governor—to reduce the number of in insurance premiums in the non-
n Reducing the number of uninsured;
uninsured Ohioans by half and to increase group market;
the number of small businesses able to n Increasing access to health care services;
– Provide sliding-scale subsidies
offer coverage to their workers. This report and

State of the States 43


n Reducing the insurance premium While the Authority is waiting for cost estimates Insurance market reforms, including
n

burden caused by cost-shifting from the before making final recommendations, the basic the creation of a new basic benefit plan
uninsured. design of their coverage expansion proposal is: called the Utah NetCare Basic Health
Care Plan; the allowance of mandate-
The primary areas of focus in the draft
n Expanded Medicaid/SCHIP eligibility for free benefit plans to be offered in certain
report include:
all residents with family incomes below circumstances; the establishment of
n Maximizing enrollment in public 300 percent FPL, including sliding scale an Internet portal for the purchase
programs for those eligible but not yet cost-sharing; the uninsured with access of these new plans; the inclusion of
subscribed; to employer-sponsored insurance would sole proprietors in the small group
received premium assistance to purchase market pool; and the establishment of a
n Developing an affordable basic health
private coverage. reinsurance pool.
benefits plan;
n Access to a restructured Charter Oak Streamlining and standardizing
n
n Generating sufficient public revenue; and
program, which currently allows families various aspects of provider, insurer,
n Encouraging the take-up of private to buy health insurance regardless of their and consumer interactions and
coverage. health status at premiums tied to income. communications; the bill also creates
The Blueprint report was shared with statewide a framework for demonstration
n A Connecticut Health Partnership, using
participants for feedback and the Oklahoma projects for delivery and payment
the state employee health benefit plan as a
team expects to have revised recommendations systems reforms.
base, will be available to all residents and
ready by the start of the Oklahoma legislative employers in order to improve employer Requiring certain contractors who do
n
session in February 2009. offer rates and employee take-up rates, business with the state to offer health
and to offer coverage to those in the non- insurance to their qualified employees.
Connecticut group market.
Arkansas
The 10-member, legislatively-created
The Authority also has multiple Arkansas is developing a strategic plan for
HealthFirst Connecticut Authority released a
recommendations for containing costs health care that encompasses short-term,
draft report in December that has identified an
and improving quality. Particularly, they intermediate, and longer-term components.
urgent need for expanded health coverage and
focus on the role of data collection and Work toward this goal is taking place
transformation of the system of care. The draft
analysis, emphasizing that data should drive through the Governor’s Implementation
report provides recommendations for ways to
policy development, implementation, and Group, which is identifying opportunities
expand and improve health coverage, while also
evaluation. The Authority also recommended to implement improvements that do
addressing issues that affect both the insured
that a public entity be assigned or developed not require legislative or other action,
and uninsured, such as health information
to oversee the proposed reforms and better including those that require cross-agency
technology, wellness, and chronic diseases.
coordinate state spending on health care. collaboration or coordination, and the
The Authority focused on the complementary
Governor’s Roundtable on Health Care,
goals of universal coverage and access to safe,
Utah which is developing strategies to improve
effective care for all Connecticut residents by
In March, Utah enacted H.B. 133 which, health, deliver needed health care, and
first establishing two workgroups—the Cost,
among other more immediate measures, enhance both worker productivity and
Cost Containment, and Finance Workgroup
established a framework for the development the state’s business climate. Nearer-term
(CCCF) and the Quality, Access, and Safety
and implementation of a strategic health goals include developing a package of
Workgroup (QAS). More than fifty individuals
reform plan. The legislation created the legislative initiatives for recommendation
representing a broad range of interested
Health System Reform Task Force, which to the governor for introduction in the
stakeholders made up each workgroup. The
was charged with creating a plan for health January 2009 legislative session, while
Authority first met in October 2007 and held
system reform. In December, the Task Force building political consensus to help
27 meetings between then and December 2008,
drafted three bills for introduction in the 2009 facilitate its passage.137
during which time it reviewed research and
legislative session.136 Those bills focus on:
expert testimony and also hosted nine public
forums throughout the state.

44 State of the States


Coverage Institute offers in-depth technical assistance to States

The Coverage Institute (CI), a targeted Robert Wood Johnson Foundation, through For
n the New Jersey team, the kick-off
SCI technical assistance program, was SCI, awarded development grants to meeting brought together key legislative
unveiled in 2007 and has helped states Arkansas, Kansas, Maryland, Minnesota, and executive branch leaders for a
address substantial and comprehensive New Mexico, Oklahoma, Oregon, Texas, and constructive conversation on health
care health reform throughout 2008. The Wisconsin. For the most part, the states are coverage, leading to the development of a
CI was instrumental in helping a group of using the funds to continue their involvement sequential coverage expansion proposal.
state leaders from the public and private in a stakeholder consensus-building Governor Corzine signed into law the
sectors deepen their understanding of the process, to fund experts to help them first phase of the reforms, sponsored by
implications of various programmatic options develop policy proposals, and to fund the Senator Joe Vitale, in July 2008.140
for expanding health coverage in their actuarial modeling of various policy options.
respective states. In addition, Colorado and New Jersey were
Perhaps one of the most important aspects
awarded microsimulation modeling grants.
of the Institute is collaboration—the
The CI began with a kick-off meeting that Both states are working with a team from
result of requiring teams to represent
brought together representatives of 14 the Urban Institute to develop and delineate
various components of government and
states (Arkansas, Colorado, Indiana, Kansas, a finite number of policy options for use in
the private sector. Such collaboration
Maryland, Minnesota, New Hampshire, a microsimulation model, and to understand
encouraged states to move beyond
New Jersey, New Mexico, Ohio, Oklahoma, important design and implementation issues.
political turf, to dampen political rhetoric,
Oregon, Texas, and Wisconsin). Each state
and to bring disparate parties together in
selected a team to participate in the highly Despite the severe budget setbacks
a neutral environment. As one state official
interactive process for developing policy and experienced by many of the participating
commented, “You can’t put a dollar figure
program recommendations. While the mix states, many have made extraordinary
on the importance of having SCI as a neutral
of participants varied by state, the teams progress. Throughout, this report highlights
third party spearheading the efforts.”
included senior executive branch officials, the successes of participating states, but
legislators, and decision makers from private a few examples of CI team achievements
The Coverage Institute has fostered a sense
purchasers, the advocacy community, and include the following:
of community among all participating states.
practitioners. Fifteen distinguished faculty
Participants stay in contact with one another
members shared their expertise on various The
n Ohio CI Team developed a
and are aware of each other’s progress
issues, including insurance market reforms, comprehensive plan to reduce the
through bimonthly conference calls. The
reinsurance, other methods to subsidize number of uninsured Ohioans by half; the
states also have participated in technical
coverage, connectors/exchanges, team presented the plan to the governor
assistance meetings that allow them to
Medicaid waivers and the Deficit Reduction in July 2008.138
advise and learn from one another. The CI will
Act, health systems improvement, and
The
n Maryland team developed a proposal, conclude in June 2009; however, SCI intends
strategies for building stakeholder and
subsequently enacted, that included a to announce the start of another Institute in
policymaker support.
Medicaid expansion for parents/caretaker spring 2009.
relatives with a phased-in expansion for
Following the initial meeting, participating
childless adults, along with as a small
states were then eligible to compete
business subsidy program that started
for additional funding for development/
offering assistance to small businesses in
microsimulation modeling or other reform
October 2008.139
development activities. In February, the

State of the States 45


State of the States

SCHIP Moves Forward in the


face of uncertainty

The U.S. Census Bureau reported that the number of uninsured


children in 2007 fell from the previous year by 500,000 to 8.1
million. The decrease is primarily attributable to an increase in
publicly sponsored coverage of children through Medicaid and
the State Children’s Health Insurance Program (SCHIP).141

46 State of the States


In 2007, Congress and the president failed to bill’s passage.148 Children in families with from 205 percent FPL) and, when fully
agree on legislation that would reauthorize income above 350 percent FPL may buy into implemented, will provide benefits for
SCHIP. Instead, they extended the current the existing FamilyCare (SCHIP) program an estimated additional 9,040 children
reauthorization until March 31, 2009. In and receive the same services available to and 686 pregnant women. The law
addition, the Centers for Medicare & Medicaid FamilyCare beneficiaries, with monthly also expanded CHP+ mental health
Services (CMS) issued a policy directive on premiums ranging from $137 for a family benefits to correspond with those offered
August 17, 2007, that made states ineligible with one child to $411 for a family with through Medicaid and allocated funds to
to receive federal SCHIP funds for children three or more children. The state estimates provide medical homes to approximately
with gross family income above 250 percent that 15,000 children could benefit from 100,000 Medicaid and CHP+ children.
of the Federal Poverty Level (FPL) unless the program.149 The law also increased The law permits further expansion to
the following two conditions are met: (1) 95 the FamilyCare income eligibility level for 250 percent FPL if funds are available in
percent of children with family income below parents from 133 to 200 percent FPL. With the future. Implementation will begin in
200 percent FPL are covered; and (2) employer- the expansion, the number of adults covered March 2009.155
sponsored insurance for children with family under NJ FamilyCare is expected to increase
income below 200 percent FPL has not fallen from 97,000 to 153,768 by the end of fiscal In June, CMS approved North
by more than 2 percentage points during the year 2011.150 Dakota’s request to expand SCHIP
previous five years. eligibility from 140 to 150 percent FPL.
New York’s fiscal year 2009 budget Implementation of the expansion began
If a state meets these standards, CMS requires allocates $19 million in state funds for a in October, with an additional 800
additional provisions to prevent crowd-out SCHIP eligibility expansion from 250 to uninsured children expected to gain
of private coverage. For children in families 400 percent FPL. After CMS denied New coverage during the first year. In North
earning above 250 percent FPL, the child must York’s request for expansion beyond 250 Dakota, however, families may disregard
be uninsured for at least a year to be eligible percent FPL, New York decided to fund child care expenses, payroll taxes, child
for SCHIP coverage, and the state must require its expansion with state-only money and support, and other expenses when
the maximum amount of legally permissible initiated implementation in September.151 calculating their income in determining
cost sharing.142 Eight states filed suit again eligibility such that children in some
the Bush Administration in October 2007, Planned Expansions of 250 families earning close to 200 percent
contending that the new eligibility rules either Percent FPL and Below FPL may qualify for coverage.156
force out children already in the program or CMS approved an increase for Indiana’s
leave many thousands of otherwise eligible SCHIP up to 250 percent FPL (from 200 Beyond Eligibility
children without coverage.143 In April 2008, percent), which falls short of the state’s Expansions
lawyers from the Government Accountability enacted 2007 SCHIP expansion to cover New Mexico and Utah have taken
Office (GAO) issued their opinion that the children up to 300 percent FPL.152 steps to increase enrollment but have
Bush Administration violated federal law with not passed eligibility expansions.
the August 17 directive.144 CMS approved an increase in Louisiana’s Utah passed legislation to require the
SCHIP eligibility level for children state’s SCHIP to operate under open
Despite these challenges, the following eight from 200 to 250 percent FPL, reflecting enrollment. In the past, open enrollment
states enacted or received CMS approval a reduction from the 300 percent FPL has been irregular, but the law mandates
for SCHIP expansions in 2008: Colorado, originally passed by the Louisiana that any child qualifying for the
Indiana, Iowa, Kansas, Louisiana, New Jersey, legislature. Implementation of the program will be guaranteed coverage.157
New York, and North Dakota.145 expansion began in June 2008.153 New Mexico’s legislature agreed to fund
$22.5 million to increase coverage of
Planned Expansions of 300 Kansas passed an eligibility expansion of eligible children through Medicaid and
Percent FPL and Above HealthWave (Medicaid and SCHIP) for SCHIP.158
Iowa passed legislation that sets a target children from the current level of 200 percent
of covering all its children by 2010. The FPL to 225 percent FPL beginning in 2009, While some states have made SCHIP
law includes an expansion of hawk-i and to 250 percent FPL by 2010—if more expansion a priority, approximately 8
(SCHIP) to 300 percent FPL and 12-month federal funding becomes available.154 million children remain uninsured.159
continuous Medicaid eligibility, among other As state officials and other interested
measures.146 Iowa needs CMS approval for its Colorado enacted a SCHIP expansion stakeholders continue efforts to expand
expansion.147 for Child Health Plan Plus (CHP+) as health coverage for children, they will
part of an $18.4 billion operating and be monitoring the new administration’s
New Jersey enacted a law in July mandating capital budget. The expansion covers and Congress’ consideration of SCHIP
coverage of all children through either public pregnant women and children in families reauthorization in 2009.
or private insurance within one year of the earning less than 225 percent FPL (up
State of the States 47
State of the States

State reform efforts


target small employers

Several state reforms have focused on assisting small employers’


efforts to provide access to health insurance. Between 2005 and
2008, at least 10 states enacted new programs to improve or increase
coverage in the small group market.160 Recent innovations include
wellness plans, first-dollar coverage benefit design, and assistance
with implementation of Section 125 plans. Other reforms include
reinsurance, tax credits, and premium subsidies. This section
explores some of the challenges in the small group market and
highlights some of the new ideas being pioneered by states.

48 State of the States


The Problem: Erosion of Figure 7 Percentage of All Firms Offering Health Benefits, 2000-2008*
Small Group Coverage
100
The continuing erosion of employer-sponsored 99% 99% 99% 99% 99%
98% 98% 98% 98%
insurance (ESI) and related increases in the
number of uninsured explain much of the 80
ongoing interest in reform of the small group 68% 68% 66% 65% 63%
market. While the percentage of large firms 62%
59% 60% 59%
offering coverage has remained fairly constant 60
57% 58% 58%
at 98 or 99 percent of workers, the percentage 55%
52%
of employers with fewer than 200 workers 47% 48%
49%
40 45%
offering insurance fell from 68 percent in 2000
to 62 percent in 2008 as shown in Figure 7. Even
All Large Fims (200 or More Workers)
fewer very small employers (3 to 9 employees) 20 All Small Firms (3 to 199 Workers)
offer coverage; their offer rate fell from 57 to 49 3-9 Workers

percent.161 The loss of ESI, primarily driven by


a drop in coverage among small firms, has been 0
2000 2001 2002 2003 2004 2005 2006 2007 2008
a major cause of falling coverage rates in the
*Test found no statistical differences from estimate for the previous year shown (p<.05).
United States since 2000.162 More than 62 percent Note: Estimates presented in this exhibit are based on the sample of both firms that completed the
of uninsured adults work for small firms (100 or entire survey and those that answered just one question about whether they offer health benefits.
Source: KFF/HRET Survey of Employer-Sponsored Health Benefits, 2000-2008.
fewer employees) or are self-employed.163

1) premium subsidies; 2) reinsurance; 3) small businesses (2 to 9 employees) that began


The lower rates of coverage in the small group
restructured benefit design; 4) Section 125 enrollment in October 2008. The state offers
market are attributable to several factors. First,
plans; and 5) employer mandates. Several of a 50 percent subsidy for health insurance
those in the small group market face higher
the newer programs employ a combination of premiums; in return, the employer must
administrative costs because of the smaller pool
these approaches. establish a Section 125 plan to ensure that the
of people across whom to spread the fixed costs of
premium is paid out of pre-tax earnings.
marketing, enrollment, and underwriting, thereby
Premium Subsidies—Because affordability (See page 52 for more information about
driving up per person premium costs.164 Second,
is one of the greatest obstacles to coverage, Section 125 plans.) For a plan to be eligible,
premiums can change dramatically from year to
many states have enacted legislation to permit it must encourage wellness by providing
year because of the health experience of one or
subsidization of employers willing to contribute employees with a health risk assessment
two workers. Third, insurance plans often mark
to their workers’ health coverage. In effect, the and incentives for health-promoting
up premiums out of concern about year-to-year
state adds private dollars (from the employer and activities, preventive care, and chronic care
variation in health costs.165 Fourth, small firms
employee) to state funds as a cost-effective way to management.171 To qualify for the subsidy, the
tend to pay lower wages in general than large firms
expand coverage. Nonetheless, states face several employer cannot have offered coverage in the
and operate on tighter margins, making it more
design questions when considering subsidies. last 12 months.
difficult for them to offer comprehensive health
Should the state subsidize coverage already sold
insurance to workers.166,167
in the market? Should it try to influence the Reinsurance—Healthy New York is one
benefit package? Should a state use Medicaid of the oldest and largest state-based small
Even among employers who continue to
funds (which constrain benefit design options)? group coverage programs. To lower costs for
offer coverage, the trend is toward greater
Should a state subsidize the premium through qualified individuals and small groups, the
employee cost sharing. Under one definition of
the tax code or through monthly payments? state: (1) reduced the benefit package and
underinsurance,168 the increase in underinsurance
Should a state limit the plan to workers whose increased cost sharing; (2) provided care
was 60 percent between 2003 and 2007.169 Those
employers participate or should they open the through limited networks that agreed to a
insured in the small group market have been
plan to individuals as well? Should a state require reduced reimbursement; and (3) included
particularly affected by this increase. In 2008 alone,
a person to be uninsured for a given amount a state-funded reinsurance program. Since
the percentage of small business employees (3-199
of time before qualifying for coverage? Table 1 enactment of the program, the state has
employees) with a deductible more than $1,000
demonstrates that states have answered these enhanced the program’s attractiveness
jumped from 16 to 35 percent.170
questions in a variety of ways. by offering additional choices of benefit
packages. The Healthy New York plan costs
Approaches to Coverage Maryland offers a recent example of a program about 40 percent less than average premiums
Expansion that combines a subsidy with other policy in the small group market and two-thirds less
To address the low and declining coverage approaches. The Maryland Health Insurance than premiums in the individual market.172
rates among small businesses, states are Partnership is a premium subsidy program for
turning to several approaches, including: State of the States 49
Table 1 Enrollment Experience of Select State Small Business Subsidy Programs
Enrollment
Program Updates
Eligibility
(Start date) Fall 2008
(Individuals)

CoverTN Businesses must have less than 25 employees with 50 percent earning $43,000 a year or less. The plan is
(2007) available for businesses who have not offered insurance for six consecutive months, or if offered, the employer has 16,020
not paid 50 percent or more of the premiums. The plan must be offered to all employees.

Employers with 2-500 employees who have not offered a health plan to employees within the past twelve
ARHealthNet months. At least one employee must qualify for subsidized premiums and have a household income at or
5,000
(2006) below 200 percent FPL, and all employees must participate in the program or provide documentation of
coverage.

Uninsured firms (2-9 employees) that have not offered insurance for 24 months and have no employees who
Insure Montana
earn more than $75,000 per year. 5,500
(2006)
For employers of small businesses with 2-9 employees offering health plans, a tax credit of up to 50 percent 5,000
of paid premiums is available.

New Mexico State


Low-income, uninsured, working adults with family income below 200 percent FPL. Participating employers must 33,200
Coverage Insurance
have ≤50 employees and have not voluntarily dropped a commercial health insurance in past 12 months.
(2005)

Workers and their spouses, who work in firms with 50 or fewer workers and contribute up to 15 percent of
Insure Oklahoma premium costs; self-employed; unemployed individuals currently seeking work; and individuals whose employers 11,000
(Previously known do not offer health coverage with household incomes at or below 200 percent FPL. + 5,000 in the
as O-EPIC)
Small employers must contribute at least 25 percent of eligible employee’s premium costs and offer an Individual Plan
(2005)
Insure Oklahoma-qualified health plan.

Small businesses (2–50 employees) that have not offered health benefit coverage to their employees during
West Virginia Small
the preceding 12 months are eligible to participate. Employers must pay at least 50 percent of the premium 1,500
Business Plan (2005)
cost. At least 75 percent of employees must participate.

Small employers that have previously not offered insurance and with 30 percent of workers earning less than
Healthy New York $34,000 annually. 153,080
(2001) Sole proprietors and working individuals without access to ESI who earn less than 250 percent FPL and
have been uninsured 12 months.

Idaho Access to Health Income Eligibility up to 185 percent FPL with an employer contributing 50 percent of the premium. The
400
Insurance (2005) subsidy has a maximum of $100 per month per person or $500 per month per family.

The Massachusetts Individuals with income below 300 percent FPL are eligible. Employers contribute 50 percent of the
Insurance Partnership premium. Businesses with 1-50 employees are eligible. Coverage must qualify as comprehensive. 15,600
(2000) Enrollees must show that they have been uninsured for at least six months.

Employers can receive a subsidy of up to 50 percent of the premium if the following criteria are met:
• The business has between two and nine employees;
Maryland Health
• The average employee wage is below $50,000; and
Insurance Partnership
• The employer did not offer health insurance to employees during the 12 months prior to application. 420*
(2008)
For a health plan to be eligible for a subsidy it must encourage wellness by providing employees with a health risk
assessment and incentives for health-promoting activities, preventive care and chronic care management.

Individual must earn below 300 percent FPL and the employer must contribute 60 percent of the premium.
Maine Dirigo Choice The program offers subsidies to the individual on a sliding scale. 10,663
(2003)
Dirigo Choice is currently closed to subsized employers and all individuals.

Arizona Health The state pledged up to $5 million in tax credits to subsidize private insurance premiums. Employers must have
Insurance Premium from 2-25 employees and have not offered coverage for 6 months. Eligible individuals must earn below 250 2,110
Tax Credit (2006) percent FPL. The state pays 50 percent of the premium, up to $1,000 for individuals and $3,000 for a family.

North Carolina Small


Small businesses are eligible for a $250 per year per employee tax credit to off-set their share of health
Business Health
insurance premiums. The business must have 1-25 eligible employees, the employer must cover 50 percent N/A
Insurance Tax Credit
of the premium and the employee’s income must be less than $40,000 per year.
(2006)
For additional information on these programs and other state initiatives, visit http://www.statecoverage.org/node/23
* 420 individuals and 80 businesses were enrolled as of December 1, 2008. The program began enrollment in October, 2008.

50 State of the States


The state covers 90 percent of the costs for an premium, individuals pay between $35 and possibility that the state’s individual mandate
individual between $5,000 and $75,000.173 To $99 per month depending on age, tobacco use, caused higher demand among employees—it
manage the costs of enrollees, New York retained and body weight. An annual limit of $25,000 is still remarkable that Massachusetts has been
the incentives for insurers by requiring enrollees per person applies, along with limits on able to counteract or possibly even reverse the
to pay 10 percent of premiums between $5,000 hospitalization costs, prescription drugs, and national trend of declining coverage rates in
and $75,000 and all additional costs above that physician visits. To participate, an employee the small group market.
threshold. Healthy New York has been operating must work for a low-wage firm that had not
since 2001 and covered about 153,000 enrollees as offered health coverage for at least six months. Implementation and Evaluation—As states
of fall 2008. Once purchased, the coverage is portable and work on a range of strategies, they discover
can even cover the individual during periods that even the most well-conceived policy
Restructured Benefit Design—Across of unemployment. Subsequent expansion of interventions do not always achieve expected
the insurance market—in large businesses, the program applies to individuals working results if the interventions are not properly
public employee plans, and publicly funded for large businesses who have been without implemented and evaluated. Implementers
coverage—purchasers are adopting strategies to health coverage for at least six months. should work closely with business groups to
promote wellness and improve health through ensure that a program meets the needs of local
an emphasis on prevention, primary care, and Advocates of Tennessee’s approach argue businesses and that participation is simple. An
healthy lifestyle choices. These strategies are that low-income individuals are less worried effective marketing campaign requires reliance
being applied to the small group market as well. about protecting their assets in the case of on many outlets for communication; a state
In general, state policymakers are seeking to slow a catastrophic event and more interested in cannot expect a program to succeed if the state
or reverse the trend in declining coverage rates a policy that pays for routine care. Despite does not promote it. Careful consideration
in the small group market without resorting continuing concern about individuals who should be given to the role of brokers in the
to the typical strategies of cutting benefits and exceed benefit limits, the hope is that patients program, as they are the traditional conduit
increasing cost sharing. They believe that they will receive the primary and preventive care for small businesses’ purchases of insurance
can use the state’s regulatory power to encourage that helps them avoid the need for expensive and selection of insurance products.176 Finally,
health plans to use strategies that would help specialty or hospital care. states will not know if a program succeeds
enrollees become healthier, thus reducing unless every program includes a strong
underlying costs over time. Both the Tennessee and Rhode Island reforms evaluation component. Evaluation enables
set a target price and asked insurers to bid policymakers to recast programs midstream to
Rhode Island has been leading the way in on the services they could provide for that address barriers and help ensure effectiveness.
promoting wellness plans in the small group premium within certain parameters. These
market. They issued a request for proposals to states are attempting to use their negotiating Conclusion
carriers for a wellness product, indicating that the power to secure a better deal for enrollees. A word of caution is in order about coverage
benefit package should emphasize preventive care expansion programs that target small
and noting that the average premium for the plan Employer Mandate and Section 125 businesses. Even “successful” programs have
could not exceed 10 percent of the state’s average Plan Requirement—In 2006, Massachusetts attracted only a small segment of the insurance
annual wage, or $314 for single coverage (in began taking an aggressive approach by market. It is difficult and expensive to engage
2007).174 Now that carriers have responded with implementing a series of reforms that address small and often low-wage employers. A small
benefit package proposals, the state is expected to both the individual (non-group) and small employer may have only one or two uninsured
meet its legislatively defined price point, reducing group markets. The reforms called for merging workers, and those workers may or may not
to approximately 20 to 25 percent below market the state’s small group and individual markets; be interested in paying part of the premium
rate the premiums for all small businesses. In establishing the Health Connector (which is a for coverage. States have had greater success in
2008, the New Hampshire and Florida legislatures clearinghouse of commercial insurance plans); enrolling large numbers of uninsured workers
enacted similar initiatives (see page 57). requiring employers to offer a Section 125 plan by targeting individuals, often with initiatives
(a tax shelter for premiums paid by employees); funded through Medicaid. However, if a state
Benefit designs emphasizing first-dollar coverage, and imposing a penalty on employers with has set the more modest goal of achieving
along the lines of benefit plans being offered 11 or more full-time employees who fail to increased affordability, choice, and fairness
in Tennessee and Arkansas, provide another offer coverage to full-time workers. According for employers and employees in small firms,
strategy that merits consideration. Tennessee to a recent survey of employers in the state, many of the policy options discussed above are
set guidelines during the procurement process coverage in the small group market increased worth consideration. The small group market
for two state-sponsored products that require between 2007 and 2008 from 63 to 70 percent is costly, unstable, and eroding, yet several tools
the successful carriers to emphasize preventive among employers with 3 to 10 workers and are available to states to help employers offer
care at an average premium of $150 per member from 88 to 92 percent among employers with health insurance to their employees.
per month (2007 rates). After the state and the 11 to 50 workers.175 While several reasons could
employer each contribute one-third of the total explain the uptick in coverage—including the State of the States 51
Section 125 plans: Policy Implications for States

A growing number of states are expressing under the Consolidated Omnibus Budget employers facilitate their offering of Section
interest in reducing the number of uninsured Reconciliation Act (COBRA), as well as 125 plans. As part of the reform package,
workers and making their health coverage nondiscrimination and benefit design adults in the state were required to purchase
more affordable by requiring or encouraging requirements under the Health Insurance insurance if they could afford to do so.
employers to set up Section 125 plans—also Portability and Accountability Act (HIPAA). While most employers report a positive
referred to as “cafeteria plans.” These plans It appears that Section 125 plans are not experience with Massachusetts’ Section 125
refer to Section 125 of the U.S. Internal subject to the Employee Retirement Income plans, take up rates have been relatively low,
Revenue Code, which establishes rules Security Act (ERISA), however, as long as especially during the initial implementation
related to taxable and non-taxable benefits employers do not promote purchase of period. Massachusetts has found wide
offered by employers. Section 125 plans specific individual health insurance policies. variation in the education and outreach
reduce the effective cost of health care Further, state policies that require employers offered by employers about the benefit of
coverage for many employees (depending to adopt Section 125 plans should not be Section 125 plans. As of November 2008,
on their total income and family situation) by preempted by ERISA as long as the state law just 1,129 of the 14,879 adults purchasing
allowing them to purchase coverage on a applies to employers and does not refer to coverage through the Connector without an
pre-tax basis. This administrative mechanism employer-sponsored plans. employer contribution did so through Section
reduces both employees’ and employers’ 125 plans. While this number is relatively
share of Medicare and Social Security taxes, To minimize the potential for problems under modest, there has been a steady increase in
as well as employee income taxes and ERISA and the tax code, states that are the numbers of people using a Section 125
employer unemployment payments. considering a Section 125 cafeteria plan plan when purchasing their health insurance.
requirement should draft that mandate very
Section 125 plans are an attractive option broadly. States should also avoid terms such The state’s experience thus far offers
to state policymakers because they are a as “employer group,” “employer-sponsored,” several lessons for other states, including
very low-cost way to make coverage more and “group plans.” States may simply choose the importance of frequent communication
affordable. (States with an income tax that is to refer to these plans as “plans available with employers to keep them engaged, the
tied to the federal tax forego a small amount under a cafeteria plan.” States may also need to target specific types of employers
of revenue.) This tax shelter has been wish to consider providing model cafeteria and individuals who have the most to benefit
available to small businesses for years, so plan materials and technical assistance to from Section 125 plans, the necessity of
the question is how to increase participation employers, as well as model COBRA notices. simplifying the administrative process, and
without: a) running afoul of other legal the importance of providing easily accessible,
issues; or b) creating an onerous burden Exchanges or Connectors that offer a selection jargon-free outreach materials that employers
on small businesses. States have made it of competing health coverage choices offer can give to workers.178
easier for small businesses to participate an advantage to states seeking to implement
by: a) conducting outreach and education; Section 125 plans. These exchanges help Other States Explore Section 125 Plans
b) helping them with forms and paperwork; minimize the potential that individually A number of other states have considered
c) offering mini-grants to help small purchased health insurance could be or are implementing Section 125 plans as
businesses set up plans; and d) combining a interpreted as an employer-sponsored plan. part of reform efforts aimed at reducing
requirement to use a Section 125 plan with the number of uninsured. For example,
a premium subsidy to make the package Massachusetts’ Experience Minnesota’s comprehensive health care
more attractive. For employees that take Massachusetts’ experience in implementing reform legislation, passed in 2008, includes
advantage of the Section 125 plan, savings Section 125 plans offers lessons to other a provision that employers with 11 or more
on health premiums are typically around states considering a similar approach. As full-time workers who do not offer group
25 percent, but vary based on income and part of Massachusetts’ comprehensive health insurance are required to establish
family size from a negative tax liability (for 2006 health reform law, employers with a Section 125 plan so that employees can
those with very low incomes who benefit 11 or more full-time workers are required purchase health insurance with pre-tax
from the Earned Income Tax Credit) to a 50 to establish Section 125 plans that enable dollars.179 Minnesota has taken an additional
percent savings on premiums. workers to purchase health insurance with step by establishing a $1 million fund to help
pre-tax dollars regardless of whether or not cover certain employer costs associated
Legal and Policy Issues177 employers offer coverage to their workers or with establishing Section 125 plans. Other
Several federal laws affect implementation contribute to the premium. Massachusetts examples of state approaches to Section 125
of these Section 125 plans. Because these also established the Commonwealth Health plan policies are described in Table 2.
plans qualify as “group health plans” under Insurance Connector Authority to help
the Internal Revenue Code, they appear small employers and individuals purchase
subject to employer notice provisions affordable insurance, and to help all

52 State of the States


Table 2 Overview of State Approaches to Section 125 Policies Designed to Expand Coverage
(Note: information deemed accurate as of 7/29/08)

Policy

State
Applicable Firm Size/Type Section 125 Requirement
(Effective Date)

Connecticut employers of all sizes that (a) offer fully


Connecticut Such employers are required to establish a Section 125
insured health coverage and (b) require an employee
(October 2007) plan.
contribution to that coverage

Created a tax credit to encourage employers to establish


a fully insured health plan in conjunction with a Section
Indiana All Indiana employers that do not currently offer health
125 plan. The tax credit is equal to the lesser of $50 per
(January 2008) coverage or a Section 125 plan
employee or $2,500 for two years if the employer offers such
a plan.

Maryland
Non-offering Maryland firms with 2 to 9 full-time employees To qualify for a premium subsidy, the employer must
(September participating in Maryland’s new subsidized coverage initiative establish a Section 125 premium conversion plan.
2008)

Such employers must (a) maintain a Section 125 plan, (b)


enable employees to pay for their coverage (either through
Massachusetts
Massachusetts employers of 11 or more employees their employer or through the Connector) on a pre-tax basis,
(October 2007)
and (c) file a copy of the Section 125 plan document with the
Connector.

Such employers are required to establish a Section 125


Minnesota Minnesota employers that do not offer health insurance plan. This proposal does not require employers to offer
(July 2009) with more than 10 employees health insurance coverage or contribute to it and includes
an opt out provision.

Missouri
Missouri firms offering fully-insured coverage with an Such employers are required to establish a Section 125
(to be
employer contribution plan.
determined)

Such employers are required to establish a Section


Rhode Island 125 plan. The legislation does not require companies
Rhode Island employers of 25 or more employees
(July 2009) to contribute to their employees’ insurance or to offer
workers the chance to buy insurance at a group rate.

Sources are:
http://www.cga.ct.gov/2007/rpt/2007-R-0690.htm; http://www.statecoverage.net/programs-indiana.htm; http://mhcc.maryland.gov/partnership/about.aspx;
http://www.mahealthconnector.org/portal/site/connector/; https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=ccrsf3780.html&session=ls85; http://
www.house.mo.gov/billtracking/bills071/billpdf/truly/HB0818T.PDF; http://www.rilin.state.ri.us/billtext07/senatetext07/s0448b.pdf
SCI would like to thank Lynn Quincy, Mathematica Policy Research, Inc., for her contributions to this table.

State of the States 53


State of the States

Cost containment
and quality improvement
prioritized by states
The rising cost of health care and new research about varia-
tion in quality of care have spurred many states to focus on
increasing value in their respective health care systems. States
want better value for their health care dollar, first in the public
sector as well as throughout the health care system. Increas-
ingly, states are considering coverage reform in tandem with
improved mechanisms for providing and paying for health care.
While much remains to be learned about promoting quality
health care at a fair price, some states are leading the way with
pilot projects and innovative programs that will inform future
federal and state reforms.

54 State of the States


Why Is Reform Needed? Figure 8 State Ranking on Access and Quality Dimensions
In 2007, The Commonwealth Fund Top
released its State Scorecard on Health System Rank

Performance, which revealed wide state-


to-state variation in access to care, cost,
efficiency, and quality. As shown in Figure 8,
quality was highly correlated with access to

State Ranking on Quality


care, indicating that increased coverage is an
important strategy for improving the overall
health of a state’s population.

The Scorecard also showed that higher


spending levels do not necessarily lead
to quality improvement, as confirmed by
research from the Center for Health Policy
C

Research, which developed the Dartmouth Bottom


M

Atlas. In fact, a recent study of several Rank


Top
Y
State Ranking on Access Rank
common conditions demonstrated that
CM

higher spending correlates with higher


MY
Source: Commonwealth Fund State Scorecard on Health System Performance, 2007
morbidity, lower satisfaction with hospital
CY

CMY
care, worse communication between Care Coordination and
K

physicians, and less access to primary care.180 Medical Homes


Many states are exploring the possibility
The negative correlation between cost and of supporting and strengthening primary
quality is of special concern in today’s care as a way to improve quality and reduce
environment of dramatically increasing costs. States believe that a strong primary
health care costs. Between 1999 and 2008, care system can help coordinate patient
the cost of health insurance premiums more care, promote prevention and healthy
than doubled (increasing by 119 percent) lifestyles, educate patients on their health
while wages grew by only 34 percent.181 At conditions, and reduce costly emergency
the same time, deductibles and cost sharing room visits and duplication of services.
for those with coverage have been on the Investing in relatively inexpensive primary
rise. Despite paying more than twice as much and preventive care as an alternative to
for health coverage, Americans are buying costly specialty services and acute care is
less comprehensive protection. In addition, such an obvious solution that some now
with rising costs and increasing enrollment, worry that primary care providers will
Medicaid now consumes an average 21.2 soon be asked to solve the full range of
percent of state budgets, which is twice the problems plaguing the health care system,
amount of eight years ago.182 piling unrealistic expectations on an
already overworked and—some would
Even if cost was not a concern, a large body argue—underpaid segment of the medical
of evidence shows that the U.S. health profession. It is possible that the term
care system fails to deliver consistently “medical home” (and related concepts
high-quality care. Care is often poorly such as patient-centered primary care and
coordinated183 and falls short of best-practice chronic condition management) is quickly
standards.184 The seminal 1999 Institute of coming to mean all things to all people.
Medicine report, To Err is Human, shone a The challenge for states is to define what
light on the pervasiveness of medical errors is expected from primary care providers;
in the U.S. health care system, estimating to decide how to pay for additional
98,000 deaths per year attributable to services such as care coordination, patient
medical errors.185 education, and health information
State of the States 55
technology that are not currently part realized the savings along with significant It establishes community care teams to
of the fee-for-service payment model; and quality improvements for Medicaid help with care coordination, patient and
to determine the target populations for such recipients.187 The program is succeeding provider education, and other patient
services. for several reasons. First, as a provider- services. In addition, Vermont has levied
led effort, Community Care can easily a 0.02 percent surcharge on all insurance
The following examples describe projects promote buy-in from a critical group premiums in the state to create a health
undertaken by states to coordinate care: of health care system participants. information technology infrastructure.
Second, the regional networks report The Blueprint for Health launched its
n Community Care of North Carolina quality information back to providers so pilot communities in 2008.189
has a long and successful track record they know when they are not meeting
n Rhode Island’s Chronic Care
with what it calls Primary Care Case best-practice standards of care. Third,
Sustainability Initiative requires
Management (PCCM). Beginning in 1998 the regional networks provide care
primary care providers to: 1) implement
with Medicaid providers, Community coordination and case management
components of an advanced medical
Care divided primary care providers into services either in a provider’s office or in
home; 2) participate in a local chronic
regional networks that support quality a community setting, shared by several
care collaborative; 3) submit data that
improvement through the development of providers. The North Carolina Community
will be publicly reported; and 4) engage
standards, data collection and reporting, Care program is now trying to spread
and educate patients190
and the provision of community-based the model beyond Medicaid providers to
resources such as care managers and all primary care providers in the state.188 The program estimates that it represents
patient educators. Both the provider and At the same time, the state is working to 67 percent of the state’s insured
the network receive a monthly payment develop a demonstration project to apply residents. The state is using the Health
per member for each Medicaid patient for the model to Medicare patients. Insurance Commissioner’s regulatory
care coordination and case management. power to require insurance plans to:
n In 2007, Vermont passed legislation
1) provide a supplemental payment to
Community Care achieved $240 million that promotes medical home pilots in
primary care providers; 2) pay for nurse
in savings in state fiscal year 2005–2006. communities around the state under
care managers; and 3) share data and
While this figure represents just a the Blueprint for Health. As reported in
report on common measures.191
fraction186 of the total North Carolina the 2008 State of the States, the program
Medicaid budget, Community Care brings together all payers except Medicare.

State Quality Improvement Institute

In March 2008, AcademyHealth and n Medical Homes—Several states are information from both public and private
The Commonwealth Fund announced either working to define medical homes payers. The available information should
the selection of nine state teams to or implementing pilots to strengthen and permit better measurement of quality and
participate in the State Quality Improvement support primary care. effectiveness across health care systems.
Institute—an intensive effort to help states In addition, states are setting benchmarks
n Payment Reform—States are looking
plan and implement concrete action plans for quality care and publicly reporting the
to improve performance across targeted at their own purchasing strategies and performance of hospitals and providers.
quality indicators. The states selected building public/private partnerships to
formulate a coordinated plan for paying n Public Health and Prevention—As
for participation were Colorado, Kansas,
Massachusetts, Minnesota, New Mexico, for quality across payers. states consider the underlying causes
Ohio, Oregon, Vermont, and Washington. of rising health costs, they recognize
n States as Conveners—States are the impact of the rising level of disease
establishing formal groups to bring burden. Several states are working to
The states are currently implementing
stakeholders together to advance a divert funds upstream to prevent chronic
their action plans, which focus on making
health care quality agenda. conditions such as diabetes and heart
system-wide changes to the health care
delivery system. The participating states are disease by investing in public health and
n Data Collection and Transparency—
addressing the following: prevention.
Several states have assembled all-
payer databases that include all claims

56 State of the States


States Work with Insurers to Provide More Affordable Plans
Focusing on Primary Care and Wellness Benefits
This past year saw two additional states The higher level plan must also include the benefit design. The general requirements
(following Rhode Island’s lead192) attempt to catastrophic coverage. Generally speaking, of the program include the following:
provide a more affordable insurance option only individuals who have been uninsured
that emphasizes primary and preventive for at least six months will be eligible for the n The base rate of the plan, calculated on
care. Both New Hampshire and Florida are program. Health plans in the future may a per member per month basis, may not
asking insurers to offer bids to the state for also competitively negotiate with the state exceed 10 percent of the previous year’s
a plan that meets prescribed benefit and to provide supplemental coverage, such as median wage, which is approximately
affordability standards. vision, dental, and cancer care. $310. The benefit plan must also include
limits on out-of-pocket spending.
Florida: Cover Florida and Florida Health The legislation also creates the Florida
Health Choices Corporation, described as a n If one carrier files rates for the HealthFirst
Choices Corporation
clearinghouse designed to promote health plan that meet the target rate, then all
In May, Governor Charlie Crist signed into law
insurance choices for small business and carriers with at least 1,000 members
a bill (S.B. 2534) that creates a new health
help them fill out the necessary forms and in the small group market must also
insurance option, Cover Florida, for Florida’s
paperwork. Through the Corporation, small offer the HealthFirst plan. If no carrier
uninsured residents starting January 2009. The
employers with 50 or fewer employees will be files a rate that meets the target rate,
bill outlines a plan that allows private insurers to
able to access coverage for their employees. the commissioner will hold a hearing
competitively negotiate with the state to provide
Employees will have the ability to choose to determine the reasonableness of
benefit plans which should cost approximately
from a variety of health plans and services, the target rate for the HealthFirst plan.
$150 or less per month.193 Cover Florida
including prepaid services, flexible savings Depending on the outcome of the hearing,
sponsors must offer at least two plans: one with
accounts, and traditional insurance products. all carriers may be required to offer the
lower-level coverage, and one with catastrophic
Employers will be required to establish product at the target premium.
coverage. Nine carriers submitted proposals
and six of those were selected by the state Section 125 plans. The program will be n The Insurance Commissioner must certify
to participate in Cover Florida.194 The benefit administered by a 15-member board made that the HealthFirst wellness benefit
designs must focus on primary and preventive up of appointees chosen by the Governor, the design creates incentives for consumers,
care in order to discourage people from Senate president, and the House speaker.195 health care providers, employers and
using emergency rooms as their source of health carriers to:
primary care. At minimum, all benefits plans New Hampshire: HealthFirst Plan
must include: In May, Governor John Lynch signed – Encourage wellness strategies;
legislation to enact HealthFirst, a health
– Promote primary care, preventive care,
Coverage for preventive services insurance plan designed to make
n
and a medical home model;
coverage more affordable by emphasizing
n Screenings wellness programs and prevention. The – Manage and coordinate care for
law requires that plan designs address persons with chronic health conditions
n Office visits
wellness, prevention, and chronic disease or acute illness;
n Urgent care management and be made available to
consumers by October 1, 2009.196 The – Advance the use of cost effective care;
n Prescription drugs insurance department has convened an and

n Durable medical equipment advisory group to make recommendations on – Promote quality of care by the use
of evidence-based, best practice
n Diabetic supplies
standards and patient-centered care.197
n Hospital care

The National Academy for State Health Wellness Initiatives choices—to prevent disease or to manage
Policy conducted a scan of state Medicaid About a quarter of the rising cost of chronic conditions once they develop.
programs and SCHIPs and found that 31 health care can be linked to the growing Despite sharp disagreements about the
states are working to advance medical home prevalence of “modifiable population risk appropriate solutions for expanding health
projects.198 Some other states are working factors,” such as obesity.200 Patient lifestyles care coverage and reforming health care
to establish medical homes throughout and health choices are one of the primary financing, there is widespread agreement—
their health care system regardless of payer. reasons for the nation’s growing disease both among health care experts and
States with multi-stakeholder initiatives burden and related increase in health care the general public201—on the value of
include Colorado, Louisiana, Maine, New costs. Doctors, employers, insurers, and promoting wellness and prevention.
Hampshire, Pennsylvania, Rhode Island, government agencies are looking for ways Many states have started implementing
and Vermont.199 to encourage Americans to make healthier
State of the States 57
wellness programs as part of their state to preventable medical errors, it became states to promote data collection and
employee health benefit plans. According clear that “business as usual” was no longer transparency.206
to a recent National Conference of State sufficient to protect patients; the time for
Legislatures survey, 14 states have adopted systemic reforms had arrived. The report n Setting a Common Vision—State
some type of wellness program for their state emphasized that, while all humans make governments have been able to set and
employees.202 Examples include mistakes, systems must be put in place articulate priorities that require data
the following: to protect against errors and promote sharing and transparency. Examples of
best-practice care. To encourage system the policy goals that transparency can
n Alabama recently announced that, as of improvements, particularly in hospitals, help achieve include improving chronic
January 2011, obese state employees will states have undertaken the following: disease care, reducing medical errors,
be required either to start getting fit or enabling patients to “comparison shop,”
pay an additional $25 per month toward n Hospitals are required to report serious and promoting quality improvements
their premiums. Employees who smoke adverse events, medical errors, or near among providers.
already pay an additional $24 per month. misses. Some states require these events
n Convening Key Stakeholders—States
to be made public while others keep the
n Arkansas state employees can earn up command the influence to bring
information confidential but encourage
to three days of vacation leave per year stakeholders to the table. Ongoing
the affected hospital to develop plans to
by participating in the Healthy Lifestyle conversations can lead to agreements on
prevent similar errors in the future.
program. data-sharing standards, common claims
n Collaborative groups have been processes, and payment incentives to
n Missouri operates an incentive program
established to share best practices and providers who deliver high-value care.
for employees, permitting them to save up
promote safe and effective care. To that
to $25 per month if they take a personal n Regulating Providers and Insurers—States
end, a number of states have established
health assessment and participate in a health can use their influence as regulators to
Patient Safety Centers.
improvement program. require insurers and providers to share
n A few states have joined Medicare and data. Such information can then be made
n Delaware, Montana, and West Virginia have
national health plans in refusing to pay for public and used as a tool for patients or
launched programs that offer screenings,
“never events” in their Medicaid and state shared only with providers and purchasers.
health coaching, fitness, and education to
employees health plans. “Never events” When providers see how they compare
help employees improve their health.
are errors such as wrong-site surgeries or with similar providers, they often take steps
n King County, Washington, operates a hospital-acquired infections that hospitals toward quality improvement. The hurdle
comprehensive health and wellness should be able to prevent.205 for states is that they do not have the
program that saved the county an authority to compel self-insured employers
estimated $40 million between 2007 or Medicare to share information.
and 2009.203 Price and Quality
Transparency n Leveraging State Purchasing Power—
During 2008, both New Hampshire and States can require data sharing,
Recognition is growing that it is time to engage
Florida passed legislation requiring insurance compliance with data standards, and
health care consumers in the effort to promote
brokers that conduct business in the state to price and cost transparency through
affordable, high-quality health care. An
work with health plans in the state to develop contracts in the Medicaid, SCHIP, and
increasing number of health plans have high
a lower-cost insurance product focusing state employee health benefit plans.
deductibles and copayments designed to steer
on prevention, primary care, and healthy
patients to high-value providers and services. The type of data collected by states must
lifestyle promotion. Both states followed the
However, in many cases, consumers lack reflect their plans for data use. Several
example set by Rhode Island, which passed
appropriate information for making informed states are leading the way in developing
similar legislation in 2007.204 For more
choices. For that reason, both federal and state all-payer claims databases. Such databases
information on these programs, see page 57.
policymakers have made data collection and are typically used for billing purposes so
price and quality transparency a priority. they are most useful for assessing costs, but
Patient Safety
they may also be used for making some
When the Institute of Medicine’s To A recent issue brief by the National quality and value determinations. States
Err is Human estimated that more than Governors Association Center for Best engaged in chronic care collaboratives
98,000 deaths per year are attributable Practices outlines four strategies used by

58 State of the States


or other practice improvement programs adoption of a health information exchange and effective medication management. In
have developed patient registries to collect (HIE). In addition, 12 states reported HIE many cases, the current payment system does
additional information about patient policy development as a priority, 9 states listed not offer financial incentives for coordination
outcomes, such as blood pressure readings development of electronic health records, of post-discharge care. Policymakers recognize
and blood sugar levels. States seeking to and 7 states listed e-prescribing.208 The that efforts to prevent readmissions can have
use data for health information exchanges Commonwealth Fund’s Commission on a High significant return on investment, saving the
will need additional data such as laboratory Performance Health System estimates that the system money while fostering patient health.
values, physician notes, and test results, investment of 1 percent of health insurance
although such data (e.g., chart reviews and premiums in health information technology Conclusion
laboratory results) are much more expensive could save the country $88 billion over 10 years President Obama’s health care plan includes
and difficult to obtain. Much of that out of projected national health expenditures many initiatives aimed at containing costs and
information is still housed in file cabinets totaling $4.4 trillion.209 improving quality. Several of the initiatives
and not generally available by electronic align with recent state efforts, including
means. Preventable Hospital the support of chronic care management
Readmissions programs, investment in health information
Health Information Both state and federal policymakers are technology, coordinated and integrated
Technology and Exchange increasing their focus on preventable patient care, required transparency in cost and
There is broad agreement that electronic health readmissions after hospital discharge. A quality information, and promotion of
information technology and communications 2007 MedPAC (Medicare Payment Advisory patient safety.211 The challenge facing the
can improve quality and save costs in the health Council) report found that 17.6 percent of new administration will lie in coordinating
care system. Not surprisingly, 70 percent of Medicare patients were readmitted to the with and building on state efforts in these
states responding to a 2007 survey reported that hospital within 30 days of discharge and that areas. The significant variation in health
“eHealth”207 was a very significant priority while the Medicare program spent $15 billion on care delivery models both between and
no states reported that it was not a priority. readmissions in 2005.210 The prevention of within states will make it critical for federal
When asked about their top state eHealth readmissions requires an effective transition policymakers to take advantage of the on-the-
priorities, 25 of 42 responding states listed from inpatient providers to outpatient providers ground expertise of state governments.

Minnesota Example Illustrates Need


for Chronic Care Coordination

One example of a program designed to While the SMDC can be proud of its punished. That is why the state, as part
prevent hospital readmissions is the accomplishments, the Heart Failure of its comprehensive health reform efforts,
St. Mary’s/Duluth Clinic (SMDC) Health Program caused a major loss in revenue is developing a “baskets of care” payment
System Heart Failure Program. The national for the health system owing to significant model. Under this model, the state will
average for hospital readmissions after uncompensated costs for outpatient establish the parameters, and providers will
six months for patients with congestive services that were not covered, including set a price, for a series of baskets of care.
heart failure (CHF) is 40 to 50 percent. telescale and patient monitoring. In addition, Providers will be reimbursed this set price
Minnesota’s state average is 20 to 25 the hospital realized decreased revenue with for all care related to a specific diagnosis or
percent, and the SMDC’s CHF readmission fewer CHF patient admissions. chronic condition, or for episodes of care,
rate is 3 to 4 percent.212 The SMDC Partly as a result of this program Minnesota such as full joint replacements (including
achieved a low rate of readmissions recognized that its payment models in pre- and post-operative care). The goal of
and improvements in patient health and use through private payers, Medicaid, the approach is both to ensure that prices
satisfaction by delivering outpatient services and the Medicare program did not align and quality of services are transparent, but
that included treatment planning, disease with the achievement of the state goal also to encourage providers to use the most
and medication management services, of higher quality, lower cost health care. cost-effective, quality-improving methods to
use of telescales and telephonic oversight, Transformational reform cannot take place achieve health outcomes for their patients.
education for patients and relatives, and unless innovative, care-improving providers It will reward high quality, efficient care like
support groups. Overall costs for patient are rewarded for their efforts rather than that being provided at SMDC.
care were cut in half.213

State of the States 59


State of the States

looking forward

As we enter one of the most challenging economic times our country has faced in recent memory, it gives us
pause to consider that a new window of opportunity may be opening with respect to health reform. Despite all
the bad economic news and worsening forecasts for the coming year, there is a tinge of optimism that comes
with one of the most popular words this year—change.

Will there be national health reform under During the next few years, the health stream or whether health care leaders will
the Obama administration? The answer reform debate will place an enormous continue to push for reform and support
varies depending on who you ask. Many spotlight on the issues surrounding health those efforts.
think that the economic crisis and its coverage and systems reform. It is our hope
widespread impact—especially the on health that this important discussion will also The challenges are enormous and
care system, the uninsured and state budgets include the role of states and their potential history tells us that health care coverage
– make the case for, not against, reform. They contributions to national reform. While expansions—and overall health reform—
believe a crisis warrants action. federal action could range from a stalemate are difficult to enact and sustain. Yet it is
to sweeping changes, it is unclear how these possible that the size of the problem and
While many hoped the passage of changes would impact individual states. the focus of the American people on the
comprehensive reforms would continue Regardless, states are likely to continue to issue will lead to positive changes, at either
to define state health reform in 2008, the play a critical role in meeting the nation’s or both the federal or state level.
year brought more struggles than successes. health care needs.
The recession has already caused profound The cost of inaction continues to mount,
dismay in state capitols around the country In the meantime, states find themselves in a both in lives lost and costs to the system. It
and we predict that 2009 is likely to bring precarious position: should they wait for a is our hope that 2009 will the be year the
further retrenchment. States have weathered federal solution to their health care problems country turns its attention to health care
tough economies in the past, and they will or continue to forge policy innovations and finds real, workable solutions to the
build upon those lessons to mitigate the within the domains over which they have problems of access, cost, and quality. We
impact on their most vulnerable populations. control? Several states have been working for hope this can be accomplished through a
Yet difficult decisions will have to be made. years on a policy-development process and partnership between states and the federal
In some circumstances, states are likely to a sequential approach to health reform. It government that will enable each to use
consider and implement cuts to public health is unclear whether economic pressures will their respective strengths to improve the
care programs. force these states to halt their processes mid- health and health care of all Americans.

60 State of the States


Endnotes 40 Kaiser Daily Health Policy Report, November 10, 2008. portion of this coverage through a payment to the federal
government, often referred to as the “Clawback.” (Smith,
1 McNichol, E. and I.J. Lav. “State Budget Troubles Worsen,” 41 State Coverage Initiatives would like to acknowledge the
Center on Budget and Policy Priorities, October 24, 2008. extensive contributions, through testimony, presentations, V. p. 13)
Updated January 14, 2009. and journal articles, of Alan Weil, executive director of the 65 Wicks, E. “Can a Sales Tax on Medical Services Help
2 Ibid. National Academy for State Health Policy, regarding these Fund State Coverage Expansions?” State Coverage
3 Minnesota Senate File 3780, https://www.revisor.leg.state. issues. Initiatives Issue Brief, AcademyHealth, July 2008.
mn.us/bin/bldbill.php?bill=S3780.1.html&session=ls85; 42 “Expanding Health Care Access,” statement of Jeanne www.statecoverage.org/node/161.
“Minnesota Legislature Passes Historic Health Care Reform M. Lambrew, University of Texas at Austin and the 66 Address delivered to the annual meeting of the
Legislation,” St@teside, State Coverage Initiatives, May 2008, Center for American Progress before the Appropriations Retirement Research Consortium, August 7, 2008.
available at www.statecoverage.org. Committee, Subcommittee on Labor, Health and Human Accessed October 10, 2008. http://crr.bc.edu/
4 Reichard, J. “Omens of Economic Ill: Medicaid Spending, Services, Education and Related Agencies, U.S. House of events/2008_conference_agenda_and_papers.html.
Enrollment Turn Upward,” Washington Health Policy Week Representatives, March 5, 2008. 67 Lipson, D.J. et al. “Leading the Way? Maine’s Initial
in Review, The Commonwealth Fund, October 6, 2008. 43 Cantor, J.C. et al. “Aiming Higher: Results from a Experience in Expanding Coverage Through Dirigo
5 Altman, D. “Health In the Economy,” Kaiser Family State Scorecard on Health System Performance,” The Health Reforms,” The Commonwealth Fund, December,
Foundation, May 2008. http://kff.org/pullingittogether/ Commonwealth Fund Commission on a High Performance 2007..
healthineconomy_altman.cfm. Health System, June 2007. 68 Glied, S. et al. “Consider It Done? The Likely Efficacy of
6 “Employer Health Insurance Costs and Worker 44 State tax revenue estimated at $750 billion. State Mandates for Health Insurance,” Health Affairs, Vol. 26,
Compensation,” Snapshots: Health Care Costs, March 2008. Government Tax Collections: 2007, U.S. Census Bureau. No. 6, 2007, pp. 1612.
7 Altman, D. op. cit. www.census.gov/govs/statetax/0700usstax.html; Federal 69 Complete information about Massachusetts affordability
8 DeNavas-Walt, C. et al. Income, Poverty, and Health tax revenue estimated at $2,568 billion. The Budget and standards and benefit design requirements can be
Insurance Coverage in the United States: 2007, U.S. Census Economic Outlook: Fiscal Years 2009 to 2018, Congressional found on the Web site for the Connector Board at www.
Bureau, Current Population Reports, Washington, DC: U.S. Budget Office, January 2008, Table F-3 for 1968-2007, mahealthconnector.org/portal/site/connector.
Government Printing Office, 2008, pp.60-235. www.cbo.gov/ftpdocs/89xx/doc8917/01-23-2008_ 70 For a full description of the Minnesota reforms, see page
9 Holahan, J. and A. Cook. “The Decline in the Uninsured BudgetOutlook.pdf. 35.
in 2007: Why Did It Happen and Can It Last?” Kaiser 45 “State Comprehensive Access Initiatives,” Statement of 71 “Intersection of Policy and Politics in State Coverage
Commission on Medicaid and the Uninsured, October Deborah Chollet, Mathematica Policy Research, Inc., Expansion Campaigns,” presentation by Walter
2008. before the Appropriations Committee, Subcommittee on Zelman, AcademyHealth Annual Research Meeting.
10 Ibid. Labor, Health and Human Services, Education and Related ww.academyhealth.org/interestgroups/shrp/2008.htm.
11 Collins, S.R. et al. “Losing Ground: How the Loss of Agencies, U.S. House of Representatives, March 5, 2008. 72 “Maine’s Dirigo Health Reform Experiment Five
Adequate Health Insurance is Burdening Working Families: 46 Butler, P. “Including Employer Financing in State Years On: An Executive Summary of Status and
Findings from The Commonwealth Fund Biennial Health Health Reform Initiatives: Implications of Recent Court Achievements,” Governor’s Office of Health Policy and
Insurance Surveys, 2001-2007,” The Commonwealth Fund, Decisions,” State Coverage Initiatives and the National Finance, September 2008.
August 2008. Academy for State Health Policy, January 2009. 73 Ibid.
12 “December Jobless Rate Jumps to 7.2%,” CBS News, January 47 Smith, V. op. cit., p. 7. 74 “Results of Some Notable Ballot Measures,” The
9, 2009, available at www.cbsnews.com. 48 Ibid, pp. 58-59. Associated Press, November 5, 2008.
13 Holahan, J. and A. Cook op. cit. 49 “Dual Eligibles: Medicaid’s Role for Low-Income Medicare 75 “Maine Passes Funding Package for DirigoChoice Health
14 Johnson, N. “States Face Two Immediate Financial Issues: Beneficiaries,” Kaiser Commission on Medicaid and Plan,” St@teside, State Coverage Initaitives, May 2008,
Short-Term Borrowing and Big Budget Deficits,” Center on the Uninsured, February 2006. www.kff.org/medicaid/ available at www.statecoverage.org
Budget and Policy Priorities, October 7, 2008. upload/Dual-Eligibles-Medicaid-s-Role-for-Low-Income- 76 “Maine’s Dirigo Health Reform Experiment Five
15 DeNavas-Walt, C. op. cit. Medicare-Beneficiaries-Feb-2006.pdf. Years On: An Executive Summary of Status and
16 Holahan, J. and A. Cook op. cit. 50 “Medicaid Best Buys - Integrating Care for Dual Eligibles: Achievements,” Governor’s Office of Health Policy and
17 Unless otherwise noted all data taken from “Employer Opportunities for States,” Center for Health Care Strategies. Finance (September 2008).
Health Benefits Annual Survey, 2008,” Kaiser Family www.chcs.org/publications3960/publications_show. 77 Cover, S.M. “Voters Strongly Support Beverage Tax
Foundation and Health Research Education Trust, htm?doc_id=747565. Repeal,” Kennebec Journal, November 5, 2008; “Maine
September 2008. 51 Center for Health Care Strategies, Presentation by Melanie Governor: No on Tax Repeal,” The Boston Globe,
18 DeNavas-Walt, C. op. cit. Bella. www.chcs.org/usr_doc/Bella,_CHCS.pdf. November 1, 2008.
19 “Employer Health Benefits Annual Survey, 2008,” Kaiser 52 Smith, V. op. cit., p. 36. 78 Ibid.
Family Foundation and Health Research Education Trust, 53 “Report to Oregon’s Congressional Delegation,” Oregon 79 “State Strategies,” State of the States, State Coverage
September 2008. Health Fund Board, Federal Laws Committee, Initiatives, AcademyHealth, January 2008.
20 Unless otherwise noted all data taken from Fronstin, P. November 25, 2008. www.oregon.gov/OHPPR/HFB/ 80 “Overview of Vermont’s Health Care Reform,” State of
“Sources of Health Insurance and Characteristics of the Federal_Laws/Federal_Laws_Report_Final_to_print.pdf. Vermont Agency of Administration, September 2008;
Uninsured: Analysis of the March 2008 Current Population 54 “Federal-State Policy Tensions,” presentation by Dave “Vermont’s Health Care Reform,” Vermont Agency of
Survey,” Employee Benefit Research Institute, September Lucas, Office of Governor Arnold Schwarzenegger, Administration. http://hcr.vermont.gov/.
2008. www.ebri.org/pdf/briefspdf/EBRI_IB_09a-2008.pdf. AcademyHealth National Health Policy Conference, 81 “Update on Implementation of Coverage Expansions,”
21 DeNavas-Walt, C. op. cit. February 2008. www.academyhealth.org/nhpc/2008/Lucas. St@teside, State Coverage Initaitives, April 2008, available
22 DeNavas-Walt, C. op. cit. ppt#405,11,Federal - State Policy Tensions. at www.statecoverage.org
23 McNichol, E. and I.J. Lav op. cit. 55 Smith, V. op. cit., p.60. 82 “Overview of Vermont’s Health Care Reform” op. cit.
24 Ibid. 56 Centers for Medicare & Medicaid Services, Letter to 83 Ibid.
25 Ibid. State Officials, August 17, 2007. www.cms.hhs.gov/smdl/ 84 “September Highlights,” State Quality Improvement
26 “Governor Kaine Announces Revenue Reforecast, Plan downloads/SHO081707.pdf. For more information about Institute, AcademyHealth and The Commonwealth
to Address Fiscal Year 2009 Shortfall,” Official Site of the the impact of this directive on states, see “The CMS August Fund. www.academyhealth.org/state-qi-institute/
Governor of Virginia, October 9, 2008. 2007 Directive: Implementation Issues and Implications for SeptemberEmailUpdatesCompilation.pdf.
27 Smith, V. et al. “Headed for a Crunch: An Update on State SCHIP Programs,” State Health Policy Briefing, Vol. 85 “Vermont’s Health Care Reform,” Vermont Agency of
Medicaid Spending, Coverage and Policy Heading into an 2, No. 5, Portland, ME: National Academy for State Health Administration. http://hcr.vermont.gov/.
Economic Downturn, Results from a 50-State Medicaid Policy, April 2008. 86 “State Strategies” op. cit.
Budget Survey for State Fiscal Years 2008 and 2009,” Kaiser 57 Smith, V. op. cit., p. 62. 87 Ibid.
Commission on Medicaid and the Uninsured, September 58 “Applicability of the Congressional Review Act to Letter on 88 “State Strategies” op. cit.; Iselin, S. “Health Care Reform
2008. State Children’s Health Insurance Program,” Government in Massachusetts,” National Academy for State Health
28 Ibid. Accountability Office, B-316048, April 17, 2008 and Policy, Annual Conference, October 2008.
29 Ibid. Memorandum from the Congressional Research Service, 89 “The Massachusetts Way,” The New York Times, editorial,
30 “Unemployment’s Impact on Uninsured and Medicaid,” January 10, 2008. http://rockefeller.senate.gov/press/ August 30, 2008.
Data Spotlight, Kaiser Commission on Medicaid and the CRSMemo01102008.pdf. 90 “Health Care in Massachusetts: Key Indicators,”
Uninsured, 2008. 59 “State Health Reform Series: Strengthening State/National Massachusetts Division of Health Care Finance and
31 Holahan, J., and A. Cook op. cit. Partnerships to Support Delivery System Reform,” Policy (August 2008); “Massachusetts Sees 439,000 Newly
32 DeNavas-Walt, C. op. cit. Engelberg Center for Health Care Reform, Brookings Insured Residents During the Past 21 Months,” St@teside,
33 “Employer Health Benefits Annual Survey, 2008,” op. cit. Institution, October 2008. State Coverage Initiatives, September 2008, available at
34 Ibid. 60 Cantor, J.C. et al. op. cit. www.statecoverage.org; “The Massachusetts Way” op. cit.
35 Ibid. 61 Glied, S. and D. Gould. “Variations In The Impact Of 91 Ibid.
36 Holahan, J. and A. Cook op. cit. Health Coverage Expansion Proposals Across States,” Health 92 Long, S. et al. “Health Insurance in Massachusetts:
37 The Fiscal Survey of States, National Governors Association, Affairs Web Exclusive, June 7, 2005. Estimates from the 2008 Massachusetts Health Insurance
National Association of State Budget Officers, June 2008. 62 State Coverage Initiatives would like to acknowledge Sherry Survey,” Urban Institute, December 18, 2008. www.
38 McNichol, E. and I.J. Lav op. cit. Glied for her thoughts about this issue. urban.org/publications/411815.html.
39 Collins, S.R. et al. “The 2008 Presidential Candidates’ 63 Rydell, C. “An Agenda for Federalism from State Leaders,” 93 “Governor Patrick Announces $21.2 Billion Medicaid
Health Reform Proposals: Choices for America,” The Health Affairs, Vol.13, No. 5, Winter 1994, pp. 252-55. Waiver Agreement,” Office of Massachusetts Governor
Commonwealth Fund, Vol. 100, October 2, 2008. 64 On January 1, 2006, prescription drug coverage for the Deval Patrick, press release, September 30, 2008; Lazar,
duals was transitioned from Medicaid to the Medicare Part K. “Mass. Gets $10.6 b for Healthcare Insurance,” The
D program but states remain required to finance a Boston Globe, October 1, 2008.

State of the States 61


94 “Massachusetts Sees 439,000 Newly Insured Residents During 123 “KHPA Board Retreat Summary,” Kansas Health Policy 159 DeNavas-Walt, C. op. cit.
the Past 21 Months,” St@teside, State Coverage Initiatives, Authority, press release, June 18, 2008. 160 See Table 1 and the new programs in Rhode Island,
September 2008, available at www.statecoverage.org. 124 State of the States, State Coverage Initiatives, Florida, and New Hampshire described on page 57.
95 Lazar, K. “State Tweaks Health Insurance Rules,” The Boston AcademyHealth, January 2008. 161 “Employer Health Benefits Annual Survey, 2008” op. cit.
Globe, October 18, 2008. 125 “Governor Bill Richardson Reacts to Special Session 162 Holahan, J. and A. Cook. “The U.S. Economy and
96 Code of Massachusetts Regulations, 114.5 CMR: Division Results,” Office of New Mexico Governor Bill Richardson, Changes in Health Coverage, 2000-2006,” Health Affairs,
of Health Care Finance and Policy, 114.5 CMR 16.00: press release, September 19, 2008; “New Mexico Approves Vol. 27, No. 2, 2008, w135-w144.
Employer Fair Share Contribution. Modest Funding Increase to Cover Additional Children,” 163 Fronstin, P. “Sources of Health Insurance and
97 Massachusetts Senate File 2863, available at http://www. St@teside, State Coverage Initiatives, September 2008, Characteristics of the Uninsured: Analysis of the March
mass.gov/legis/bills/senate/185/st02pdf/st02863.pdf available at www.statecoverage.org. 2005 Current Population Survey,” Issue Brief 287,
98 Lazar, K. “Mass. Gets $10.6 b for Healthcare Insurance,” The 126 Ibid. November 2005. www.ebri.org/pdf/briefspdf/EBRI_
Boston Globe, October 1, 2008. 127 State of the States, State Coverage Initiatives, IB_11-20051.pdf..
99 “Governor O’Malley Celebrates Enactment of Health AcademyHealth, January 2008. 164 Blumberg, L.J. and L.M. Nichols. “Why are So Many
Care Expansion; Encourages Families to Enroll,” Office of 128 Prescription for Pennsylvania, Legislation. www.rxforpa. Americans Uninsured?” Health Policy and the Uninsured,
Maryland Governor Martin O’Malley, press release, July com/legislation.html; Prescription for Pennsylvania, FAQs. C.G. McLaughlin, ed. Washington, DC: Urban Institute
7, 2008; “Maryland Begins Implementation of Reforms,” www.rxforpa.com/faq.html. Press, 2004.
St@teside, State Coverage Initiatives, July 2008, available at 129 Ibid. 165 Cutler, D. “Market Failure in Small Group Health
www.statecoverage.org. 130 Prescription for Pennsylvania, Executive Orders. http:// Insurance,” Working Paper No. 4879, Cambridge, MA:
100 Ibid. www.rxforpa.com/orders.html. National Bureau of Economic Research, Inc., 1994.
101 “Governor O’Malley Unveils Health Insurance Partnership 131 “Oregon Takes a Major Step Toward Affordable Quality 166 Nichols, L.M. et al. Small Employers: Their Diversity and
for Small Business” op. cit. Health Care,” Oregon Health Fund Board, press release, Health Insurance, Washington, DC: The Urban Institute,
102 Health Insurance Partnership Web site, http://mhcc. November 25, 2008. www.oregon.gov/OHPPR/HFB/docs/ 1997.
maryland.gov/partnership/125Plan.aspx. PressRelease_112508.pdf. 167 Information in the preceding paragraph references
103 Ibid. 132 Aim High: Building a Healthy Oregon, Oregon Health Fund comments and notes from a statement by Linda
104 Adapted from Wicks, E. “Can a Sales Tax on Medical Board, November 25, 2008. www.oregon.gov/OHPPR/HFB/ J. Blumberg to the U.S. House of Representatives
Services Help Fund State Coverage Expansions?” State docs/Final_Report_112908.pdf. Committee on Small Business, September 18, 2008.
Coverage Initiatives, AcademyHealth, July 2008. For a more 133 Ibid. 168 (1) Out-of-pocket medical expenses for care amounted
thorough discussion of the issues raised here, visit www. 134 “Covering Ohio’s Uninsured: The SCI Team’s Final Report to 10 percent of income or more; (2) among low-income
statecoverage.org/node/161. to Governor Ted Strickland,” State Coverage Initiatives, July adults (below 200 percent of the Federal Poverty Level),
105 “Updated Health Care Bill HF 2539,” Iowa House 2008; “Ohio Health Reform Recommendations,” St@teside, medical expenses amounted to at least 5 percent of
Democratic Research Staff, 82nd General Assembly, ,Bill State Coverage Initiatives, July 2008, available at www. income; or (3) deductibles equaled or exceeded 5 percent
Summary, April 22, 2008. statecoverage.org. of income.
106 Iowa House File 2539, available at http://www3.legis.state. 135 “The Oklahoma State Coverage Initiative,” November 17, 169 Schoen, C. et al. “How Many Are Underinsured? Trends
ia.us/noba/data/82_HF2539_Final.pdf; “Iowa Enacts Health 2008, available at http://www.ok.gov/oid/documents/sci- among U.S. Adults, 2003 and 2007,” Health Affairs, Vol.
Reform Legislation,” St@teside, State Coverage Initiatives, distribute-nov14.doc 27, No. 4, pp. w298-w3099.
June 2008, available at www.statecoverage.org. 136 Utah State Legislature Health System Reform Task Force, 170 “Yearly Premiums for Family Health Coverage Rise to
107 Minnesota Senate File 3780, available at https://www. available at http://le.utah.gov/asp/interim/Commit. $12,680 in 2008, Up 5 Percent, as Many Workers Also
revisor.leg.state.mn.us/bin/bldbill.php?bill=S3780.1.html& asp?Year=2008&Com=TSKHSR Face Higher Deductibles,” Kaiser Family Foundation,
session=ls85; “Minnesota Legislature Passes Historic Health 137 Information on the Oklahoma, Connecticut, and press release, September 24, 2008. www.kff.org/
Reform Legislation,” St@teside, State Coverage Initiatives, Arkansas reform efforts are based on draft documents and newsroom/ehbs092408.cfm.
May 2008, available at www.statecoverage.org conversations with reform leaders in those states. 171 The Maryland Health Insurance Partnership Web site,
108 Sonier, J. “Minnesota’s 2008 Health Reforms: Payment 138 “Covering Ohio’s Uninsured: The SCI Team’s Final Report www.mhcc.maryland.gov/partnership/
Reform and Transparency Initiatives,” National Academy to Governor Ted Strickland,” State Coverage Initiatives. 172 Schwartz, K. “Reinsurance: How States Can Make
for State Health Policy, Annual Conference, October 2008. www.healthcarereform.ohio.gov/index.aspx. Coverage More Affordable,” The Commonwealth Fund,
109 Kaiser Daily Health Policy Report, September 17, 2008. 139 Maryland Health Insurance Partnership. http://mhcc. 2005.www.commonwealthfund.org/publications/
110 Guyer, J. “Vermont’s Global Commitment Waiver: maryland.gov/partnership/. publications_show.htm?doc_id=286904.
Implications for the Medicaid Program,” Kaiser 140 New Jersey Senate No. 1557, available at http://www.njleg. 173 Ibid.
Commission on Medicaid and the Uninsured, April 2006. state.nj.us/2008/Bills/S2000/1557_R3.PDF. 174 “Health Insurance Bulletin, Number 2007-1, Office of
111 Koller, C. “No Money but Some Public Authority,” National 141 DeNavas-Walt, C. op. cit. the Health Insurance Commissioner, State of Rhode
Academy for State Health Policy, Annual Conference, 142 “States Moving Forward: Children’s Health Coverage in Island; available at http://www.dbr.state.ri.us/documents/
October 2008. 2007-08,” Georgetown University Health Policy Institute, divisions/healthinsurance/070306%20Bulletin%20
112 Minnesota Senate File 3780, available at https://www. Center for Children and Families, September 2008. 2007-1.pdf; http://www.dbr.state.ri.us/documents/
revisor.leg.state.mn.us/bin/bldbill.php?bill=S3780.1.html& 143 Kershaw, S. “8 States Plan to Press Bush on Health Bill,” The divisions/healthinsurance/061218_20qs_FINAL.pdf.
session=ls85; “Minnesota Legislature Passes Historic Health New York Times, October 2, 2007. 175 Gabel, J. R. et al. “After the Mandates: Massachusetts
Reform Legislation,” St@teside, State Coverage Initiatives, 144 Pear, R. “President is Rebuffed on Program for Children,” Employers Continue to Support Health Reform as More
May 2008, available at www.statecoverage.org. The New York Times, April 19, 2008. Firms Offer Coverage,” presentation slide 8, 2008. www.
113 Ibid. 145 “States Moving Forward: Children’s Health Coverage in allhealth.org/briefingmaterials/GabelPresentation-1338.
114 Ibid. 2007-08” op. cit. ppt#272,8.
115 “New Jersey Health Care Reform Act,” Bill Statement; 146 Ibid. 176 For a more thorough discussion of design and
“New Jersey Expanding Coverage for Children, Adults 147 “Updated Health Care Bill HF 2539,” op. cit. implementation features that promote enrollment in
Signals First Phase of Universal Plan,” BNA’s Health Care 148 “States Moving Forward: Children’s Health Coverage in small business plans, see Volpel, A. et al. “Marketing
Policy Report, July 14, 2008; “New Jersey Governor Signs 2007-08” op. cit. State Insurance Coverage Programs: Experiences of Four
Health Reform Legislation,” St@teside, State Coverage 149 Ibid; “Recent State Updates,” St@teside, State Coverage States.” www.statecoverage.org/node/164.
Initiatives, July 2008, available at www.statecoverage.org. Initiatives, March 2008, available at www.statecoverage.org. 177 Adapted from Butler, P. Employer Cafeteria Plans:
116 Ibid. 150 Ibid; “New Law Expanding Coverage for Children, Adults States’ Legal and Policy Issues, California HealthCare
117 “Major Proposals,” California Healthcare Foundation, Signals First Phase of Universal Plan,” BNA’s Health Care Foundation, October 2008.
calhealthreform.org, http://calhealthreform.org/content/ Policy Report, Vol.16, No.28, July 14, 2008. 178 Carey, B. “The Section 125 Plan Requirement and
view/58; State of the States, State Coverage Initiatives, 151 “States Moving Forward: Children’s Health Coverage in Massachusetts Employers: Experiences, Reactions,
AcademyHealth, January 2008. 2007-08” op. cit. and Initial Results,” Commonwealth Health Insurance
118 Weintraub, D. “The Death of Health Care Reform: How 152 Ibid. Connector Authority, SCI Summer Workshop for State
Arnold Schwarzenegger’s Overhaul Plan Was Doomed by 153 Ibid; “Recent State Updates,” St@teside, State Coverage Officials, July 2008.
the Legislature’s Liberal-Conservative Partisan Crossfire,” Initiatives, March 2008, available at www.statecoverage.org. 179 While Minnesota “requires” participation in Section 125
The Sacramento Bee, February 10, 2008. 154 Ibid; “Recent State Updates,” St@teside, State Coverage plans, employers can opt out of this requirement with no
119 DiCamillo, M. and M. Field. “As Insecurities with the Initiatives, May 2008, available at www.statecoverage.org. penalty.
Health Care System Grow, Californians 155 Ibid. 180 Fisher, E.S. et al. “The Implications of Regional Variations
are Concerned about the State’s Failure to Enact Health 156 “States Moving Forward: Children’s Health Coverage in Medicare Spending, Part 2: Health Outcomes and
Reform Legislation,” Field Research Corporation, April 28, in 2007-08” op. cit.; “Recent State Updates,” St@teside, Satisfaction with Care,” Annals of Internal Medicine, Vol.
2008. www.thehealthcareblog.com/the_health_care_blog/ State Coverage Initiatives, June 2008, available at www. 138, No. 4, pp. 288-98.
files/FieldPoll.pdf. statecoverage.org. 181 According to data collected in the Kaiser/HRET Survey
120 Ibid. 157 “States Moving Forward: Children’s Health Coverage in of Employer-Sponsored Health Benefits. See http://ehbs.
121 “Sebelius Remains Committed to Schools, Health Care, 2007-08” op. cit. kff.org/images/abstract/EHBS_08_Release_Adds.pdf.
Openness in Government,” Office of Kansas Governor 158 Governor Bill Richardson Reacts to Special Session Results op. 182 Fiscal Year 2007 State Expenditure Report, National
Kathleen Sebelius, press release, May 19, 2008. cit.; “New Mexico Approves Modest Funding Increase to Cover Association of State Budget Officers, Fall 2008. http://
122 “Kansas Health Reform: Hard Work Still Ahead,” Kansas Additional Children,” St@teside, State Coverage Initiatives, www.nasbo.org/Publications/PDFs/FY07%20State%20
Health Policy Authority, press release, May 4, 2008. September 2008, available at www.statecoverage.org. Expenditure%20Report.pdf.

62 State of the States


183 “Framework for a High Performance Health System for 194 “Nine Health Insurance Companies Submit Proposals for 204 State of the States 2008: Rising to the Challenge, State
the United States,” The Commonwealth Fund Commission ‘Cover Florida’ Program,” Kaiser Daily Health Policy Report, Coverage Initiatives, AcademyHealth, January 2008.
on a High Performance Health System, New York: The August 20, 2008. 205 For more information on “never events,” see www.cms.
Commonwealth Fund, August 2006. 195 “Governor Crist Signs Cover Florida Legislation to hhs.gov/apps/media/press/release.asp?Counter=1863.
184 McGlynn, E.A. et al. “The Quality of Health Care Delivered Provide Health Insurance Options to Florida’s 3.8 Million 206 Quality and Price Transparency as an Element of State
to Adults in the United States,” New England Journal of Uninsured” op. cit.; St@teside, State Coverage Initiatives, Health Reform, National Governor’s Association Center
Medicine, Vol. 348, No. 26, pp. 2635-45. May 2008, available at www.statecoverage.org. for Best Practices, August 2008. http://www.nga.org/
185 Kohn, L.T. et al., eds. To Err Is Human: Building a Safer 196 Fahey, T. “House OKs plan aimed at lower health insurance portal/site/nga/menuitem.9123e83a1f6786440ddcbeeb50
Health System, Washington, DC: National Academy Press, premiums,” Manchester Union Leader, May 7, 2008; 1010a0/?vgnextoid=a6a0fbc0578bb110VgnVCM1000001
1999.
“New Hampshire House Passes Bill to Create Plan to a01010aRCRD.
186 The total Medicaid budget in North Carolina for state fiscal
Lower Insurance Premiums for Small Businesses,” Kaiser 207 The survey defined “eHealth” as any health care practice
year 2007–2008 exceeded $11 billion.
Daily Health Policy Report, May 9, 2008; “New Hampshire supported by electronic processes and communication,
187 Willson, C. “Community Care of North Carolina,” February
2008. www.statecoverage.org/node/226. Enacts Legislation to Assist Small Employers,” St@teside, including health information technology (HIT) and
188 Community Care of North Carolina Web site, http://www. State Coverage Initiatives, July 2008, available at health information exchange (HIE).
communitycarenc.com/. www.statecoverage.org. 208 Smith, V. et al. “State Health Activities in 2007:
189 Vermont Blueprint for Health, http://healthvermont.gov/ 197 Ibid. Findings from a State Survey,” February 2008. www.
blueprint.aspx 198 “Results of the State Medical Home Scan,” The National healthmanagement.com/files/1104_Smith_state_e-
190 Koller, C. “The Rhode Island Chronic Care Sustainability Academy for State Health Policy, October 2008. www. hlt_activities_2007_findings_st.pdf.
Initiative (CSI-RI): Translating the Medical Home nashp.org/_docdisp_page.cfm?LID=980882B8-1085-4B10- 209 Schoen, C. et al. “Bending the Curve: Options for
Principles into a Payment Pilot,” power point slides at the B72C136F53C90DFB. Achieving Savings and Improving Value in U.S. Health
2008 conference of The National Academy for State Health 199 Ibid. Spending,” The Commonwealth Fund, December 18,
Policy Web site, available at www.nashp.org/Files/Koller_ 200 Thorpe, K.E. “The Rise in Health Care Spending and What 2007. www.commonwealthfund.org/publications/
Precon_NASHP2008.pdf. to Do about It,” Health Affairs, Vol. 24, No. 6, pp. 1436-45. publications_show.htm?doc_id=620087.
191 Ibid. 201 Connolly, C. “Obama Policymakers Turn to Campaign 210 “Promoting Greater Efficiency in Medicare,” MedPAC
192 See the Rhode Island Section of 2009 State of the States. Tools,” Washington Post, December 4. http://www. Report to Congress, June 2007.
193 “Governor Crist Signs Cover Florida Legislation to washingtonpost.com/wp-dyn/content/article/2008/12/03/ 211 Information about Obama’s health care plan taken from
Provide Health Insurance Options to Florida’s 3.8 Million AR2008120303829.html?hpid=topnews www.barackobama.com/pdf/issues/HealthCareFullPlan.pdf.
Uninsured,” Office of Florida Governor Charlie Crist, press 202 “State Employee Health Benefits,” National Conference of 212 “Heart Failure Disease Management Improves Outcomes
release, May 21, 2008; “Recent State Updates,” St@teside, State Legislatures Web site, http://www.ncsl.org/programs/ and Reduces Costs,” Agency for Healthcare Quality and
State Coverage Initiatives, May 2008, available at www. health/stateemploy.htm. Research. http://innovations2staging.silverchair.com/
statecoverage.org. 203 Dow, B. “King County’s Health Initiative,” power point content.aspx?id=275.
slides at AcademyHealth Summer Meeting, July 2008, 213 Ibid.
available at www.statecoverage.org/node/240.

State of the States 63


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