[Senate Hearing 111-865]
[From the U.S. Government Publishing Office]
S. Hrg. 111-865
LEARNING FROM THE STATES: INDIVIDUAL STATE EXPERIENCES WITH THE
HEALTHCARE REFORM COVERAGE INITIATIVES IN THE CONTEXT OF NATIONAL
REFORM (ROUNDTABLE DISCUSSION)
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
ON
EXAMINING INDIVIDUAL STATE EXPERIENCES WITH HEALTH CARE
REFORM COVERAGE INITIATIVES IN THE CONTEXT OF NATIONAL
REFORM
__________
APRIL 28, 2009
__________
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
EDWARD M. KENNEDY, Massachusetts, Chairman
CHRISTOPHER J. DODD, Connecticut MICHAEL B. ENZI, Wyoming
TOM HARKIN, Iowa JUDD GREGG, New Hampshire
BARBARA A. MIKULSKI, Maryland LAMAR ALEXANDER, Tennessee
JEFF BINGAMAN, New Mexico RICHARD BURR, North Carolina
PATTY MURRAY, Washington JOHNNY ISAKSON, Georgia
JACK REED, Rhode Island JOHN McCAIN, Arizona
BERNARD SANDERS (I), Vermont ORRIN G. HATCH, Utah
SHERROD BROWN, Ohio LISA MURKOWSKI, Alaska
ROBERT P. CASEY, JR., Pennsylvania TOM COBURN, M.D., Oklahoma
KAY R. HAGAN, North Carolina PAT ROBERTS, Kansas
JEFF MERKLEY, Oregon
J. Michael Myers, Staff Director and Chief Counsel
Frank Macchiarola, Republican Staff Director and Chief Counsel
(ii)
?
C O N T E N T S
__________
STATEMENTS
TUESDAY, APRIL 28, 2009
Page
Kennedy, Hon. Edward M., Chairman, Committee on Health,
Education, Labor, and Pensions, opening statement.............. 1
Prepared statement........................................... 2
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming,
opening statement.............................................. 3
Bingaman, Hon. Jeff, a U.S. Senator from the State of New Mexico. 5
Prepared statement........................................... 5
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 6
Kingsdale, Jon, Ph.D., Executive Director, Commonwealth Health
Insurance Connector, Boston, MA................................ 8
Prepared statement........................................... 9
McAnneny, Eileen, Esq., Senior Vice President, Associated
Industries of Massachusetts, Boston, MA........................ 12
Prepared statement........................................... 12
Liu, Ruth, Senior Director of Health Policy and Health Reform,
Kaiser Permanente, CA.......................................... 15
Prepared statement........................................... 16
Besio, Susan, Ph.D., Director, Office of Vermont Health Access,
Human Services Agency, State of Vermont, Burlington, VT........ 24
Prepared statement........................................... 25
Chen, Harry, M.D., Emergency Room Physician and Board of Vermont
Program for Quality Health Care, Burlington, VT................ 33
Prepared statement............................................... 25
Clark, Hon. David, Speaker of the Utah House of Representatives,
Salt Lake City, UT............................................. 34
Prepared statement........................................... 34
James, Brent, M.D., M.Stat., Executive Director, IHC Institute
for Health Care Delivery Research, Intermountain Health Care,
Inc., Salt Lake City, UT....................................... 38
Prepared statement........................................... 39
(iii)
LEARNING FROM THE STATES: INDIVIDUAL STATE EXPERIENCES WITH THE HEALTH-
CARE REFORM COVERAGE INITIATIVES IN THE CONTEXT OF NATIONAL REFORM
(ROUNDTABLE DISCUSSION)
----------
TUESDAY, APRIL 28, 2009
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 2:31 p.m., in
Room SD-430, Dirksen Senate Office Building, Hon. Edward
Kennedy, Chairman of the Committee, presiding.
Present: Senators Kennedy, Mikulski, Bingaman, Murray,
Sanders, Hagan, Merkley, Enzi, Alexander, Burr, Isakson, Hatch,
and Coburn.
Opening Statement of Senator Kennedy
The Chairman. We will come to order.
Senator Enzi was telling us about the good old days, when
this committee was really called to order, and had great
success in bringing together different colleagues to consider
the work of this committee.
It's good to see all of you today and I appreciate it very
much.
I think most of you have a pretty good idea about where we
are--I think our committee, over a period of time, has been
looking at a variety of different issues. The Medicare,
Medicaid, and CHIP programs--those have all been issues that we
have been focused on, over the past several years.
We still have very important work to do and we are very,
very hopeful that our committee will be able to deal
effectively in these areas, as we have in some of the others.
We have an extraordinary group of individuals whom we have
called on to be of help and assistance to this committee.
Rarely have we had a group of individuals who have worked as
conscientiously and thoroughly on the issues which we're facing
before the committee. We are enormously grateful to all of
those who have been a key part of all of our efforts.
We are especially thankful for Jon Kingsdale and Eileen
McAnneny who are joining us today from Massachusetts. We will
have a chance to introduce all of those who are here, and we
will start with our members, and start with Senator Enzi.
We are very thankful that Senator Enzi has been willing to
take on so much of the responsibility of this committee for
these past weeks, and he has just done an extraordinary job,
and we're all very, very appreciative and grateful to him.
I will ask him to start, and then we'll go along with the
other members of the committee.
[The prepared statement of Senator Kennedy follows:]
Prepared Statement of Senator Kennedy
Today, America stands at an historic crossroad for our
health care system. Unlike earlier attempts at health reform
dating back to President Harry S. Truman, there is no realistic
alternative. Either we join together and put our Nation on the
right track to affordable, accessible health care for all, or
our system will collapse from its own weight and
contradictions.
A few key facts demonstrate the magnitude of this problem.
More than one in six Americans--nearly 50 million individuals--
are uninsured.
25 million more are underinsured.
Nearly 80 percent of the uninsured are from
working families.
40 percent belong to the middle class.
The uninsured lack insurance because they can't
afford it.
Our Nation spent about $2.4 trillion on health care in
2008--more than twice as much as in 1997 and half as much as
projected for 2017.
Employer-sponsored health insurance premiums have grown
four times faster than wage increases over the last 8 years.
These increases have affected businesses profoundly. GM
spends more money on health care than on steel. Starbucks
spends more on health insurance premiums than on coffee.
The impact is particularly harsh on small businesses. In
2007 only 45 percent of firms with 3-9 employees offered health
benefits (compared to 99 percent of firms with 200 or more
employees).
What harms businesses also harms families. Non-elderly
Americans spend more than 10 percent of their income on health
insurance premiums, and the percentage rises every year. For
those without access to employer-sponsored insurance and who
have pre-existing health problems, insurance is often
unavailable at any price. Elderly couples must have average
savings of $300,000 to pay for their lifetime health expenses
not covered by Medicare.
Job losses resulting from the current economic crisis are
making this problem even worse. For every 1 percent increase in
the unemployment rate, another 1.2 million persons lose their
health insurance. For every 100 people losing their jobs, the
ranks of the uninsured grow by 85. Lack of health insurance
results in postponement of needed care, worsening of illness,
increased absence from work and decreased productivity, and
higher costs when these people are treated for acute illnesses,
through expensive emergency care, with poor follow-up.
These problems will worsen as health costs accelerate
beyond the growth of the overall economy. Without reform,
Medicare spending will consume 25 percent of Federal income tax
revenues by 2025, and 40 percent by 2035, according to the
Trustees of the Medicare Trust Fund.
Medicaid, funded by Federal and State budgets, will face
equally large financial challenges. Employers will be unable to
absorb the growth in insurance premiums, and the ranks of the
uninsured will continue to swell.
Congress must deliver strong medicine to America's health
care system to break this cycle. As we have learned from
successful State experiments, the foundation for an affordable
and accessible health care system rests on a three-legged
stool: The first is system-wide reform of health insurance
markets, especially the individual and small employer markets.
The second leg is shared responsibility by individuals, their
employers and government, with each having an essential role to
achieve full participation. Finally, we need realistic support
and subsidies for those who cannot afford to purchase health
insurance on their own.
Today, we will hear from experts from four States which
have pioneered different approaches to expanding coverage for
reforming their delivery systems: Utah, Vermont, California,
and Massachusetts. We will hear about their successes and
failures, the obstacles they have yet to overcome, and most
importantly, the lessons from their experience for national
health reform.
I take particular pride in the achievements of the
Massachusetts health reform, which has increased coverage from
90 percent of all residents to about 97.5 percent in less than
3 years, and provides valuable lessons based on its successes
and shortcomings. No other State has achieved this level of
success, and it has faced up to problems in primary care,
quality of care, and other aspects of this issue with courage
and tenacity.
I appreciate the remarkable progress made by each of these
States and I look forward to learning more today about the
lessons they can teach us in preparation for effective national
health reform.
Opening Statement of Senator Enzi
Senator Enzi. Thank you, Mr. Chairman. I want to thank you
for the way you've distributed the workload on your side, while
it's been necessary for you to be gone. You've had some
outstanding people who have been willing to work, and as a
result we've gotten results.
Since everybody's kind of concentrating on healthcare a
little bit today, because of what's happened in Mexico and is
now spreading to the United States, I do want to mention that
Senator Burr spent about a year and a half of his life working
on a bioterrorism bill, and everybody on this committee got to
work on it, and because of the efforts of this committee,
they're in place already, 50 million doses of Patamaflu
vaccine, which will take care of what we have so far. And puts
in place a way to develop the vaccine through the fall, for the
fall epidemic that could hit, that will make a huge difference
to people, possibly, all over the world.
But just as importantly, it put in place some of the tools
for quickly identifying the kinds of things that are happening
right now, and it's not very often that a committee or a person
can take a look into the future, and find something that
actually becomes necessary and lifesaving in the future.
I congratulate the committee, Senator Burr, and Senator
Kennedy for the particular work that they did on it.
I do want to thank you for holding this roundtable today on
State-based healthcare reform initiatives. The States are
always kind of, mini labs for what can happen, and they find a
lot of the successes, and they find a lot of the problems for
us, so that we don't have to experience them on a national
level.
I do believe it's crucial for us, as we consider national
reforms, to hear from people across the country, about what
they've learned while enacting healthcare reforms.
I always say, ``If you want to know how things are really
going on the ground, you just talk to the folks that have
actually done something.'' That's what we're going to do today.
This isn't a normal situation where the Chairman invites
four people, and I invite one, and then both sides show up to
beat up on everybody. This is where we actually want to know
what you did, how you did it, what the effect was, and then a
chance for some interaction among the people on the panel about
how one person's idea might work pretty well with another
person's idea--and that's very helpful for us, as we begin
drafting a bill.
National healthcare reform will impact the lives of
millions of Americans in every State. In fact, probably before
we're done, it will affect every single American. It's
important for us to remember that our States are sometimes very
different, and that is what makes America great. We're a
diverse country with differences of opinion, and unique ways of
solving problems.
Represented here today are States that span both the
political spectrum, and the geographic width of our Nation.
They've all taken on the laudable goal of improving the health
of our citizens, but have done so in different ways. I feel
strongly that we need to keep this in mind as we continue to
pursue national reforms.
Throughout my discussions on healthcare reform, I've
insisted that we cannot just focus on expanded coverage. We
also have to focus on improving quality, and getting more value
out of our healthcare system. Our current pace of spending is
not sustainable, and we must get healthcare costs under
control.
I believe we can do that, and I'm interested in hearing
ideas from those on the panel and have experience in working to
bring down costs.
Another topic of discussion I'm interested in is insurance
market reforms. I understand in Massachusetts reforms like
guarantee issue and modified community rating were imposed
several years prior to the development of the connector, and
the implementation of the individual mandate. I do worry that
forcing States to dramatically change their insurance market
rules too quickly could result in some very serious unintended
consequences.
I also note that in Massachusetts, there is no public plan
option. While it is crucial that we get the policy of insurance
market reform right and increase the value of healthcare
dollars, I would be remiss if I didn't at least mention the
perils of process. Without the right process, we can't move
forward on the best healthcare reforms for the American people.
The first real test of whether the new Administration and
Senate leaders are serious about developing bipartisan
solutions was how the Budget Conference Report addressed
healthcare reform. The majority failed that test.
Reconciliation would cut off most avenues for real debate in
the Senate, and is intended primarily as a tool to reduce the
deficit. If those in the majority do use the budget
reconciliation to jam the healthcare reform through the Senate,
they'll be sending a clear signal that they're not interested
in truly bipartisan effort, and I hope that's not true.
With that, I will look to our witnesses to make
recommendations for how we should shape the policies of
healthcare reform.
Mr. Chairman, I thank you for holding this roundtable
today.
The Chairman. Thank you very much. I'll let that comment
that you aimed at the Democrats go by.
[Laughter.]
Senator Enzi. We'll talk later.
The Chairman. This is pretty early in the game--but we want
to have Senator Bingaman, and Senator Hatch, if you would make
a comment, and then we'll call on Senator Bingaman to make an
additional comment.
Statement of Senator Bingaman
Senator Bingaman. Mr. Chairman, let me thank you for having
the hearing. This is, I think, the third of these hearings
we've had on the whole subject of coverage, and how to expand
coverage, and I do think it's very useful to have people here
from these four States that are represented, and your own State
of Massachusetts has probably done more than any State to take
on this difficult job of reforming healthcare and expanding
coverage.
I know we have a couple of witnesses here from Senator
Sanders' State of Vermont, and that's very welcome, as well. We
have two witnesses from Utah, Senator Hatch's State, and a
representative from California. We're glad to have all of these
witnesses.
I do think there's a lot we can learn at the Federal level
from the experiences we've observed with individual States, and
I think they can start us down the path toward a solution at
the national level, as well.
Again, I thank you for having the hearing, and I look
forward to hearing from each of these witnesses.
[The prepared statement of Senator Bingaman follows:]
Prepared Statement of Senator Bingaman
Welcome, I am pleased to participate in today's hearing
with Senators Kennedy, Enzi and the other members of the
committee. States face many health care challenges including:
the rising number of uninsured, the rising cost of health care,
and a fragmented medical and insurance system. In the end
almost 50 million Americans are left without any access to
health insurance and many millions more have inadequate
coverage.
Today we will hear about reform experiences in
Massachusetts, California, Vermont, and Utah. These States have
taken bold steps in attempting to address the complex
healthcare problems they face.
Perhaps one of the most successful models of reform has
been Massachusetts. Although their uninsurance rate was low
before reform--around 13 percent--they have cut this unisurance
rate by 75 percent. Now more than 97 percent of the population
has coverage. In addition, the State has nearly cut in half the
cost of premiums in the individual market and remarkably, the
cost premiums of policies sold through the Connector is even
expected to decline this year--at a time when medical inflation
continues to outpace other sectors of the economy. It's not
surprising that the reform enjoys a 75 percent public approval
rating in Massachusetts.
I want to thank the panelists for their participation
today. I look forward to hearing about the efforts in their
States.
It is my hope that this hearing will serve to inform and
encourage the Senate's important work to achieve national
health reform.
The Chairman. Thank you very much. We'll now hear from
Senator Hatch.
Statement of Senator Hatch
Senator Hatch. Thank you Mr. Chairman. I appreciate you,
and appreciate your leadership on this committee and your
leadership in healthcare, in particular.
I welcome all of you to the committee, we're very grateful
to you, to come and spend time with us, and help us to
understand these problems better.
We would especially like to recognize speaker David Clark
from my home State and Dr. Brent James, who has a world
reputation in healthcare--both from my great State of Utah--for
lending their time and their expertise to this important
conversation.
Just like me, I'm sure that every member will find their
insights extremely helpful, as we move toward reform in our
Nation's healthcare system. Before talking about policy, let me
take a couple of minutes to talk about process.
Healthcare reform is an important national priority that is
too big for political gamesmanship. We're talking about an
issue that makes up one-sixth of our total economy. I'm very
disappointed that the upcoming Budget Conference Report will
include partisan reconciliation instructions for healthcare
reform.
Any successful healthcare reform proposal must be subject
to the full scrutiny of both parties of the Senate and House of
Representatives, and the American people. Using the budget
reconciliation process in the Senate, for example, would limit
debate to only 20 hours, and restrict the ability of Senators
to amend and perfect a proposal that is intended to steer one-
sixth of our economy in a new direction.
Now, this would make it difficult--if not impossible--to
gain broad, bipartisan support for the effort, and I think it
would be a tremendous disservice to the American people, and
our Nation. The notion of a 50-vote healthcare reform
legislation that is jammed through after being debated only 20
hours, with a limited amendment process, should scare every
person in this room.
Now, having said that, let me now focus on the incredibly
important policy being discussed in the room today. As we move
forward on comprehensive reform, it is important to recognize
that all States are not created equal. Every State has its own
unique mix of challenges, based on everything from an insurance
market, to demographics, and regulations. I'm sure that both
Speaker Clark, and Jon Kingsdale will agree with me when I say
that Utah is not Massachusetts, and Massachusetts is not Utah.
Although, Senator Kennedy has been trying all of these years to
make Utah like Massachusetts.
[Laughter.]
What works in one State will not necessarily----
The Chairman. The issue is cut.
[Laughter.]
Senator Hatch. Yes, this is cut, yes. I'm just beginning.
[Laughter.]
There's an enormous reservoir of expertise, experience and
field-tested reform at the State level, which is represented
well on this panel. I personally believe in 50-State
laboratories that help us to arrive at final conclusions on
things as important as this.
We should take advantage of that, of you folks here, by
placing States at the center of efforts to meet coverage and
affordability goals.
There will be, naturally, an important role for the Federal
Government in the partnership, but it will have to give the
States flexibility and assistance to meet coverage and
affordability objectives. We should not make the mistake of
assuming that the Federal Government is the solution to all
problems. I think the focus should be on families, not
Washington.
Having said that, let me just say that I, unfortunately,
have to leave at the conclusion of my remarks to attend a very
important briefing in the Senate Intelligence Committee in the
Secure Room. I just want to thank you, Mr. Chairman, for this
courtesy. I want to thank all of you for the great testimony I
know you will give, and the help that you will give to every
member of this committee, and I hope we all pay strict
attention to what you have to say.
I'm grateful to you, welcome to you, and of course, we'll
learn from you and I'll pay attention to what you have to say,
regardless.
Thank you, Mr. Chairman.
The Chairman. Thank you very much. We are very lucky to
have Jeff Bingaman and we'd ask him if he'd be good enough to
moderate this for us today.
Jeff.
Senator Bingaman [presiding]. Good, I'm glad to do that,
let me just briefly re-introduce our witnesses and then we'll
just start over at the left, and have each of you tell us what
you think we need to know about this subject.
Jon Kingsdale is the Executive Director of the Commonwealth
Health Insurance Connector in Boston. Thank you very much for
being here, you're right at the center of the reform efforts
there in Massachusetts, and we're anxious to hear your views on
those.
Ms. McAnneny is the Senior Vice President with Associated
Industries of Massachusetts, also in Boston. Thank you for
being here.
Ms. Liu is the Senior Director of Health Policy and Health
Reform with Kaiser Permanente in California, thank you for
being here.
Let's see, in Vermont we have Susan Besio, who is the
Director of the Office of Vermont Health Access with the Human
Services Agency in Vermont, in Burlington.
Harry Chen is an M.D., and emergency room physician and
Board of Vermont Program for Quality in Healthcare, also in
Burlington. Thank you for being here.
Then, as Senator Hatch indicated, we have the majority
leader of the Utah House of Representatives here, the Honorable
David Clark. Thank you for being here, we appreciate it very
much.
And Brent James is the Executive Director with the IHC
Institute for Healthcare Delivery Research with Intermountain
Healthcare, Inc., in Salt Lake City.
Thank you all for being here, why don't we start with you,
Mr. Kingsdale, if you'd advise us as to the things you think we
need to know about the experiences you've had in Massachusetts.
STATEMENT OF JON KINGSDALE, Ph.D., EXECUTIVE DIRECTOR,
COMMONWEALTH HEALTH INSURANCE CONNECTOR, BOSTON, MA
Mr. Kingsdale. Good afternoon, and thank you so much. With
my 60 seconds, I won't re-introduce myself, but just jump right
into it.
Perhaps the most important lesson from Massachusetts is
that it can be done, with Senator Kennedy's help. With all but
2.6 percent of our residents insured, we enjoy near-universal
coverage. We're learning, of course, as we go, but I would
offer five lessons for your consideration.
First, the individual mandate has proven essential to
covering the uninsured as the keystone of our theme of shared
responsibility among many parties.
Second, that implementing health reform is a campaign built
on the theme of shared responsibility and supported by
coalitions of progressive advocacy groups, health insurers,
employers--such as Eileen McAnneny represents.
Third, that there are, of course, many twists and turns to
implementing complex reform, which really could not be
anticipated in statute. Rather, the legislature, wisely
delegated some key decisions to a representative Board of the
Connector, which conducts its activities in public, with great
transparency, and has kind of a learning organization. I think
Senator Daschle made a similar point in his cogently argued
book about the importance of delegation.
Fourth, that exchanges can be a valuable component of a
broader set of reforms and I've supplied committee staff with
some thoughts on their design. Here, I would stress the need
for independence, if a public agency is to create and regulate
a market.
Then, finally, I would point out that Massachusetts has
succeeded in covering most of our people by starting with
coverage expansion. We are now moving to address costs, and I
would urge you to consider Massachusetts' example in not
holding the uninsured hostage to cost control, but I would hope
that you would devise a political strategy for progressing from
the very difficult challenge of covering expanding coverage, to
the nearly impossible challenge of controlling costs. Thank
you, and I look forward to your questions.
[The prepared statement of Dr. Kingsdale follows:]
Prepared Statement of Jon Kingsdale, Ph.D.
Thank you for this opportunity to share my State's experience with
health reform, in the context of your effort to expand financial access
to medical care for the Nation. My name is Jon Kingsdale and I am the
Executive Director of the Commonwealth's Health Connector. This is an
independent State authority, established under the landmark health
reform law, Massachusetts' Chapter 58 of the Acts of 2006, as one of
several State agencies charged with expanding health insurance
coverage. The Health Connector operates two new coverage programs,
makes policy and regulatory decisions, and orchestrates public outreach
and education efforts.
Perhaps the most important lesson from Massachusetts' effort to
achieve near-
universal health insurance is to demonstrate that it can be done, here
in the United States. Two years after Chapter 58 took effect, the
State's uninsurance rate had fallen to just 2.6 percent, by far the
lowest in the country and about one-fourth of what it had been prior to
reform.\1\ This is not quite universal coverage, but it is only 1
percent or so above the uninsurance rates of some European countries
commonly considered to have ``universal'' coverage. In the course of
implementing Chapter 58, we have learned many lessons and we continue
to evaluate and re-think our reforms. We do not have any ``silver
bullets'' to offer, but I would suggest five lessons from the
Connector's experience that might help inform national efforts.
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\1\ Long, S., Cook, A., & Stockley, K. (2009, March). Health
Insurance Coverage in Massachusetts: Estimates from the 2008
Massachusetts Health Insurance Survey. Boston, MA: Division of Health
Care Finance and Policy. Available online at, http://www.mass.gov/
Eeohhs2/docs/dhcfp/r/survey/08his_access.doc.
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First, the individual mandate has proven essential to covering
large portions of the uninsured. As evidence, I would cite the contrast
with Hawaii, which enacted a mandate on employers and employees only.
Yet, the rate of uninsurance there still fluctuates around 8
percent.\2\
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\2\ DeNavas-Walt, C., Proctor, B., & Smith, J. (2008, August). 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.
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Not only does the individual mandate work to enroll those who might
otherwise choose to remain uninsured--whether subsidized or not--it
also works indirectly to lower the cost of insurance. The uninsured are
disproportionately young, single male, and poor \3\: some considerable
numbers of them are quite healthy and prefer to take the chance of not
being covered. As a result, these so-called ``invincibles'' do not
contribute through insurance risk pools to subsidize those in poor
health; moreover, when trauma or serious illness do strike the
uninsured, they actually add to providers' bad debt and charity care,
which is ultimately born by premium-payers and taxpayers. Massachusetts
has found ways to cover many of the young ``invincibles'' at rates they
can afford, and with coverage that helps lower premiums for others.
Non-group enrollment in Massachusetts more than doubled in the year
after the individual mandate took effect and, judging from the
Connector's enrollment, some 55 percent of new, non-group enrollees
were aged 17-35 and some 85 percent purchased single coverage.\4\
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\3\ Long, S., Cook, A., & Stockley, K. (2009, March). Health
Insurance Coverage and Access to Care in Massachusetts: Detailed
Tabulations Based on the 2008 Massachusetts Health Insurance Survey.
Boston, MA: Division of Health Care Finance and Policy. Available
online at, http://www.mass.gov/Eeohhs2/docs/dhcfp/r/survey/
08his_detailed_tabulations.pdf; and Massachusetts Department of Revenue
(2008). Massachusetts Department of Revenue, Data on the Individual
Mandate and Uninsured Tax Filers, Tax Year 2007. Boston, MA: Author.
Available online at, http://www.mass.gov/Ador/docs/dor/News/
PressReleases/2008/2007_Demographic_Data
_Report_FINAL_(2).pdf.
\4\ Commonwealth Health Insurance Connector Authority, Commonwealth
Choice Enrollment Data.
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The individual mandate is controversial. It polls less favorably
than reform generally or than a mandate for children alone.\5\ But it
is the keystone of our reform. So, Massachusetts has taken special care
to implement the requirement that adults have insurance, if affordable,
in such a way as to build support for it over time. Importantly, it is
enabled by complimentary initiatives, which exemplify our law's theme
of ``Shared Responsibility:'' (a) the commitment of employers with over
10 employees to make a ``fair and reasonable'' contribution toward
group health insurance; (b) the commitment by government to subsidize
insurance for low-income people without other access to coverage; and
(c) the requirement that the larger health plans participate in the
Connector and the non-group market, under regulations that guarantee
issue and renewal of insurance policies using adjusted community
rating.
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\5\ Sussman, T., Blendon, R.J., & Campbell, A.L. (2009, April 21).
Will Americans Support the Individual Mandate? Health Affairs Web
Exclusive w501-w509.
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The individual mandate is part of a broader commitment from various
parties, including business and health insurers, to ``Shared
Responsibility.'' The second point I would make is that implementing
health reform in Massachusetts is a campaign, built around this theme
of ``Shared Responsibility.'' Because individual responsibility is a
critical element, which generates bi-partisan support and resistance,
its acceptance cannot be taken for granted, but must be earned. Having
done so, tax compliance is very high--98.6 percent in the first year--
and the popularity of reform overall and even of the mandate have risen
steadily.
As part of this campaign, Massachusetts phased in penalties for the
mandate only after expanding new sources of coverage, and the Connector
allows case-by-case exceptions to the individual mandate through a
generous appeals process. We evaluate the results of our experiment,
both to celebrate its victories and to identify and correct the
problems. The State's legislature follow reform's progress closely,
even enacting follow-up reforms in 2008 (Chapter 305), and Governor
Patrick has been steadfast in his support of Chapter 58 throughout this
very challenging economic climate. The coalitions of interest groups
that helped pass Chapter 58, on a bi-partisan basis and with nearly
unanimous votes, continue to campaign for its implementation. These
coalitions include liberal advocacy groups, employers and insurers.
Third, because implementing this ``experiment'' is so challenging,
Chapter 58 created new State entities to guide the reforms. Anything so
ambitious as reforming one-sixth of our economy cannot be captured in a
single piece of legislation, but involves some degree of trial and
error, learning by doing. The Massachusetts legislature built a sturdy
statutory framework for reform, but delegated many key policy
determinations and provided the resources to oversee coverage
expansions. It provided special funding for the first-year
administrative activities of a half-dozen existing State agencies,
capitalized the newly-established Health Connector, and authorized an
ongoing source of administrative revenues for new programs.
Chapter 58 authorizes the Connector's semi-independent and broadly
representative Board of Directors to make tough policy calls.\6\ The
Connector conducts all its activities in public and very transparently,
and it prides itself on being a ``learning organization.'' For example,
the Board defined ``Minimum Creditable Coverage'' and ``Affordability''
by unanimous votes in 2007, only to significantly revise these
determinations in 2008 (also by unanimous votes). The Connector
launched its small-group offering in early 2009 as a pilot, with a
commitment to evaluate and revise it in light of preliminary
experience.
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\6\ By statute (M.G.L. c. 176Q 2(b)), the Connector's 10-member
Board of Directors is chaired by the Commonwealth's Secretary of
Administration & Finance and also includes, ex officio, the Director of
Medicaid; ex officio, the Commissioner of Insurance; ex officio, the
Executive Director of the Group Insurance Commission; three members
appointed by the Governor, one of whom shall be a member in good
standing of the American Academy of Actuaries, one of whom shall be a
health economist, and one of whom shall represent the interests of
small businesses; and three members appointed by the attorney general,
one of whom shall be an employee health benefits plan specialist, one
of whom shall be a representative of a health consumer organization,
and one of whom shall be a representative of organized labor.
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By contrast, a statute is not a ``learning organization'' and
Chapter 58 could not have anticipated the many twists and turns of
implementing such complex change. Similarly, Senator Daschle has argued
for delegating implementation of national health care reform to a new
Federal authority with expertise, independence and flexibility.\7\
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\7\ Daschle, T., Lambrew, J. & Greenberger, S. (2008). Critical:
What We Can Do About the Health-Care Crisis. St. Martin's Press: New
York, NY.
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Fourth, properly constituted, resourced and empowered, an exchange
can be a valuable component of a broader set of reforms. The Health
Connector actually runs two different insurance exchanges, serving
distinct functions and clients. Commonwealth Choice is a distribution
channel for individuals in the non-group market to buy health insurance
with their own money at premiums which are, by law, the same in or
outside the Connector. ``Commonwealth Care'' offers a choice of plans,
purchased by the Connector for uninsured adults earning 300 percent or
less of the Federal Poverty Level (FPL)--to which some enrollees make a
premium contribution, but those below 100 percent of the FPL do not.
Commonwealth Care negotiates premiums and drives a hard bargain with
its own dollars in a way that Commonwealth Choice, as a free-market
exchange, simply cannot do.
Each program uses competitive solicitations and offers a choice of
plans to enrollees at different price points. Both programs add value,
but the two exchanges operate in very different ways, reflecting their
different objectives, statutory rules, and target populations. If the
Congress authorizes exchange(s) as part of broader reform, there are
important decision points about how aggressive the exchange(s) should
be in influencing premium rates, which populations an exchange should
serve, whether the exchange(s) should try to stimulate change in the
surrounding market, how best to promote coverage and inform the public
about insurance, and whether there should be one national exchange or
many State exchanges. These decisions must be coordinated with each
other and the larger reform context. I have elsewhere supplied the
committee's staff with some thoughts on these questions.
The Commonwealth's Health Connector does enjoy considerable, though
by no means total, independence from politics, and I would urge the
committee to consider the advantages of semi-independence for a public
agency administering a market or exchange. On the one hand, an
exchange's efficacy derives from its capacity, as a public agency
operating in the context of larger reform, to exert market forces and
prudent purchasing to improve the value of health insurance. On the
other hand, its credibility and authority to improve competition and
benefit consumers depends on its objectivity and independence from
overt political influence. I would draw an (imperfect) analogy to the
SEC, the Federal Reserve Board, and other such Federal entities
designed to improve the functioning of markets and cite, again, Senator
Daschle's argument.\8\
---------------------------------------------------------------------------
\8\ Daschle, T., Lambrew, J. & Greenberger, S. (2008).
---------------------------------------------------------------------------
Fifth, as ambitious as Chapter 58 is, comprehensive reform was
simply too much for Massachusetts to digest in one gulp. Rather, we are
trying to sequence reform, starting with near-universal coverage and
moving now to address costs. Massachusetts is very proud of having
achieved 97.4 percent coverage, compared with a national average below
85 percent. Doing so has not exacerbated the underlying problems of
run-away health care costs, shrinking supply of primary care
clinicians, and fragmented, uncoordinated care which characterize
American medicine. Neither has it solved these problems.
Having made the commitment to near-universal coverage,
Massachusetts now confronts the challenge of controlling costs. This is
the more difficult challenge. On the one hand, in enacting Chapter 58,
the Commonwealth did not hold the uninsured hostage to first
controlling medical costs. On the other hand, the Commonwealth will not
be able to sustain near-universal coverage, if we cannot now control
costs. So, we now confront costs from the moral high-ground of
protecting near-universal coverage, but without any guarantee of
success. The fifth lesson is that the nation must not hold the
uninsured hostage to cost control, but that the Nation will need a
political strategy for progressing from the very difficult challenge of
expanding coverage to the even greater challenge of controlling medical
costs.
Comprehensive health reform is a marathon, not a sprint.
Massachusetts has chosen to start with coverage and pace its reforms,
but it also runs the risk of not finishing the race.
Senator Bingaman. Thank you very much. Ms. McAnneny. I'm
mispronouncing your name, it's----?
Ms. McAnneny. McAnneny.
Senator Bingaman. McAnneny.
Ms. McAnneny. There's an N missing.
Senator Bingaman. Yes.
Ms. McAnneny. Thank you.
Senator Bingaman. All right. Please, go right ahead.
STATEMENT OF EILEEN McANNENY, SENIOR VICE PRESIDENT, ASSOCIATED
INDUSTRIES OF MASSACHUSETTS, BOSTON, MA
Ms. McAnneny. I, like Jon Kingsdale, won't waste part of my
60 seconds on an introduction. I would like to thank you for
the opportunity, it's truly an honor and a privilege to
participate in this, and especially to appear before Chairman
Kennedy, who has been an outstanding Senator for the State of
Massachusetts, and whose Herculean efforts and influence really
made healthcare happen in Massachusetts. Thank you, Senator.
Robert Blendon, who is a professor at Harvard School of
Public Health spoke recently, and he had mentioned that there
have been 61 prior efforts, to date, between the States and the
Nation to attain universal healthcare coverage, and 60 of those
efforts have not succeeded--Massachusetts is the exception.
I believe Massachusetts' success--at least in part--can be
attributed to the support of the business community, so I think
that that is a critical component to any healthcare reform on
the national level.
I also agree with Jon Kingsdale that the individual mandate
has been a critical component in motivating people to purchase
the insurance. Often it has been available to them, and for
whatever reason they have not taken it. That has been a great
motivating force. I also think our incremental approach has
been key, because it has allowed us to deal with the bumps in
the road, and it did not up heave our current system, it didn't
require an employer mandate, rather, or it didn't repeal the
employer-sponsored insurance. Rather, it worked within those
confines, and targeted populations that needed insurance, and
was successful as a result.
I look forward to the discussion. Thank you.
[The prepared statement of Ms. McAnneny follows:]
Prepared Statement of Eileen McAnneny
Good afternoon. For the record my name is Eileen McAnneny, Senior
Vice President and Associate General Counsel of Associated Industries
of Massachusetts (AIM), the State's largest nonprofit, nonpartisan
association of Massachusetts employers. AIM's mission is to promote the
well-being of its 6,500 members and their 680,000 employees and the
prosperity of the Commonwealth of Massachusetts by improving the
economic climate, proactively advocating fair and equitable public
policy, and providing relevant, reliable information and excellent
services.
On behalf of our membership, I am honored to provide the employer
perspective on Massachusetts health care reform. AIM has a very diverse
membership, representing employers in all sectors of the economy, of
all sizes and from all regions of our State. A common denominator for
them, however, is that they all offer health insurance to at least a
portion of the workforce. This fact certainly shapes AIM's point of
view.
1. KEY LESSONS LEARNED
Chapter 50 of the Acts of 2006, the most recent attempt by
Massachusetts to adopt and implement major health care reform, has been
very successful to date for several reasons. Although Massachusetts
health care reform is often touted as a ``bold experiment'' and
``landmark legislation,'' it was prompted by several far more mundane
factors. The need to win Federal approval of the Commonwealth's Section
1115 Medicaid Waiver under which the State's Medicaid program had
operated for more than a decade to retain hundreds of millions of
dollars in Federal funds certainly served as an impetus. In 2005, the
Center for Medicaid and Medicare Services (``CMS'') urged Massachusetts
to devise a plan to provide health insurance coverage more efficiently
to the uninsured. Rather than making payments to the disproportionate
share providers, CMS wanted the money to go directly to individuals to
pay for health insurance premiums.
In addition, there were two ballot initiatives pending that were
problematic to the business community. The first would have made very
comprehensive health care a right under the Massachusetts'
Constitution. The second established a payroll tax on Massachusetts'
employers that would be used to fund an expansion of public health care
programs. Because both initiatives required the business community to
pay significantly more for health care but did not change the delivery
system in any way or give the employer community a say in how the money
would be spent, neither ballot question was appealing. This served to
motivate employers to engage in the dialogue among major stakeholders
about how to cover the uninsured more efficiently in Massachusetts.
Lastly, Speaker of the House Salvatore DiMasi, Senate President Robert
Travaglini and Governor Mitt Romney all demonstrated unflagging
leadership and commitment to ensuring that Massachusetts devised a way
to cover the uninsured in a way that would win CMS's approval, improve
the lives of the uninsured and win the approval of employers.
Equally important was the participation in the dialogue of all
major stakeholders--doctors, hospitals, consumers, insurers, employers
and lawmakers--and the consensus among them that the status quo was not
optimal. Their participation allowed for very thoughtful and well-
informed dialogue, and perhaps more importantly, made them vested in
the long-term success and sustainability of health care reform as we
moved forward with implementation and encountered the inevitable
``bumps in the road.''
Massachusetts took an incremental approach to its reform. We did
not seek to fundamentally revamp the way people obtained coverage, to
eliminate employer-sponsored coverage or conversely, to impose an
employer mandate. Instead, we sought to adapt the existing sources of
coverage and fill in the gaps. For example, Medicaid income-eligibility
thresholds were expanded to cover children under 300 percent of the
Federal poverty level. All insurance policies sold in Massachusetts
were required to expand the definition of ``dependent'' to include
children: (1) until they reached 26 years of age or (2) for full-time
students for 2 years after they lost their status as a dependent under
the Internal Revenue Code, whichever came first. This change was
designed to get more young adults covered in a cost-effective manner. A
young adult plan was also introduced into the marketplace that did not
include all the mandated benefits as a way to make the insurance more
affordable. This targeted approach, although not universally supported,
allowed Massachusetts to move forward.
Massachusetts policymakers did not let the perfect get in the way
of the good. At the time the legislature enacted Chapter 58, for
example, future funding sources for some of the expansions remained
uncertain, and several of the elements were met with a healthy dose of
skepticism by various stakeholders. Public policymakers forged ahead to
ensure approval of the Medicaid Waiver, but also because the goal of
universal coverage was a worthy one and the challenges were not
insurmountable.
2. KEY ELEMENTS OF MASSACHUSETTS HEALTH REFORM CRITICAL IN THE CONTEXT
OF NATIONAL REFORM
Massachusetts was well-suited relative to many other States to
address the issue of the uninsured and to strive for universal
coverage. Prior to enactment of Chapter 58, Massachusetts: had one of
the lowest rates of uninsured in the Nation (between 6-9 percent);
spent over $1 billion annually in reimbursement to hospitals for
coverage for the uninsured already through the Uncompensated Care Pool;
had a higher rate of employers providing health insurance to employees
than the Nation as a whole and a higher percentage of employees taking
that coverage. In many ways, this made Massachusetts uniquely situated
to address the challenge of covering the uninsured.
Nevertheless, there are key elements included in the Massachusetts
plan that are readily transferable and key to the success of a national
model.
Massachusetts reform was premised on the concept of shared
responsibility and central to that is the individual mandate
requirement. In fact, much of Massachusetts' success in reducing the
number of uninsured can be attributed to the individual mandate. Many
of the 432,000 newly-insured had access to coverage prior to enactment
of health care reform in 2006, but chose not to enroll. Of those,
160,000 people, who were offered employer-sponsored plans and refused
them prior to imposition of the individual mandate, are today covered
through their employer's plan. Similarly, of the 72,000 people newly
signed up for MassHealth, many were eligible prior to health care
reform but did not enroll. Thirty-two thousand individuals purchased
coverage for themselves when they opted not to before. The balance of
the newly-insured, about 175,000 covered lives, is covered by
Commonwealth Care, the State's subsidized insurance product. While the
compliance burden of the health care mandate falls on the individual,
employers and the State largely shoulder the cost. From the employer
perspective, it is critical that lawmakers recognize the increased cost
implications of the individual mandate on the employer community.
In addition, the requirement that all residents of the Commonwealth
have insurance begs the question about how much insurance is enough to
satisfy this requirement. The debate about what is ``minimum creditable
coverage'' in Massachusetts evoked strong reactions from employers.
While individuals ultimately must comply or face tax consequences,
employers wanted to make sure that the benefits they offered met the
MCC standard. Otherwise, employers would be in the untenable position
of providing health insurance coverage at great expense yet their
employees would still be subject to fines. The challenge is defining
MCC in a way that ensures adequate coverage while allowing employers to
be flexible in the coverage that they provide.
Creation of the Commonwealth Health Insurance Connector was one of
the more innovative provisions of the Massachusetts health care reform
law. Its purpose was threefold. Its primary function was to facilitate
the purchase of health insurance by individuals by serving as a
clearing house for all products that provided good value to consumers.
These products received the Commonwealth's seal of approval. In
addition, the Connector administered the Commonwealth Care product
(subsidized insurance on a sliding scale for those with income below
300 percent of the Federal poverty level) and Commonwealth Choice, a
product offered to all individuals without any income limitations.
Last, the Connector was charged by the legislature with making some
critical public policy decisions such as what is minimum creditable
coverage and when is an individual excused from the health care mandate
because insurance is unaffordable.
3. THE MOST DIFFICULT ASPECTS OF THE MASSACHUSETTS HEALTH REFORM
The most difficult aspects of health care reform, from the employer
perspective, were the provisions that were adopted as ``workarounds''
to Federal law and are therefore not directly relevant to the national
discussion. For example, to provide all individuals with the Federal
tax benefits available to employer-based insurance, Massachusetts
requires all businesses with 11 or more full-time equivalents to
establish and maintain a section 125 plan. This enables employees who
are ineligible for employer-sponsored insurance to pay for the entire
health insurance premium in pre-tax dollars and those that are eligible
for employer-sponsored insurance to pay for their portion of the
premium in pre-tax dollars. Should Congress enact national health
reform and want to provide a tax exemption for the cost of health
insurance, the necessary changes could be made to the Internal Revenue
Code.
The most contentious aspect of the health care reform debate in
Massachusetts was whether or not to impose an employer mandate.
Predictably, the consumer advocates wanted to impose an employer
mandate and the employer community vehemently opposed it. The
compromise requires certain employers that do not offer health
insurance to a sufficient number of their employees or subsidize it
adequately to make a monetary contribution to the State towards the
cost of subsidized care. The ``fair share contribution'' provision has
proven very difficult to understand and comply with. Since its initial
implementation, the FSC requirements have been amended to impose more
frequent reporting requirements and additional burdens on business,
particularly those with part-time, seasonal or temporary help. This
issue, along with the definition of minimum creditable coverage,
threatened to undermine the consensus that Massachusetts had carefully
built around health care reform.
In many ways, the most difficult aspect of health care reform in
Massachusetts lays ahead. Massachusetts health care reform was intended
to cover the uninsured. Although the employer community's we preference
was to address the increasing cost of health care before we expanded
coverage, and warned that the long-term viability of health care reform
would be jeopardized if cost was not addressed, we did not stand in the
way of the Commonwealth's efforts to provide health insurance to the
uninsured, and in fact, are committed to that goal.
The high cost of health insurance, which serves as a barrier to
purchasing health insurance for many small businesses and individuals
and acts as a competitive disadvantage for the businesses located here,
must be addressed. The cost of health insurance in Massachusetts
exceeds the national average by 30 percent and health care reform has
done nothing to moderate premium trends to date. In fact, as a result
of health care reform, some businesses now must pay a fair share
contribution. Others are now providing coverage to more of their
employee population or have increased their benefit offerings to comply
with the minimum creditable coverage standard. Despite these additional
costs, nearly three-quarters (72 percent) of Massachusetts employers
offer health insurance to their employees and this offer rate has held
steady, even as the employer offer rate nationally has declined from 68
percent to 60 percent between 2001 and 2007.
The economic challenges confronting Massachusetts employers, and
their willingness and/or ability to offer coverage going forward, will
be a key determinant in whether Massachusetts reform is sustainable
absent significant progress on reducing health care costs.
On behalf of Associated Industries of Massachusetts and the
employers we represent, I thank you for the opportunity to provide
comments and look forward to working with members of the committee as
you explore national health reform.
Senator Bingaman. Thank you very much.
Ms. Liu, you're going to give us the word on what's
happening in California and what we can learn from that?
STATEMENT OF RUTH LIU, SENIOR DIRECTOR OF HEALTH POLICY AND
HEALTH REFORM, KAISER PERMANENTE, CA
Ms. Liu. Yes, I'm happy to do so, and I want to thank you
for the invitation to be here today to discuss lessons from
California.
I think as you know, the California effort didn't quite
succeed, so my testimony may be a little different than some of
my colleagues. I still think there are many lessons that we can
learn from the effort.
I am currently with Kaiser, I did want to inform the
committee that, at the time of the California Health Reform
Effort, I was Associate Secretary at the California Health and
Human Services under the Schwarzenegger administration. My
views here today are my own, and not that of the Governor or
the Administration.
I think there are really three key lessons to learn from
the California experience. The first is that, in the California
effort, we did focus on a broad definition of health reform,
including prevention and wellness strategies, a strategy for
universal coverage and financing, and a focus on cost
containment. I believe that is essential to focus on all three
aspects, simultaneously, to ensure that any reform effort is
financially sustainable in the long-term.
Second, we wrestled with issues around affordability--both
affordability for purchasers of coverage, and keeping the cost
of the reform proposal affordable for the State.
There are many lessons learned in terms of benefit design,
subsidy design, and shared responsibility that I think will
translate well nationally.
And finally I want to say that we spent considerable time
and effort designing an approach that would allow us to
transition--as smoothly as possible--from an underwritten, but
fairly robust individual market, to a guaranteed issue market
without health status rating, that preserved comprehensive
offerings. I think it would make sense to look at that
transition very carefully, as Senator Enzi has raised.
Once again, I want to thank you for the opportunity to be
here, and I want to thank you--especially Senator Kennedy--for
your efforts in Massachusetts, and for the national reform
effort that we're all looking forward to in California.
[The prepared statement of Ms. Liu follows:]
Prepared Statement of Ruth Liu
Thank you for the invitation to be here today to discuss lessons
from the California health reform effort and implications for national
reform. I am Ruth Liu, Sr. Director of Health Policy in the Legal and
Government Relations Department of Kaiser Foundation Health Plan
(``Health Plan'') and Kaiser Foundation Hospitals (``Hospitals'').
Health Plan and Hospitals, together with the contracting Permanente
Medical Groups, constitute the Kaiser Permanente Medical Care Program.
Kaiser Permanente is the Nation's largest private integrated health
care delivery system, providing comprehensive health care services to
more than 8.7 million members in nine States (California, Colorado,
Georgia, Hawaii, Maryland, Ohio, Oregon, Virginia, Washington) and the
District of Columbia. At the time of the California health reform
effort, I was Associate Secretary at the California Health and Human
Services Agency in the Schwarzenegger administration. The views
reflected in this testimony are my own, not that of Governor
Schwarzenegger or his Administration.
OVERVIEW OF KEY LESSONS
In the California reform effort, we focused on a broad definition
of health reform, including prevention and wellness initiatives; a
strategy for universal coverage and financing; and a focus on cost
containment. I believe it is essential to focus on all three aspects
simultaneously to ensure that any reform effort is financially
sustainable in the long-term.
Second, we wrestled with issues of affordability, both
affordability for purchasers of coverage and keeping the cost of the
reform proposal affordable for the State. There are many lessons
learned in terms of benefit design, subsidy design and shared
responsibility that would translate well nationally.
Finally, we spent considerable effort in designing an approach that
would allow us to transition as smoothly as possible from an
underwritten, but robust, individual market to a guaranteed issue
market without health status rating that preserved comprehensive
offerings.
BROAD DEFINITION OF HEALTH REFORM
The California reform effort was designed around three overarching
principles:
A focus on prevention and wellness to ensure that the
health reform effort had the objective of keeping people healthy at the
center. In this area we focused on strategies to foster individual
responsibility for health through benefit product design; to promote
more effective chronic care management; to engage communities in broad
public health campaigns and initiatives; and to promote higher
standards of patient safety in our hospitals.
Universal coverage to ensure that all Californians had
access to high-quality, affordable health care. To achieve universal
coverage we felt it was imperative to have an individual mandate, as a
purely voluntary system will leave many individuals uninsured. The
mandate also needed to be accompanied by subsidies for low-moderate
income individuals and changes in market and rating rules in the
individual market to ensure access and affordability for those with
pre-existing health conditions. Effective enforcement of the mandate
was also essential to spread risk broadly and keep premiums affordable.
Cost containment to move towards making health care more
affordable for all purchasers of coverage and to promote strategies for
more efficient health care delivery. A key component in the area of
cost containment for the currently insured was our focus on what we
labeled the ``hidden tax'' or the cost shift that exists for commercial
purchasers from both the uninsured and the underpayment of public
programs. Medi-Cal, (California's Medicaid program) has one of the
lowest provider reimbursement rates in the country and accounts for a
significant shift of costs onto the private sector. A major financial
component of our effort included increasing provider reimbursement
rates for Medi-Cal by over $4 billion. This strategy was intended to
both reduce the cost shift and improve access to providers for an
expanded Medi-Cal program. Any significant expansion of the Medicaid
program nationally under reform should take into account this issue. We
also pursued a number of other initiatives to address the underlying
costs of health care including promotion of health information
technology and e-prescribing, pay for performance, fostering a greater
reliance on evidence-based medicine and the prevention and wellness
strategies noted above. Nationally, there are additional steps and
policy levers at the government's disposal to drive more efficient care
delivery and payment reforms.
AFFORDABILITY FOR INDIVIDUALS AND THE STATE: BENEFIT DESIGN
A key consideration in designing a coverage proposal is the trade-
off between the comprehensiveness and cost of a specified benefit
design. For the subsidized benefit, this dilemma will affect both the
overall cost of the program and the cost for the individual, in terms
of any contribution towards the premium and associated cost sharing
with the product. For the unsubsidized benefit, the question becomes
what minimum level of comprehensiveness is appropriate in conjunction
with an individual mandate. In the California proposal, we determined
that it did not make sense to have one standard benefit for all income
levels of the uninsured. Subsidized lower income individuals clearly
needed a more comprehensive benefit with minimal cost sharing, but that
same benefit design might be quite costly for individuals who were not
subsidized, particularly for those with incomes just above the subsidy
threshold level.
An addendum to this statement provides further detail, but in
general the Administration proposed the following:
Expanded public coverage for the lowest income individuals
(Medic aid or CHIP for children up to 300 percent FPL; Medicaid up to
100 percent for all documented adults);
Subsidized coverage with a sliding scale contribution
towards premium for documented adults between 100-250 percent FPL.
Subsidized coverage included a broad scope of benefits and moderate
cost sharing;
Mandated minimum coverage of a high deductible plan
($5,000), with preventive services, some office visits and some drug
coverage outside the deductible for those above 250 percent FPL. The
scope of benefits covered was similar to the subsidized benefit.
During negotiations with the Legislature these parameters were
modified, and the minimum benefit was never defined, but there was
general agreement that a variable benefit design approach dependent on
the income level of the individual was preferable for both individuals
and the State.
AFFORDABILITY FOR INDIVIDUALS AND THE STATE: SUBSIDY DESIGN
Closely associated to the issue of benefit design and affordability
was the issue of subsidy design. As indicated above, the lowest income
individuals received a full subsidy with a sliding scale subsidy for
those with slightly higher incomes, and no subsidy for those above 250
percent FPL. Several factors were considered in designing the sliding
scale subsidy level including affordability for individuals, minimizing
employer crowd out and Federal cost sharing rules.
During negotiations, it became clear that a subsidy design with the
income cut-off levels we had proposed would be particularly problematic
for older individuals. We had taken steps to phase out health status
rating, but we allowed a continuation of age rating (and rating based
on family size and geography). This meant that older individuals over
250 percent FPL would face quite high premiums. We felt that some
difference in premium between younger and older individuals was
appropriate given that: (1) older individuals have less constraints on
their budget than young families (no child care or education expenses
and lower housing expenses); and (2) health coverage is of greater
value since average utilization increases with age. However, we
concluded that some additional financial assistance would be needed for
this population.
There was considerable discussion around what level of subsidy
could be offered and what the subsidy should be benchmarked against.
Several stakeholders argued that subsidies should be based on all
possible out-of-pocket costs rather than on premium alone which would
have been prohibitively expensive for the State. In the end, we decided
that additional subsidies would be provided on a sliding scale basis
for those between 250-400 percent FPL if the premium cost for a product
with moderate cost sharing ($2,500 deductible) exceeded 5.5 percent of
gross income. This allowed the subsidy costs to remain affordable,
while ensuring that individual out-of-pocket expenses would be limited.
AFFORDABILITY FOR INDIVIDUALS AND THE STATE: SHARED RESPONSIBILITY
One of the underlying principles articulated by Governor
Schwarzenegger was his desire to have all stakeholders in the health
care system bear some responsibility for reforming the health care
system. This proved to be a fairly popular approach because the
proposal was designed such that all stakeholders both benefited in some
way from the proposal and also bore some new responsibility, financial
or otherwise. While some of the specific measures used in the
California proposal would not translate well nationally, the general
principle should. At the national level there are also additional
opportunities for shared responsibility that States cannot pursue. For
instance, an employer mandate at the State level generally has to be
considered as a ``pay or play'' mandate due to ERISA concerns, but at
the national level policymakers could mandate at least larger employers
to simply ``play'' at some minimum level.
MARKET REFORM
One of the most difficult policy challenges we faced in California
was determining the most appropriate way to move from a highly
underwritten, but quite robust, individual market to an individual
market with guaranteed issue, no health status rating, but still
preserving more comprehensive benefit offerings for those who preferred
them.
Here we could not look to other States that had adopted broad
health reforms such as Massachusetts since the market conditions and
regulatory rules were completely opposite. In California, the
individual market is quite robust with relatively low premiums and
younger and healthier individuals that can pass medical underwriting in
the market. In Massachusetts, guaranteed issue and rating rules were
already in existence before broad reform, and the individual market was
quite expensive and generally much higher risk than in California. An
influx of new individuals into the market in Massachusetts, some higher
risk, but others lower risk, would generally lower premium costs. In
California, an influx of individuals, particularly a large number of
higher risk individuals, would likely increase premiums considerably.
In particular, this meant that if we were to have a guaranteed
issue, we needed to ensure that the mandate would be well enforced so
that younger healthier individuals would be more likely to comply with
the mandate and moderate the risk pool and overall premium increases.
This was quite a controversial issue and the compromise bill left much
to be determined by the State during implementation. However, the
enforcement measures widely discussed included a concept called
``seamless coverage'' which would permit the State to adopt a number of
education and enrollment steps to improve compliance with the mandate.
It would also allow the State to default enroll individuals who did not
comply with the mandate after a specified period of time in the
mandated minimum coverage and pay their premium until the individual
was in compliance.
We certainly could not find a perfect solution to solve the
complexity of issues this transition engendered, but we agreed on
several approaches that would: gradually transition to our stated end
goal while minimizing disruption of the current market; moderate likely
premium increases for those currently in the individual market; and
keep premiums relatively affordable for those entering the market for
the first time. We also wanted to ensure that a broad choice of
benefits, from less comprehensive to more comprehensive would be
available on a guaranteed issue basis with rating appropriate to the
difference in benefits, not expected risk. A summary of reforms and
proposed market changes submitted by a coalition of health plans in
California are included as an addendum to this statement. Some of the
key reforms in addition to guaranteed issue and an enforceable mandate
included:
A gradual phasing out of health status rate bands;
Grandfathering of individuals with current insurance if
they had that insurance 18 months prior to the mandate;
Requiring risk adjustment among plans across the newly
insured pool and the grand fathered pool to ensure all plans shared the
new ``risk'' in the market equitably;
A requirement to offer a wide variety of products and to
price them in relation to the rest of an insurer's portfolio. These
requirements would preserve broad choice for consumers with rating
appropriate to the difference in benefits, not anticipated risk.
Corresponding rules for the purchase of guaranteed issue
products by individuals to ensure that the comprehensive plans were not
adversely selected against and prices remained affordable.
Determining a single strategy for a smooth transition in a national
reform effort may prove very difficult given the wide variation in
market conditions and regulations across the country. It may be
preferable to establish Federal standards around benefit design and
financial subsidies along with rules and regulations to ensure broad
choice and fair rating for consumers and appropriate risk adjustment
across plans. Implementation benchmarks could also be established
through Federal regulation. States could be allowed to design their own
transitional strategies to meet these benchmarks with provision of
Federal subsidy dollars tied to meeting these standards and benchmarks.
The goal of national health reform is an ambitious, but much-needed
policy reform in this country. I look forward to discussing these
lessons from California with you in greater depth and discussing
additional opportunities not available at the State level as you move
forward with the national health agenda.
Addendum
1. benefit design considerations in the california reform effort
One of the key issues policymakers face in determining an
appropriate benefit design for the currently uninsured population is
the trade-off between comprehensiveness of the product and the cost.
In the California reform effort, the Administration's health reform
team considered comprehensiveness of the benefit from the standpoint of
both the scope of covered benefits and the cost sharing associated with
the product. Likewise cost was considered from the standpoint of the
cost of the premium for the individual and the ability of an individual
to afford associated cost sharing. In the case of the subsidized
product, consideration was also given to the subsidy costs for the
State, the impact on employer ``crowd out'', and Federal cost sharing
rules that would impact the ability to draw down Federal funds.
In terms of the scope of benefits, all individuals were required to
purchase a product that met the ``Knox Keene'' standard required for
all HMO products in the State, plus prescription drug coverage. Knox
Keene requires coverage of all ``basic health care services'' including
physician services, hospital inpatient and ambulatory care services,
diagnostic lab and radiological services, home health services,
preventive health services, emergency health care services and hospice
care. In addition to these general categories, State lawmakers have
included specific mandates that are a subset of these categories.
Cost sharing for the products varied dependent on the income level
of the individual. Since lower income individuals have less
discretionary income, the subsidized population had a benefit with zero
to moderate cost sharing. Individual contributions towards the cost of
the subsidized product were established as part of the shared
responsibility principle for all but those with the lowest incomes, to
offset some of the subsidy costs for the State, and to mitigate
employer crowd out. Cost sharing for the unsubsidized product was set
with much higher parameters. The rationale for this approach was two-
fold: higher income individuals generally have more discretionary
income, and with no subsidy for the premium costs, might prefer a
benefit design with higher cost sharing parameters. In a guaranteed
issue world, an individual could purchase a more comprehensive benefit
design if they preferred.
The Administration team originally modeled costs based on the
following parameters:
All children regardless of documentation status up to 300
percent FPL eligible for either Medicaid (up to 100 percent) or SCHIP
(101-300 percent).
Documented adults up to 100 percent FPL--Eligible for
Medicaid.
Documented adults 101-250 percent--Eligible for subsidized
coverage.
Subsidized coverage defined as Knox Keene benefits
plus prescription drugs.
Individual cost towards premium--100-150 percent
FPL--3 percent of gross income, 151-200 percent FPL--4 percent
of gross income, 201-250 percent FPL--6 percent of gross
income.
$500 deductible, $3,000 out-of-pocket maximum.
Prevention, physician office visits and Rx outside the
deductible with limited co-pays.
Documented adults above 250 percent--mandated to purchase
minimum coverage. Minimum coverage never defined in legislation, but
modeled at:
Knox Keene benefits plus prescription drugs.
$5,000 deductible; $7,500 individual/$10,000 family
out-of-pocket maximum. Prevention, some physician office visits
and some drug coverage outside the deductible with low-moderate
co-pays.
During the negotiations with the Legislature the benefit parameters
were modified somewhat, to reflect the following changes:
Documented adults from 101-150 percent would have no
contribution towards the premium.
Adults from 151-250 percent would be required to
contribute up to 5 percent of their income based on a sliding scale.
Subsidized coverage benefits would be based on a modified
SCHIP product with similar cost sharing parameters.
Minimum benefit standard for those over 250 percent would
be determined at a later date by a State agency through a public
hearing process.
Additional subsidies would be provided on a sliding scale
basis for those between 250-400 percent FPL if the premium cost for a
product with moderate cost sharing ($2,500 deductible) exceeded 5.5
percent of gross income.
2. california health reform market reforms overview
Individual Mandate for the purchase of coverage.
Intent: Necessary to attain universal coverage. Can better meet
affordability concerns if all individuals are required to purchase
coverage.
Exemptions may be provided for the following reasons: new
California residents, individuals who apply for and are granted an
affordability or a hardship exemption by the Managed Risk Medical
Insurance Board (MRMIB), and persons with incomes below 250 percent of
the Federal Poverty Level (FPL) if the cost of premiums for minimum
creditable coverage exceeds 5 percent of their income. (The last
exemption is basically for undocumented adults below 250 percent who
would not be eligible for subsidized coverage. Documented adults below
250 percent would qualify for either Medi-Cal or new subsidized
coverage and would not have to pay more than 5 percent of income for
that coverage.)
Guaranteed Issue of all products from onset of the
mandate, with carriers required to offer a diversity of products from
high-deductible to comprehensive.
Intent: Broad choice of guaranteed issue products for consumers.
Guaranteed issue corresponds to the mandate. If you are exempt from
the mandate, you do not qualify for GI coverage.
Use the ``seamless coverage'' approach to ensure that
people comply with the mandate.
Intent: Enforcement of the individual mandate is essential for
guaranteed issue to work properly. The State will adopt a number of
education and enrollment steps to improve compliance with the mandate
and will default enroll individuals in coverage after a specified
period of time and pay their premium until the individual is in
compliance.
Grandfather products that are below the minimum standard
for those who have had those products for 18 months prior to the
mandate.
Intent: Don't require people who have been purchasing insurance to
change their coverage. By grandfathering these people their rates will
also initially be protected from major rate increases as a consequence
of the new market rules.
Individuals are allowed to purchase and renew coverage
below the mandated minimum up to enactment of the mandate, but
individuals purchasing this type of coverage will not be grand
fathered, unless they had this coverage 18 months prior to the mandate.
Intent: Ensure that a variety of low-cost products are available to
consumers before the individual mandate goes into effect.
Prohibit the introduction of new products below the
minimum standard 18 months in advance of the mandate.
Intent: While people with long-standing existing coverage below the
minimum should not be forced to change their coverage, insurers should
be discouraged from selling coverage that doesn't meet the minimum
standards to get around our new policy. Over time, individuals with
coverage lower than the minimum will shift over voluntarily to products
that meet the minimum standard.
Establish coverage choice categories and require insurers
to offer choice in a variety of levels using a similar rating
portfolio.
Intent: Ensure that a broad range of products are offered on a
guaranteed issue basis from less comprehensive to more comprehensive in
the reformed market and that they are priced in relationship to each
other based on differences in benefit design, not based on possible
risk selection.
Gradually phase out increased charges for health status by
limiting the amount insurers can ``rate up'' for those with health
problems.
For the first 2 years insurers can rate 20 percent
above or below based on a person's health status.
For the next 2 years insurers can rate 10 percent
above or below based on a person's health status.
After 4 years insurers cannot vary their rates based
on a person's health status. Insurers will only be allowed to
vary rates based on age, family composition, and geography.
Intent: ``Soften'' the transition from a market that is not
guaranteed issue and where rates differ dramatically according to
health status, to a market that is guaranteed issue and rates vary only
by age, family and geography. Individuals who are older and sicker will
pay more, but the differential is limited and they are guaranteed issue
coverage. By allowing health status rate bands initially, there will
not be as big a premium increase for young, healthy individuals who had
coverage or who will be buying coverage for the first time. Individuals
who had coverage that exceeds the minimum will still see premium
increases estimated at about 20 percent more than they pay today. To
minimize that expected rate increase we would need to either broaden
the health status risk bands or ``re-insure'' products for these
individuals at a cost of approximately $300 million. In our language we
give authority for this reinsurance mechanism if we choose to pursue
this strategy.
Apply an overall maximum ratio (for example; rates for a
60-64 year old cannot be more than XXX higher than rates for a 30-34
year old) for individuals between 30-34 and the 60-64 rate categories.
Intent: Health status rate bands will mean that older individuals
in general will pay more than younger individuals both because of their
age and their higher health risk. By requiring an overall rate ratio
for middle age to the oldest category we protect the oldest individuals
from very high rates. We exclude the youngest (19-29) because we need
to keep prices affordable for the youngest who will be the least likely
to comply with the mandate.
Require plans to redistribute funds among themselves based
on the number of high risk individuals each health plan has.
Intent: Make sure that all health plans share the new ``risk'' in
the market equitably. This component is particularly important because
we are grandfathering a large number of individuals who have coverage
that does not meet the minimum standard. Without this structure some
plans may not participate fully and fairly in the guaranteed issue
market. All plans should bear an equitable cost for reforming the
market.
Authorize a shared reinsurance provision, should the age
adjusted risk of individuals enrolled in the unsubsidized market,
significantly exceed the incidence of risk of those enrolled in the
subsidized program.
Intent: Split the cost of reinsurance by having the plans bear the
first portion of risk if the risk is up to 10 percent higher. This
methodology will incentivize plans to better manage risk as they will
be on the hook for the first level of reinsurance. The State then bears
the additional cost of reinsurance above 10 percent as a means to keep
rates more affordable for the majority of individuals.
3. Proposed Rules to Safeguard Market Viability under Guaranteed Issue
Proposals mandating guaranteed issue of health insurance are among
the ideas for health care reform recently advanced. However, as the
experiences of a number of other States attest, instituting guaranteed
issue in the individual market can trigger severe unintended
consequences, such as large, destabilizing premium increases and
insurer flight from the market. It is therefore critical that in
implementing guaranteed issue, careful attention be paid to minimizing
these risks and assuring that a wide variety of benefit packages can
continue to be offered at reasonable rates.
Mandating coverage for all individuals is an absolute requirement
for successful implementation of guaranteed issue, but it alone is not
sufficient for a good outcome. The two-phase proposal described below
represents our initial thinking about how guaranteed issue could be
established without harming the people currently served in the
individual market and assumes that other elements of health care reform
proposed do not undermine a viable market.
PHASE ONE: TRANSITIONING TO FULL GUARANTEED ISSUE
Because of the major risks involved in moving to guaranteed issue,
it is important that there be a transition period to assure that
persons currently in the market do not experience a sudden increase in
rates and that the individual market remains viable. We propose the
following transition rules:
The State will define a baseline HMO benefit plan and a
baseline PPO benefit plan with the same actuarial value.
At some reasonable time after the baseline plans have been
defined, a carrier must offer at least one baseline plan on a guarantee
issue basis. If a carrier chooses to offer more than one product in the
individual market, it must offer the baseline benefit plan for each
product. A product offered in the subsidized pool would be excluded
from this requirement.
In offering the guaranteed issue benefit plans, a carrier
shall continue to have flexibility in establishing and maintaining
provider networks as long as the carrier meets regulatory requirements
for access to care and as long as guaranteed issue is available in at
least one product using each network offered by the carrier.
The baseline product for each network offered by the
carrier shall be its lowest priced product and be subject to guaranteed
issue.
Carriers may also offer other benefit plans not subject to
guaranteed issue. Carriers will be able to develop benefit plans and
price as they do now.
At the same time that plans begin offering the baseline
benefit, the individual mandate shall commence and the State shall
begin enforcement activities.
The State will continue to operate a high-risk pool
similar to MRMIP and shall continue to subsidize its cost by an
appropriation of no less than the amount now provided for support of
MRMIP, which is $40 million from the Tobacco Tax.
End of Transition Period
The transition period will end when there is full
compliance with the individual mandate. We will work together and with
the Governor's Office and the legislature to define full compliance.
When it is determined that there is full compliance with
the individual mandate, the phase two framework will go into effect.
PHASE TWO: IMPLEMENTATION OF FULL GUARANTEED ISSUE
Objective
To establish a functional, sustainable market where Californians
who are not eligible for subsidized coverage and are required to
purchase coverage through the individual market have guaranteed access
to affordable coverage, regardless of health status.
Assumptions
All Californians are mandated to obtain health coverage
through direct purchase, employment or a public plan.
The individual mandate is fully effective and the State
actively monitors and enforces the enrollment requirement.
The individual mandate requires minimum coverage of a plan
with high cost-sharing, such as a $5,000 deductible plan, with a $7,500
out-of-pocket maximum. Californians could also satisfy the mandate by
purchasing any plan which meets Federal qualification for an HSA-
compatible HDHP plan.
These rules would apply to adults above 250 percent of
poverty and children above 300 percent of poverty who are ineligible
for other public programs.
Benefit Plans
The State will define five classes of benefit plans, each
class having an increasing level of benefits.
Within each class, the State will define one baseline
HMO and one PPO plan, and a baseline for any other type of
product that meets the minimum mandated benefit.
The State will define reasonable benefit variation
from the baseline that will allow for a diverse market within
each class.
The benefits within each class could be standard and
uniform across all carriers, or the benefits offered in each
class could be defined based on actuarial equivalence.
Each carrier in the individual market will offer at
least one plan in each class.
Carriers are not obligated to offer all product
options, but if a carrier chooses to offer a product option in
one class, it must offer that product option in all classes.
All plans will be offered to individuals on a
guaranteed issue basis once full application of the individual
mandate has been achieved.
Carriers participating in the individual market must offer
all plans in all of their approved service areas.
Any coverage that does not at least equal the minimum
State-mandated plan does not qualify as meeting the individual coverage
requirement.
Classes defined by the State must reflect a reasonable
continuum between the class with the highest and lowest level of
benefits.
Rationale
This allows an individual to choose a benefit plan with
the appropriate level of coverage for the individual's needs.
Carriers should compete on the basis of price, quality and
service, not risk selection. The State would act as ``referee''
establishing the rules and preventing carriers from designing plans to
avoid high risk enrollees.
Guaranteed Issue Requirements
Individuals would elect a plan within a benefit
classification. An individual may change plans as follows:
Annually, in the month off the individual's birthday,
within the same benefit classification.
Every 3 years, in the month of the consumer's
birthday, the consumer may move up one level of benefits.
At any time, within the same carrier's portfolio, a
consumer may move to a lower class.
At significant life events, the individual would have
broader open-enrollment choices and can move up 2 or 3 bands
(upon marriage, the death of a subscriber).
Individuals applying for coverage would be required to
fill out a standard health status questionnaire to assist plans in
identifying (a) persons in need of disease management, and (b) high-
risk applicants.
Rationale
The time limitation on enrollment protects the more comprehensive
plans from accruing a high level of risk that would result in making
them unaffordable. It would encourage people to choose benefit plans
that will meet their needs over the long term.
Prior identification of persons in need of disease
management allows plans to reach out to these people to encourage them
to get the care they need.
Prior identification of high risk applicants will
facilitate the re-insurance mechanism discussed below. The
identification of ``high risk'' applicants would be invisible to the
enrollee, except to the extent they are candidates for disease
management.
Rating Rules
Carriers may rate the entire portfolio in accord with
expected costs or other market considerations, but the rate for each
plan would be set in relation to the balance of its portfolio.
Each plan would be priced as determined by each carrier to
reflect their expected costs with appropriate cost-subsidization across
the entire individual risk pool. Additional rules would require the
following:
If a carrier offers different provider networks on
different plans, it may consider the effect on health care costs.
Rates may vary from applicant to applicant by:
(1) Age--Legislation to define specified age bands.
(2) Family--Legislation to define 5 family sizes (Single Sub,
Sub/Sp, Sub/Ch, etc. . . .). Carriers can chose to offer only
member level rates (a family rate would be the sum of the
individual rates for each family member).
(3) Geographic rate regions, limited to 9 regions, of a
carrier's choice. A region may not split a county more than
once, and within a county, may not split any block of zip codes
sharing the first three digits.
(4) Health Improvement Discounts. A carrier may reduce co-
payments or offer premium discounts for non-smokers,
individuals demonstrating weight loss through a measurable
health improvement program or individuals actively
participating in a carrier's disease management program. Any
discounts must be approved by the State.
A carrier must use the same rating factors for age, family
size and geographic location for each plan.
No artificial constraints will be placed on differences in
rates by age, family composition, or region.
Rationale
These are similar to the current rules in the small group
market.
Allowing pricing flexibility between plans allows carriers
to reflect the differences in their costs structure and anticipated
experience under each plan.
This structure must be linked with an effective re-
insurance pool to protect the richest plan category from the selection
costs likely to occur.
Reinsurance Pool
Carriers would be allowed to cede high risk enrollees into
a subsidized pool.
This process would be invisible to the enrollee as it
would be a financial arrangement between the carrier and the State.
Financing for this pool would be broad-based and shall not
rely only on the premiums from the individual market.
There are various approaches to re-insurance that have
been used and that are being developed. We could discuss the details of
what would be best in California as part of development of the final
proposal.
Rationale
This would help to maintain affordability for individuals.
This also helps to ensure a level playing field so that
carriers compete based on price, quality and service rather than risk
selection.
Senator Bingaman. Ms. Besio, tell us about Vermont.
STATEMENT OF SUSAN BESIO, Ph.D., DIRECTOR, OFFICE OF VERMONT
HEALTH ACCESS, HUMAN SERVICES AGENCY, STATE OF VERMONT,
BURLINGTON, VT
Ms. Besio. OK. First, I'm going to correct the
pronunciation of my name, which is Besio (Bes-eye-o), Susan
Besio.
I'm actually the Director of Healthcare Reform for Vermont,
and also the Director of the State's Medicaid Program. I want
to thank you, along with the other panelists, for asking the
States to be here today, and for your leadership.
Vermont has long valued coverage as important for our
residents. However, Vermont's reforms were very, very
comprehensive, in that they did address both coverage, care
delivery, prevention and wellness, and trying to control costs.
Hopefully we'll get a chance to talk about all of those aspects
today.
In terms of coverage, Vermont has always had coverage as a
key component of our State's values. We have a very expansive
Medicaid program, we actually cover children up to 300 percent
of Federal poverty level, childless adults up to 150 percent,
and adults with dependents up to 185 percent of Federal poverty
level.
That was a key cornerstone of our coverage expansions that
we initiated in 2006. We're also one of the few States in the
country that has guaranteed issue and community rating which,
again, is part of our Vermont values that we want to provide
affordable and comprehensive coverage to all of our residents,
regardless of age or health status.
Since the fall of 2007, when we implemented our reforms,
our uninsured rate has dropped from 9.8 percent to 7.6 percent
for all of our residents, and from 4.9 percent to 2.9 percent
for our children. We're very proud of that progress, we did
this without an individual mandate, but we did do it with new,
comprehensive, private market product called Catamount Health,
premium assistance for people up to 300 percent of the Federal
poverty level for both Catamount Health and for their employer-
sponsored insurance, for people with employer-sponsored
insurance.
We did integrated private and public outreach and
marketing, and enrollment, and we insisted that coverage be
comprehensive and affordable, with low deductibles and low out-
of-pocket cost.
The reason that is so important to us is because we
recognize that if people have high out-of-pocket costs, they're
not going to access preventative care, even if preventative
care is free, because the follow-up care is not. And so, we
think that's a very important value to consider when you're
developing benefit designs that might be standardized at the
national level.
We also would think that we have some experience around the
role of insurance regulation, implications of Medicaid and
Medicare in terms of the complexity of those systems, and how
they interface with our States' abilities to expand and
maintain coverage. Obviously, the importance of simultaneous
system redesign in terms of care delivery which has to go hand-
in-hand with the coverage initiatives.
We very much appreciate you asking Vermont to be at the
table today. We think that we have a lot of learning to offer,
we also believe that--as Senator Hatch mentioned--each State
has unique values, conditions, and State and local regulations
that can not be dismantled in any kind of healthcare reform
effort, because we have made significant progress, and we do
not want to go back.
Again, thank you very much for having us here today, and we
look forward to our discussion.
[The prepared statement of Ms. Besio follows:]
Prepared Statement of Susan Besio, Ph.D. and Harry Chen, M.D.
INTRODUCTION
My name is Susan Besio. I am the Director of Health Care Reform for
the State of Vermont, and also was recently appointed Director of the
State's Medicaid Program. With me today is Dr. Harry Chen, who is a
practicing emergency room physician and board member of Vermont Program
for Quality in Health Care, and former Vice-Chair of the Vermont
Legislative Committee on Health Care. We would like to thank Senator
Kennedy, Senator Enzi, Senator Bingaman, Senator Sanders, and the rest
of the members of the committee for giving us the opportunity to speak
today about our State's experiences with health care reform related to
coverage and how they can inform national reform efforts.
VERMONT HEALTH CARE REFORM CONTEXT
Per capita health care costs are lower in Vermont when compared to
the United States, but the spending gap has been narrowing since 1999.
Health care spending growth rates in Vermont have exceeded national
averages for each of the last 4 years, and health care costs were 17.1
percent of Vermont's gross State product in 2007. We cannot afford our
current health care system.
Universal health care coverage is a key mechanism to help bring
down the costs of health care. Covering the uninsured will help lower
uncompensated care costs, which affect premiums paid by the insured. In
addition, people who do not have affordable, comprehensive coverage do
not access preventive or primary care, and instead use costly emergency
room services; they also develop more significant illnesses which
require more costly services. For example, data from the Vermont 2005
Family Health Insurance Survey \1\ showed that 45 percent of uninsured
children did not see a physician for routine care (compared to 7
percent of insured children); this has significant implications for
both short-term and long-term wellness, and health care expenditures.
---------------------------------------------------------------------------
\1\ Vermont Family Health Insurance Survey, 2005. The survey report
can be found at http:
//www.bishca.state.vt.us/HcaDiv/Data_Reports/healthinsurmarket/
2005_VHHIS_Final_
080706.pdf.
---------------------------------------------------------------------------
In 2005, before our reforms began, Vermont had an uninsured rate of
9.8 percent (61,056) compared with a national rate of 15.7 percent, and
an uninsured rate for children of 4.9 percent.\1\ This relatively low
uninsured rate is partially due to Vermont use of its Medicaid 1115
waiver authority to expand coverage for the uninsured. The Dr. Dynasaur
program provides Medicaid coverage to all children with household
incomes under 300 percent FPL, to pregnant women with household incomes
under 200 percent FPL, and to parents and caretakers with household
incomes under 185 percent FPL. The Vermont Health Access Plan (VHAP)
provides coverage for uninsured adults with household income under 150
percent FPL and adults with children on Dr. Dynasaur who have income
under 185 percent. Approximately 19 percent of Vermonters (125,000)
have health insurance provided by the State through these programs.
Regarding private insurance, Vermont is one of a handful of States
that requires guaranteed issue and community rating--reflecting the
State's values of wanting to provide affordable, comprehensive health
coverage regardless of age or health status (matters largely outside
the individual's control). However, affordable coverage is becoming
more difficult, especially in the individual market, where enrollment
has decreased 44 percent from 2000 to 2007. And while Vermont employers
appear to be maintaining coverage for their employees, the cost-sharing
within the plans is increasing each year, making it more difficult for
Vermonters to get the care they need, when they need it.
VERMONT HEALTH CARE REFORM LEGISLATION
On May 25, 2006, Vermont Governor James Douglas signed into law
Acts 190 and 191 (Acts Relating to Health Care Affordability for
Vermonters). These Acts, augmented by portions of the State Fiscal Year
2007 Appropriations Act and Act 153 (Safe Staffing and Quality Patient
Care), along with Acts 70 and 71 in 2007 and Acts 203 and 204 in 2008
provide the foundation for Vermont's Health Care Reform Plan.
Vermont's comprehensive package of health care reform legislation
is based on the following reform design principles:
It is the policy of the State of Vermont to ensure
universal access to and coverage for essential health care services for
all Vermonters.
Health care coverage needs to be comprehensive and
continuous.
Vermont's health delivery system must model continuous
improvement of health care quality and safety.
The financing of health care in Vermont must be
sufficient, equitable, fair, and sustainable.
Built-in accountability for quality, cost, access, and
participation must be the hallmark of Vermont's health care system.
Vermonters must be engaged, to the best of their ability,
to pursue healthy lifestyles, to focus on preventive care and wellness
efforts, and to make informed use of all health care services
throughout their lives.
Using these principles as a framework, Vermont's health care reform
legislation contains over 50 separate initiatives designed to
simultaneously achieve the following three goals:
Increase access to affordable health insurance for all
Vermonters.
Improve quality of care across the lifespan.
Contain health care costs.
It is significant that Vermont's landmark 2006 Health Care Reform
legislation was the product of extensive negotiation and collaboration
by the Douglas administration, legislative leaders of the Vermont
General Assembly, and the private sector participants--including
providers and payors--in Vermont's health care system. While there were
multiple ideas and political agendas as part of the discussions, there
is agreement that the final legislation was comprehensive in its
breadth and significant in its potential impact on health care in
Vermont. There also was a commitment to move forward with
implementation in a collaborative, non-partisan manner to maximize its
success, as evidenced by the subsequent, collaborative work embodied in
additional legislation passed in 2007 and 2008 and under development in
the current legislative session.
VERMONT COVERAGE REFORMS
These reforms are making a real difference. In contrast to many
other States where the number of uninsured is increasing, Vermont's
coverage reforms instituted in the past 2 years have reduced the number
of uninsured from 9.8 percent in 2005 to 7.6 percent in 2008, and the
uninsured rate for children has fallen from 4.9 percent in 2005 to 2.9
percent in 2008.
Data from the 2005 Vermont Family Health Insurance Survey on the
demographics of the uninsured in Vermont helped focus the design of our
coverage reforms. According to the survey, 51 percent of the uninsured
in Vermont were estimated to be eligible for a Medicaid program but not
enrolled in the program; 27 percent of the uninsured in Vermont had
household income under 300 percent FPL but were not eligible for a
Medicaid program; and 22 percent of the uninsured in Vermont had
household income greater than 300 percent of FPL. Over three-quarters
of Vermonters indicated that cost was the major reason for being
uninsured.
In response, Vermont's coverage reforms:
designed and implemented the new Catamount Health
insurance plan,
developed income-sensitive premium assistance programs for
Catamount Health and for employer-sponsored insurance,
developed the new brand name ``Green Mountain Care'' to
include the State's Medicaid and Medicaid expansion coverage programs,
Catamount and the new premium assistance programs under a single
umbrella, and
implemented mechanisms to assist with comprehensive
outreach to every uninsured Vermonter that is matched with application
assistance, tracking, follow-up, and referral.
Mandated in statute, the new coverage initiatives were designed
with very specific underlying values. These included ensuring
comprehensive coverage and affordable coverage; (premiums and out-of-
pocket); promoting preventive care and chronic care management;
augmenting, not supplanting, employer-based coverage; and avoiding
contributing to the cost shift via inadequate provider payments in any
new coverage plans.
Catamount Health Plan: Act 191 of 2006 created a separate insurance
pool in the individual market for the purpose of offering a lower cost
comprehensive health insurance product for uninsured \2\ Vermonters.
The Catamount Health Plan is modeled after a preferred provider
organization plan with a $250 in-network deductible and $800 out-of-
pocket maximum for individual coverage. Cost sharing is prescribed in
statute, and includes a waiver of all cost-sharing for chronic care
management and services for subscribers who agree to participate in a
defined chronic care management program offered through the carrier,
and a zero deductible for prescription drug coverage. Lower premium
costs as compared to equivalent benefit plans on the individual market
were achieved due to estimates concerning the claims costs of the
uninsured relative to the claims costs of the general population, and
based on provider reimbursement rates established in the law that are
lower than commercial rates (but 10 percent higher than Medicare
rates). Catamount Health policies began being offered by Blue Cross
Blue Shield of Vermont and MVP Health Care on October 1, 2007. As of
the end of March 2009, over 8,200 people have enrolled in Catamount
Health Plans, and enrollment continues to increase by several hundred
each month.
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\2\ Uninsured means: (1) you have insurance which only covers
hospital care OR doctor's visits (but not both); (2) you have not had
private insurance for the past 12 months; (3) you had private insurance
but lost it because you lost your job or your hours were reduced; got
divorced; have or are finishing COBRA coverage; had insurance through
someone else who died; are no longer a dependent on your parent's
insurance; or graduated, took a leave of absence, or finished college
or university and got your insurance through school; (4) you had VHAP
or Medicaid but became ineligible for those programs; (5) you have been
enrolled for at least 6 months in an individual health insurance plan
with an annual deductible of $10,000 or more for single coverage or
$20,000 or more for two-person or family coverage; or (6) you lost
health insurance as a result of domestic violence.
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Catamount Health Premium Assistance Program.--Of the 8,200
beneficiaries covered by Catamount Health Plans, 85 percent are
receiving premium assistance, which is available to Vermont residents
who have been uninsured for at least 12 months (with exceptions) and
who are not eligible for a public insurance program such as Medicaid.
Premium assistance is based on household income, and eligible
individuals are able to purchase a Catamount Health policy at the
following rates, with the remainder paid by the State:
Up to 200 percent FPL: $60 per month;
200-225 percent FPL: $110 per month;
225-250 percent FPL: $135 per month;
250-275 percent FPL: $160 per month;
275-300 percent FPL: $185 per month; and
Over 300 percent FPL: Full cost of the Catamount Health individual
policy ($393/month).
Employer Sponsored Insurance (ESI) Premium Assistance Programs.--
Vermont's health care reform is designed to support and build on our
Nation's current health care system that primarily relies on employer-
based coverage. As such, the new Catamount Health Plan and the
associated premium assistance programs were constructed to minimize
``crowd-out'' from employer coverage, and the funding of the reforms
include an assessment on employers that do not offer insurance.
The ESI Premium Assistance Program also makes health coverage more
affordable for uninsured Vermonters who have incomes under 300 percent
FPL and have access to approved employer-sponsored coverage.\3\ If
cost-effective for the State, adults currently enrolled in the Medicaid
VHAP program and new VHAP applicants who have access to an approved
employer-sponsored insurance (ESI) plan are required to enroll in their
employer-sponsored plan as a condition of continued coverage under
VHAP. The premium assistance program provides a subsidy of premiums or
cost-sharing amounts based on the household income of the eligible
individual to ensure that the individual's out-of-pocket obligations
for premiums and cost-sharing amounts are substantially equivalent to
or less than the annual premium and cost-sharing obligations under VHAP
(ranging from $7 to $49 per month). In addition, supplemental benefits
or ``wrap-around'' coverage is offered to ensure VHAP-eligible
enrollees continue to receive the full scope of benefits available
under VHAP.
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\3\ ESI plans must be comprehensive and affordable. Affordable is
defined as a maximum individual in-network deductible of $500.
Comprehensive is defined as including coverage for physician care,
inpatient care, outpatient, for prescription drugs, emergency room,
ambulance, mental health, substance abuse, medical equipment/supplies,
and maternity care. Employers do not have to contribute to the plan for
it to qualify.
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Catamount Health Premium assistance applicants who have access to
an approved employer-sponsored insurance (ESI) plan are required to
enroll in their employer-sponsored plan as a condition of receiving
premium assistance. Their cost sharing for their employer's plan is
identical to those enrolled in the Catamount Health Premium Assistance
program.
As of the end of March 2009, over 1,450 Vermonters were receiving
premium assistance from the State to enroll in their employer's plan.
Seamless Transitions.--The statutes and State regulations governing
the premium assistance programs and the already existing Medicaid-
related programs are designed to create an integrated system of State
assistance to better assure the continuity of health care to covered
beneficiaries, so that individuals who fall out of one assistance
category may transition into another when financial eligibility
requirements are met.
Comprehensive, Integrated Marketing and Outreach.--The State has
worked with the private carriers offering Catamount Health Plans and
other Vermont stakeholders to develop a comprehensive marketing
strategy across all the coverage and affordability initiatives. Through
a contract with a national marketing firm, the State has implemented an
aggressive outreach campaign, including television, radio, Internet,
and print advertising; developed a new Green Mountain Care Web site
with a high level screening tool; augmented an existing toll-free help-
line to inform people about and assist them to enroll in Green Mountain
Care programs; and conducted trainings around the State with over 2,500
participants. The State also works with the Department of Labor to
conduct outreach to employers, including targeted efforts to companies
following a layoff; has implemented targeted outreach to 18-34-year-
olds where they live, work and play; and has recently gotten
sponsorship by a major bank to promote Green Mountain care.
Private Insurance Market Reform.--A viable non-group market (where
premiums are perceived as affordable and where enrollment is stable for
all demographic groups without access to employer-sponsored insurance)
is an essential component of a well-functioning, all-lines health
insurance market. Like many other States, the Vermont non-group market
is characterized by declining enrollment, adverse selection, increasing
prices, enrollment in high deductible plans, and limited carrier
participation. Act 191 of 2006 directed BISHCA to establish a non-group
market security trust to reduce premiums in the non-group market by a
minimum of 5 percent to make non-group products more affordable for
individual Vermonters. Unfortunately, limited State funds have resulted
in a lack of progress to lower the costs for Vermonters enrolled in
these products.
Act 191 of 2006 also directed the State to study the non-group
market and make recommendations to the General Assembly to improve this
option for Vermonters. While the State has contracted with a national
expert to conduct studies and make recommendations for reforms to this
market the complexity of this type of reform has prohibited significant
changes.
Healthy Lifestyles Insurance Discounts.--Vermont is a community-
rated State, and therefore costs variations within a specific insurance
product are not generally allowed for different populations. However,
beginning in 2006, health care reform legislation has authorized the
State to adopt regulations permitting health insurers to establish
premium discounts (up to 15 percent of premiums) or other economic
rewards for subscribers in Vermont's community-rated non-group and
small group markets, and to allow insurers in the small and large group
markets to offer split benefit design plans, which would allow a
healthy lifestyle differential in cost sharing for the same premium
cost. Any discounts offered through these programs must be offered in a
non-discriminatory manner and may not be limited by health status.
Individuals committing to improve health through healthier lifestyle
choices must be offered the discount. It is hoped that these new
options will provide an incentive for choosing healthier lifestyles,
help make insurance more affordable for individuals and businesses,
improve the health of Vermonters enrolled in these plans, and thereby
affect the overall growth in our health care costs in the long run.
Possible Individual Insurance Mandate.--In 2006, Vermont made a
conscious decision to not require an individual mandate such as the
Massachusetts approach. However, Act 191 of 2006 does require that if
less than 96 percent of Vermont's population is insured by 2010, the
legislature must ``determine the needed analysis and criteria for
implementing a health insurance requirement by January 1, 2011 . . .
including methods of enforcement, providing proof of insurance to
individuals, and any other criteria necessary for the requirement to be
effective in achieving universal health care coverage.'' Actuaries for
the Vermont Department of Banking Insurance and Health Care
Administration have opined that an individual mandate can be an
effective way of addressing adverse selection and pre-existing
condition coverage challenges. However, learning from Massachusetts, it
is clear that an individual mandate requires significant State
investments to make affordable coverage available so residents can meet
the mandate. Given the current economic environment, an individual
mandate does not seem fiscally feasible for Vermont in the near future.
FINANCING FOR VERMONT'S COVERAGE REFORMS
Funding for the programs within Vermont's Health Care Reform is
based on the principle that everybody is covered and everybody pays.
Catamount Health Fund.--Vermont's health care reform established a
new fund in Fiscal Year 2007 primarily as a source of funding for the
Catamount Health and ESI premium assistance programs. Sources of
revenue include 17.5 percent of the new cigarette taxes (see below),
the Employers' Health Care Premium Contribution (see below), Catamount
Health premium assistance amounts paid by individuals to the State, and
other revenues established by the General Assembly.
Increases In Tobacco Product Taxes.--The health care reform
legislation included a $.60 per pack increase in the cigarette tax
beginning July 1, 2006 and an additional $.20 per pack increase
beginning July 1, 2008; a new tax on ``little cigars'' and roll-your-
own tobacco as cigarettes; and changed the method of taxing moist snuff
to a per-ounce basis and increases tax on July 1, 2008 by 17 cents.
Employers' Health Care Contribution Fund.--Act 191 of 2006
established an Employer Health Care Contribution Fund to contribute to
the Catamount Fund.\4\ Employers pay an assessment based on their
number of ``uncovered'' employees, using the following guidelines:
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\4\ More information can be found at: www.labor.vermont.gov/
Default.aspx?tabid=1164.
Employers without a plan that pays some part of the cost
of health insurance of its workers must pay the health care assessment
on all their employees.
Employers who offer health insurance coverage must pay the
assessment on workers who are ineligible to participate in the health
care plan (unless the plan is offered to all full-time employees, and
the employee is a seasonal or part-time worker with coverage
elsewhere), and on workers who refuse the employer's health care
coverage and do not have coverage from some other source.
The assessment is based on full-time equivalents at the rate of
$91.25 per quarter ($365 per year), exempting eight FTEs in fiscal
years 2007 and 2008, six FTEs in 2009, and four FTEs in and after 2010.
The assessment rate increases annually indexed to Catamount Health Plan
premium growth.
Medicaid Global Commitment to Health 1115 Demonstration Waiver.--In
2005, Vermont entered into a new 5-year comprehensive 1115 Federal
Medicaid demonstration waiver designed to: (1) provide the State with
financial and programmatic flexibility to help Vermont maintain its
broad public health care coverage and provide more effective services;
(2) continue to lead the Nation in exploring new ways to reduce the
number of uninsured citizens; and (3) foster innovation in health care
by focusing on health care outcomes. The Waiver program consolidates
funding for all of the State's Medicaid programs, except for the new
Choices for Care (long-term care) waiver and several small programs
(SCHIP and DSH payments for hospitals). It also converts the State's
Medicaid organization to a public Managed Care Organization (MCO).
Under this new waiver, the MCO can invest in health services that
typically would not be covered in our Medicaid program, and Vermont's
Medicaid program has programmatic flexibility to implement creative
programs and reimbursement mechanisms to help curb our health care
costs.
In 2007, the State requested an amendment from CMS to include
Catamount Health and the employer-sponsored insurance premium
assistance programs under the financial umbrella of this waiver.
However, CMS only approved use of Medicaid funds up to 200 percent of
FPL. The Governor and the Legislature agreed to use State General Fund
to subsidize the premium assistance for individual within the 200
percent to 300 percent FPL range, recognizing that many of these
individuals cannot afford to purchase full cost insurance on their own.
State Fiscal Obligations Protected.--The health care reform
legislation enables the State Emergency Board to establish caps on
enrollment in the Premium Assistance Programs if sufficient funds are
not available to sustain the programs. This has not been employed to
date.
KEY LESSONS LEARNED AND HOW THEY INFORM NATIONAL COVERAGE REFORM
Plan Affordability.--Access to affordable health care plans is key
to universal coverage. This is very evident in Vermont's reforms, as
only 15 percent of the people who have enrolled in the new Catamount
Health Plans have bought the plans at full cost ($393 per month for an
individual). The remaining have enrolled with premium assistance, and
75 percent of those are individuals below 200 percent FPL who only pay
$60 per month.
Any national coverage option must be made affordable to people in
all income ranges, without compromising the comprehensiveness of
benefits and without further shifting costs of care to the private
sector or providers. Vermont tried to achieve this in the Catamount
Plans by requiring the providers be reimbursed at Medicare rates plus
10 percent rather then the estimated 130 percent currently paid by
private insurers. This would not be an option for a national plan, as
providers could not absorb such a massive shift in their payer mix.
Therefore, options for a federally offered plan must provide premium
assistance based on income and have mechanisms such as a risk-pool to
cover the costs for the most high needs beneficiaries. These provisions
will have significant costs that cannot be absorbed by the States.
Collaboration.--Vermont's progress on health care reform has not
come easily. Choosing a public-private partnership model for expanding
coverage requires close collaboration amongst insurers, providers and
government. Non-profit agencies have also contributed time and money to
the effort to achieve universal access. At times, this degree of
collaboration may seem duplicative, but is essential to success in the
absence of an individual mandate.
Flexibility.--Even in a small State like Vermont it is clear that
one-size-doesn't-fit-all. What works well in Burlington with its
academic medical center may be very different than what will work in a
rural community in the Northeast Kingdom. Reform efforts must allow for
such grassroots change, building on existing local successes. The
dictum of primum non nocere applies to reform as well as it does to
health care itself.
VERMONT ELEMENTS THAT ARE CRITICAL TO NATIONAL REFORM
Benefit Design.--As previously mentioned, Vermont's Catamount
Health plans offer very comprehensive coverage and low out-of-pocket
costs. Vermont believes that providing comprehensive, affordable
coverage with an emphasis on primary and preventive care, is key to
successful reforms of our health care system. Coverage with high
deductibles, high cost-sharing and/or minimal coverage does not promote
accessing early and preventive care, which in turn, will not achieve
the long-term goal of decreasing our system's health care costs.
Vermont also believes that ensuring community rating and guaranteed
issue is paramount for ensuring that all eligible people can access the
coverage they need at an affordable and fair price.
Crowd-Out Protections.--Vermont's reforms included several
mechanisms that were designed to support the existing employer-
sponsored insurance system, through which 56 percent of Vermonters get
their primary health care coverage. Catamount Health Plans and the
premium assistance programs require that individuals must be uninsured
for 12 months before becoming eligible (with exceptions due to life-
changing events). In addition, Vermont provides premium assistance for
people to enroll in their employer's plan (if it is affordable and
comprehensive). Finally, employers who do not offer coverage to their
employees must pay into the Employer Health Care Contribution Fund to
help support the State-sponsored programs. As such, over the past 3
years, Vermont has not seen a large drop in the number of insured
Vermonters who have employer-sponsored insurance even in times of
economic downturn (decrease of only .5 percent). Any national reform
efforts built on the employer-based health care system will need to
include similar provisions that protect from its erosion.
Connector Mechanisms and Insurance Regulation.--Vermont did not use
the Massachusetts Connector approach, but instead developed a unified
marketing and enrollment process between State government and the
private insurers offering the new Catamount Plan. While national
reforms that involve a coverage mandate or new Federal coverage options
may necessitate formal mechanisms to connect individuals with their
coverage options, Federal legislation should allow for program design
and implementation at the State level. Most States have specific rules
and regulations in place to regulate coverage and provide consumer
protections based on State values, such as community rating and
guaranteed issue provisions enacted in Vermont. Unless the national
reform includes standards that adhere to this level of access, a
national connector will not meet States' needs.
Establishing a national floor with flexibility for a State-based
approach would allow States to preserve consumer protections valued by
their citizens and implement innovative strategies to contain costs
while improving access and quality. States would also greatly benefit
from the creation of multi-state pooling of risk (information only
exchanges are not as useful), as long as minimum standards are
applicable. Benefit plans should be comprehensive in services covered
including mental health parity; should be subject to State consumer
appeals and remedies; and should be subject to State system reform
initiatives such as chronic care management and treatment standards.
Utilized in this way, national standards establishing a floor may be an
effective way to establish minimum coverage requirements while
maintaining State-based regulation and preventing a set-back for State
reform efforts already underway.
System Delivery Reform.--Although not the specific focus of this
Roundtable, strong evidence is emerging that coverage expansions will
not be successful if there are not simultaneous and significant efforts
to reform the care delivery system. Lack of access to primary care
physicians is a major concern as many existing physicians are reaching
retirement age and fewer medical school graduates are going into this
field. Better support (such as multi-payer payment reforms, electronic
information systems, and additional care condition staff) must be
provided to primary care providers to enable them to deliver evidence-
based preventive care and to attend to patients with chronic
conditions. Incentives to attract and retain primary care providers and
other needed allied health care providers should include educational
scholarships, loan forgiveness and reformed payment systems. Additional
improvements in administrative systems such as common formularies, pre-
authorization requirements, and common claims systems would help to
secure a primary care base and necessary access for patients. These
supports may also help turn the tide on waning interest in this type of
practice. Vermont has put significant efforts into transforming its
care delivery system though the Blueprint for Health multi-payer
integrated medical home and community care team projects, along with
the development of a statewide health information exchange. National
emphasis on these types of initiatives will be key to controlling the
cost of health care in the long-run and making coverage both affordable
and accessible.
MOST DIFFICULT ASPECTS OF VERMONT'S COVERAGE REFORMS AND EFFORTS TO
ADDRESS THEM
Balancing Fiscal Resources.--Even though Vermont currently offers
premium assistance for people up to 300 percent FPL, it has done so
without full Federal assistance that was initially expected when the
reforms were designed. As noted above, Vermont requested an amendment
from CMS to include Catamount Health and the employer-sponsored
insurance premium assistance programs under the financial umbrella of
its 1115 demonstration waiver, which operates under a negotiated cap
for total State and Federal expenditures. However, CMS only approved
use of Medicaid funds up to 200 percent of FPL, necessitating that
State funds be used over the past 2 years to support premium assistance
programs between 200 and 300 percent FPL. This has been a significant
drain on State resources, and as the economy continues to decline, this
may put the program in jeopardy. In order to help reforms succeed, the
Federal Government must support States that believe they can fiscally
support expansions under already existing Federal spending agreements.
Vermont, like other States, is facing large budget deficits over
the next few years, even after factoring in the assistance provided in
the American Recovery and Reinvestment Act. Just this past Friday,
Vermont's revenues were down-graded another 1.3 percent for this State
fiscal year ending on June 30, and by 4.1 percent for State fiscal year
2010. This is the third revenue downgrade in the past 6 months. As
such, Vermont is now experiencing significant pressures on its budget
to support the already existing Medicaid programs.
Medicare.--The fiscal resource dilemma faced by Vermont and other
States is compounded by the fact that State Medicaid programs are being
required to cover growing percentages of the costs for long-term care
and people who are dual-eligibles for Medicaid and Medicare. These
budgetary pressures are putting our coverage initiatives at risk,
thereby possibly undermining our successes to date and into the future.
Any new requirements within national reform for Medicaid expansions
and/or mandated coverages will need full Federal financial support, and
Federal payment changes for Medicare must be a part of the fiscal plan.
The fact that Medicare is an isolated federally administered
program that often has conflicting payment structures and benefit
design elements with Medicaid also impedes States' ability to deliver
coordinated and effective care for its citizens who have dual
coverages. In addition, the lack of State-level flexibility to
integrate Medicare with State reforms significantly impedes reform
efforts. While Federal policymakers have rightly focused on how
Medicare can drive change in the health care system, valuable
partnerships can be formed between Medicare and States that have
already been leading the way in reform. However, this requires the
Federal Government transform the Medicare program to permit such
collaboration and partnerships with States. One possible solution would
be to allow CMS to establish a system where State-led reform efforts
could be considered outside of the current Medicare demonstration
project methodology (e.g., CMS set up a review panel to consider State-
led proposals as they are developed). This approach is well established
in other Federal agencies, such as the National Institutes for Health.
Complexity of Medicaid Rules.--Vermont has tried to develop a
seamless system of State-sponsored coverage options. However, the
complexity of Medicaid rules and eligibility categories has made this
extremely difficult to design and administer. Medicaid rule
simplification and the latitude to better align eligibility categories
and rules across programs (e.g., food stamps) would be extremely
helpful.
Old Eligibility and IT Systems.--Many States, including Vermont,
are relying on antiquated eligibility systems that are difficult to
program and make it hard to access data and reports for guiding policy
and budgetary decisions. Vermont's eligibility determination system was
put in place in 1983. There has been recognition for a number of years
that system replacement is important; however, this requires
considerable State fiscal investments which have been prioritized for
beneficiary coverage instead. As such, it has taken significant staff
and fiscal resources to implement all of the eligibility changes
created with the addition of the Catamount and ESI premium assistance
programs. In addition, in some cases new policies that would benefit
beneficiaries or create fiscal savings have not been implemented due to
eligibility system capacities. The American Recovery and Reinvestment
Act contains significant funds for health information technology, but
these funds cannot be used to assist States to replace their
eligibility systems. Since these systems will be key to any new
coverage expansions, this decision should be revisited at the national
level.
ERISA.--The Employee Retirement Income Security Act (ERISA) has
been a problem for Vermont's reform efforts in several ways. For
example, the inability to gather data on self-insured benefit plans
limits targeted outreach to uninsureds and the ability to monitor
employer-based benefit changes over time. In addition, Vermont has had
to work around the fact that self-insured employers do not have to be
at the table for State reforms, whether focused on health care quality,
cost containment, or improving access. The ERISA also poses
implementation dilemmas for ESI premium assistance programs. A possible
Federal solution would be to write an exemption to allow States to
apply for a waiver of ERISA pre-emption, provided the State reform
effort is aimed at reducing the uninsured or achieving other federally
approved policy goals.
CONCLUSION
A key to Vermont's health reform has been the inclusion of all
stakeholders all the time--in development, design and implementation.
As we move forward with national reform, individuals, providers, the
private sector and government--at the State and Federal levels--must
work collaboratively to realize our shared goals of improving access
and quality and containing costs.
Many States have taken the lead and have implemented incremental
and comprehensive reforms that can and should inform national health
care reform, but these State reforms also should not be dismantled in
the process. There are a range of issues where State variability
matters, especially given the unique conditions of State and local
insurance markets, different perspectives on health care services, and
options for creating effective health care delivery systems.
States strongly support services that provide for the health and
well-being of their citizens. While there is a very important role for
the Federal Government in paying for and shaping the type of health
coverage available, overly proscriptive requirements will impede
States' ability to design programs, benefit packages, and coordinate
services in a way that meets the needs of our citizens.
In conclusion, we want to express our appreciation for the
leadership by your committee to move forward on the national agenda for
health care reform. We in Vermont believe it is essential to the
overall physical and fiscal health of our State and our Nation, and we
look forward to partnering with you in this crucial and exciting
endeavor.
Senator Bingaman. Thank you very much.
Dr. Chen.
STATEMENT OF HARRY CHEN, M.D., EMERGENCY ROOM PHYSICIAN AND
BOARD OF VERMONT PROGRAM FOR QUALITY IN HEALTH CARE,
BURLINGTON, VT
Dr. Chen. Thank you, Senator Bingaman and other Senators
and Senator Sanders.
As a practicing emergency physician, I can speak directly
to the human toll of being uninsured. All of these are all of
the more compelling when they look you right in the eyes.
I've been privileged for the past 4 years to play a role in
shaping healthcare reform in Vermont, and I'm proud of our
results of some of the lowest uninsured rates in the Nation.
Again, we discussed arduously the mandate and came up with our
answer of not to do the mandate in Vermont, but I certainly
could understand how it helped Massachusetts.
We haven't reached our goal, but we're hopeful that we'll
get there. Coverage initiatives as a part of healthcare reform
must be comprehensive. A high-deductible plan is not healthcare
reform, it's asset protection, and it's important--for our
goal--to get the right care to the right person, at the right
time.
Coverage initiatives must be a part of comprehensive
healthcare reform, that simultaneously address quality,
efficiency and cost. We won't succeed without an adequate
workforce, without more emphasis on prevention, delivery system
reform, and payment reform. Affordability is the problem that
can unravel our efforts at real healthcare reform.
As you move forward, please be careful that your efforts
don't undermine what we've done in the States. It's clear from
Vermont's efforts that one-size-does-not-fit-all, and I would
encourage the committee--as I do in my practice of medicine--to
first, do no harm.
I'm sure this committee will wrestle with some of the same
issues that we did in Vermont in terms of the individual
mandate. We opted not to have a mandate, but with the proviso
that we could go back to it at a later time. We also wrestled
with the issue of public or private, and in Vermont we--as you
might expect--in politics, came up with what was possible,
which was a mixture of both.
In closing, I'm delighted that this committee is taking on
this important issue. I'm sure that most of us in this room
consider universal access to healthcare a moral imperative. I'm
proud of our progress in Vermont, and hope our experiences can
help inform other States in this committee, as we move forward.
Thank you.
Senator Bingaman. Thank you very much.
Representative Clark, I mistakenly tried to demote you to
the job of Majority Leader, I understand you're the Speaker.
We are very glad to have you here. Please, go right ahead.
STATEMENT OF THE HON. DAVID CLARK, SPEAKER OF THE UTAH HOUSE OF
REPRESENTATIVE, SALT LAKE CITY, UT
Speaker Clark. Thank you very much, I appreciate the
opportunity to be here, and especially want to extend a thanks
to Senator Kennedy, and to you, Senator Bingaman, for the
invitation to testify on a number of issues that are related to
health system reform.
It's interesting to note that if two States as widely
differing culturally, politically, and systemic backgrounds as
Utah and Massachusetts can pursue similar reforms, then other
States can do the same, provided they're given the ability and
the tools necessary to make those adjustments, and the
adaptations to the same basic model that fits each one of their
own States' unique circumstances.
As we proceed to developing a national health system
policy, we would propose that the best way for the Federal
Government to be involved is to respect the starting points of
each individual State--their distinct systems, their
institutions, their values, their attitudes--by allowing
significant flexibility to implement reforms and systemic
changes consistent with all of our own local circum-
stances.
I appreciate the recognition of looking at what's going on
in the States, or we wouldn't have the invitation to be here
today, but I would like to challenge the Federal Government
that they should take no action that should further reduce the
ability of States to develop creative solutions by reducing
healthcare spending, and expanding coverage. The willingness of
States to experiment should be encouraged, and their ability
enhanced by allowing reasonable exemptions, or waivers, from
some of the Federal laws and regulations that constrain
innovations right now on the State level.
Our reform efforts have included several elements, such as
creating affordable plans, developing data transparency,
creation of private marketplace, or an exchange, and also look
to creating incentives that will enhance consumerism and enable
the private market to come up with solutions. We suggest that a
similar focus on market-oriented solutions is the basis for any
action that should be taken on the Federal level.
In the State of Utah, we feel confident that the invisible
hand of the marketplace, rather than the heavy hand of
government, is the effective means whereby reforms should take
place.
Thank you.
[The prepared statement of Speaker Clark follows:]
Prepared Statement of the Hon. David Clark
My name is David Clark and I am Speaker of the Utah House of
Representatives. Senator Kennedy and Senator Bingaman, thank you for
inviting me to testify before you today on a number of issues related
to State health system reform.
Utah is arguably the healthiest State in the union and is often
recognized as having the most efficient health care delivery system.
Not coincidentally, Utah also enjoys the lowest per-capita health
spending in the Nation.\1\ However, in spite of our enviable
circumstances, Utah State officials recognized the dysfunction of our
health system and, in 2005, began serious efforts aimed at reform.
Lawmakers in both parties agreed that the status quo was unacceptable
and that the current system, characterized by misplaced competition and
misaligned incentives, could no longer be tolerated and should be
replaced by one characterized by efficiency and value.
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\1\ This and other comparative state-level data may be found at
http://www.statehealthfacts
.org/.
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In 2008 and 2009, the Utah State Legislature passed landmark
legislation setting into motion dramatic changes in the health system.
The legislative Health System Reform Task Force met numerous times in
2008 and relied heavily on input and ideas from a broad base of Utah
stakeholders, including health care providers, insurers, businesses,
and community members. Through a process involving extensive research,
public input, and consensus building, the Task Force advanced a number
of measures representing critical steps in moving our health system
reform efforts forward.
Utah's reform efforts have been and will continue to be designed to
address our State's unique circumstances; however, there are certainly
elements of our approach that may be broadly applied.
For instance, Utah and Massachusetts both pursued consumer focused
health reforms, albeit in different fashion and with a different
priority order for the common components. Both States also achieved a
broad, bipartisan consensus supporting the basic reform elements.
Dissimilarly, however, Utah began by implementing private market
reforms first--creating a defined contribution health insurance option
for employers and their workers, with public sector reforms likely to
follow. Massachusetts, on the other hand, acted first on the public
sector reform piece, shifting tax dollars from paying hospitals for
treating the uninsured to buying insurance coverage for the low-income
uninsured, and is now rolling out private insurance market reforms.
If two States with such widely differing cultural, political, and
systemic backgrounds as Utah and Massachusetts can pursue similar
reforms, then other States can do the same, provided they are given the
ability and the tools necessary to make adjustments and adaptations to
the same basic model in order to accommodate unique circumstances. As
we proceed in developing a national health reform policy, we would
propose that the best way for the Federal Government to be involved is
to respect the starting points of individual States--their distinct
systems, institutions, values, and attitudes--by allowing significant
flexibility to implement reforms and systemic changes consistent with
local circumstances.
A key lesson in our experience was the importance of cultivating
awareness and understanding of the issues at hand. State officials
engaged in a multi-year process of discussion and education among
lawmakers and stakeholders leading up to enactment of reform. That
process resulted in near unanimous approval of the reform legislation
in both houses of the Utah State Legislature. An up-front investment in
education and consensus building is essential to achieving truly
transformative health system changes. While that requires more time and
effort, the results are more satisfactory than the alternatives of
simply trying to carve out a niche with special rules for some favored
product, or patch or expand the current, sub-optimal system.
Effective communication with stakeholders is essential. In Utah, we
made it clear at the onset that the status quo simply wouldn't do and
that we were committed to enacting meaningful reform. ``Real change
requires real change'' was our clarion call. We also made a decisive
effort to clearly define our expectations to stakeholders, making them
aware that our vision of reform would require serious engagement and an
element of sacrifice by all involved. We encouraged providers,
insurers, business leaders, and members of the community to be
innovative, and even courageous, in thinking about health system
reform. Early and often, my message to stakeholders was, ``I don't want
to hear `No, because . . .' I want to hear, `Yes, if . . .' ''
While all of the Utah reform provisions (see Appendix for detailed
list) are critical, perhaps the two with the most immediate impact on
the health system is the establishment of a new defined contribution
market for health insurance and the creation of the Utah Health
Exchange. A defined contribution approach to health insurance puts the
consumer directly in control of their health benefit, while preserving
all of the Federal tax advantages that are currently only available
through an employer-sponsored arrangement. This approach is analogous
to the movement from a defined benefit pension program for retirement
to employer's defined contributions to an employee's retirement through
contributions to a 401(k) or similar retirement account.
Instead of promising or providing a certain level of health
benefit, the employer provides a pre-determined level of funding that
the employee then controls and uses to purchase their choice of health
insurance. The advantage to the employer is that in this simplified
system, their only decision is how much to contribute toward the
employee's health benefit each year. They are no longer responsible for
choosing the benefit structure, insurance company, or provider network.
However, the employer is still required to have 75 percent employee
participation in the defined contribution market. This feature is
designed to encourage appropriate funding of the employees' benefit
plan. Both the choice and the accountability are moved from the
employer side of the equation to the employee.
Employees benefit because they now can choose the health benefit
that meets their needs, adding additional funding of their own if they
so desire. This could have a major impact on the health care system. As
consumers are given the opportunity to engage in informed choices,
competition will increase. Health plans will have to respond directly
to consumer needs and demands. Ultimately, having consumers more
engaged in the process will lead to more efficient health care and
better health.
The Utah Health Exchange is another critical component. In order
for a defined contribution system to function efficiently, consumers
need a single shopping point where they can evaluate their options and
execute an informed purchasing decision. For a consumer-based market to
succeed, individuals must have access to reliable information to allow
consumers to make side-by-side comparisons of their options.
The Utah Health Exchange is an internet-based information portal
with three core functions: (1) provide consumers with helpful
information about their health care and health care financing, (2)
provide a mechanism for consumers to compare and choose a health
insurance policy that meets their needs, and (3) provide a standardized
electronic application and enrollment system. In addition, a feature
completely unique to the Utah Health Exchange will allow for premium
aggregation from multiple sources (for example, premiums from multiple
employers for an individual, from multiple employers for different
family members, or from State premium assistance programs) for a single
policy.
In addition to these two key operational features, a critical
component of the Utah approach was the underlying reliance on market-
based principles. We feel confident that the invisible hand of the
marketplace, rather than the heavy hand of government, is the most
effective means whereby reform may take place. The State must be
involved in shaping reform, but the government's role should be limited
to simply facilitating the necessary changes.
Perhaps the most difficult aspect of our reform efforts involved
overcoming Federal regulatory barriers including the Employee
Retirement Income Security Act of 1974 (ERISA), the Consolidated
Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance
Portability and Accountability Act (HIPAA). These Federal regulations
seriously limit the scope of the market affected by State reforms.
Moreover, States are unable to aggressively pursue a number of
programs, such as many of those involving wellness initiatives or
personal responsibility elements. This issue might be largely overcome
if States were granted broad authority to initiate demonstration
projects determined to promote the intended objectives of the Federal
statute.
This concludes my prepared remarks. I will be glad to answer any
questions you may have. Thank you.
______
Appendix.--Utah's Approach to Health System Reform
2008 legislation
The 2008 legislative session was the proving ground for the
innovation and determination of State leaders in reforming our health
system. Their efforts resulted in a number of measures that established
a foundation for health system reform in several ways.
Provider Transparency.--The All Payer Database (APD) was
created to provide statewide quality and cost measures for episodes of
care.
Patient Transparency.--The Utah Department of Health was
authorized to adopt standards for the electronic exchange of medical
records by the creation of the Clinical Health Information Exchange
(CHIE).
Internet Portal.--Legislation created the Office of
Consumer Health Services (OCHS) to be housed under the control of the
Governor's Office of Economic Development. This office was charged with
the task of creating an Internet portal that promotes a consumer-
oriented health care system by making information available to
consumers, allowing them to make more informed decisions.
CHIP open enrollment and outreach.--Legislation ensured
that Utah's Children's Health Insurance Program (CHIP) will cover all
eligible children who apply. It also required the State departments of
Education, Health and Workforce Services to promote enrollment of
eligible children in CHIP and Medicaid.
State Tax Credit.--The legislation established a
nonrefundable State income tax credit of up to 5 percent for
individuals paying for health insurance with post-tax dollars.
Waiver Amendments.--Required State programs to work with
the U.S. Department of Health and Human Services to help more people
get insurance through private programs and to make public programs and
subsidies available to more people in difficult circumstances.
Legislative Task Force.--Legislation also provided for an
11-member Task Force to study health system reform. Members of the Task
Force formed five working groups representing various stakeholders who
dedicated immeasurable time and effort discussing and exploring reform
options and strategies.
2009 LEGISLATION
Through a process of extensive research, public input, and
consensus building, the Task Force advanced four bills in the 2009
session. These bills represent critical steps in moving Utah's Health
System Reform forward. Among the many ambitious and bold
accomplishments in these bills:
H.B. 188: Representative David Clark, House Speaker; Sponsor, Health
System Reform--Insurance Market
Creation of a Defined Contribution Market.--This
legislation increases the availability of consumer information, choice,
and power in the health insurance market. The defined contribution
system will be operational for the small group market by January 1,
2010. In this market, employees will be able to choose any plan in the
market on a guaranteed issue basis using pre-tax dollars. Rating and
underwriting in this market will be based only on the employee's age
and their employer's group risk factor. The newly established Risk
Adjuster Board will guide technical issues related to keeping the
market vibrant and functional. Furthermore, the defined contribution
system allows individuals and families to aggregate premium payments
from multiple employer or government sources.
Expanding the Role of the Internet Portal.--This bill
clarifies and expands the role of the Internet portal in making
information available to consumers to make informed decisions in the
small group and individual markets, as well as the new defined
contribution market. The Internet portal will be a one-stop
information, shopping and comparison tool for health care consumers.
The portal will provide the technology backbone where the defined
contribution market can operate.
Enhanced Transparency.--While several efforts to enhance
transparency were initiated by the 2008 legislation, this bill contains
several additional provisions to increase the transparency of the
marketplace and to allow consumers improved access to information so
they can make better choices. The bill also requires insurance
producers to disclose commissions and compensation to their clients.
Lower Cost Products.--The bill creates new, lower cost
alternatives in several markets. The bill establishes the new lower
cost NetCare health benefit plan, allowing the exclusion of certain
State-mandated benefits. NetCare will be available as an alternative to
employees in the Utah mini-COBRA, COBRA, and conversion markets. This
bill also establishes a new product that blends PPO and HMO products
and eliminates some of the mandates related to insurer networks.
Task Force Re-authorization.--This bill reauthorized the
Health System Reform Task Force for an additional year and further
required stakeholders to continue efforts for State health system
reform.
H.B. 331: Representative James A. Dunnigan; Sponsor, Health Reform--
Health Insurance Coverage In State Contracts
Level Playing Field for Contractors.--Contractors bidding
for State projects will no longer be advantaged if they do not provide
health insurance for their employees. This legislation establishes a
requirement that companies contracting with the State for projects
exceeding a specified dollar amount provide a basic level of health
insurance for their employees. The legislation establishes enforcement
and penalties for a contractor who does not maintain an offer of
qualified health insurance coverage for employees during the duration
of the contract.
H.B. 165: Representative Merlynn T. Newbold; Sponsor, Health Reform--
Administrative Simplification
Administrative Simplification.--This bill requires
providers and insurers to work together to simplify the billing,
coordination of benefits, prior authorization, notification, and
eligibility determination processes. This bill also moves the State
toward card swipe technology for insurance cards so that a health care
provider and patient can determine eligibility and what insurance
requirements must be met for services such as deductibles, copayments
and insurance status in real time.
Demonstration Projects.--The legislation starts the
process for health care payment and delivery reform to realign
incentives in the health care system. The bill creates a systemwide,
broad-based demonstration project involving health care payers and
health care providers for innovating the payment and delivery of health
care in the State.
S.B. 79: Senator Peter C. Knudson; Sponsor, Health System Reform--
Medical Malpractice Amendments
Tort Reform.--This legislation addresses the unique
circumstances of receiving health care in an emergency room where
health care providers are required, under Federal law, to treat any
person who comes into an emergency room. Most times, emergency room
physicians must treat with no knowledge of the patient and sometimes
with an inability to communicate with a patient to determine past
medical history. The legislation establishes a standard of proof for
emergency room care in medical malpractice actions based on clear and
convincing evidence.
Senator Bingaman. Thank you very much.
Mr. James, go right ahead.
STATEMENT OF BRENT JAMES, M.D., M.STAT., EXECUTIVE DIRECTOR,
IHC INSTITUTE FOR HEALTH CARE DELIVERY RESEARCH, INTERMOUNTAIN
HEALTH CARE, INC., SALT LAKE CITY, UT
Dr. James. Thank you.
I first need to apologize, Senator Bingaman, Senator
Kennedy. I run a big training program that teaches clinical
quality to physicians and nurses--I have about 45 senior
physicians and executives sitting in my classroom in Salt Lake
right now, so this, for me, is a day trip. I have to hit the
4:30 flight to be home, I'm on the spot tomorrow, so I'm going
to quietly slip out of here in a few minutes, I hope.
Senator Kennedy, I have to mention that quite a number of
those folks are from Massachusetts General Hospital and Brigham
and Women's at the moment, so we're having a delightful
discussion in my old home State, some years ago. Saturday I'll
be there to deliver a keynote at a lecture on electronic
medical records to maintain my faculty appointment at Harvard
School of Public Health.
The Chairman. Badly needed.
Dr. James. It's essential, to say the least. It's good to
be going home, at least for a visit.
The Chairman. Good.
Dr. James. Short version, the key to universal access is
controlling the rate of increasing healthcare costs. The key to
controlling healthcare costs is something called utilization
rates. It's not how much we pay per unit, it's the number of
units.
We've just completed a study that will soon appear in a
major journal, where we estimated that, approaching 50 percent
of all healthcare expenditures in the United States, they are
technically waste, using a quality model. That's almost 50
percent of a $2.4 trillion budget. I think that's where the
real solution to this lies.
Senator Bingaman. Could you just pull the microphone a
little closer?
Dr. James. There we go.
Senator Bingaman. That helps.
Dr. James. Is that better?
Senator Bingaman. Thank you, yes.
Dr. James. Yes, about 50 percent, we estimated, using a
rigorous model that leads directly to action of current
healthcare expenditures are waste from a patient's perspective,
nonvalue adding, and represents a huge opportunity.
We think one of the ways to approach that, which we're
starting to experiment with in support of Representative
Clark's initiatives is bundled payment through accountable care
organizations. Quality measurement and accountability are
essential parts of that, we know an awful lot about that today,
know how to do it, and there are a series of well-established
principles by which we could build effective quality
measurements in the country; we're not following them very well
today.
[The prepared statement of Dr. James follows:]
Prepared Statement of Brent C. James, M.D., M.Stat.
Mr. Chairman, thank you very much for the opportunity to share some
of our experience as we have studied, then attempted, health reform
within the State of Utah. I join the Honorable David Clark, Speaker of
Utah House of Representatives, in this hearing. Speaker Clark has very
ably led a joint Utah Senate-House task force studying health care
delivery reform for the last 2 years. The task force report anticipates
a coordinated series of legislative initiatives, that will roll out
over the next several years. The first installment of that legislation
was passed and signed into law earlier this year.
Speaker Clark is obviously better positioned to describe the task
force, the results of its investigations, and the resulting Utah State
health reform legislative agenda than am I. I therefore plan to focus
my remarks on the implementation of health care reform within the State
of Utah. I am the Chief Quality Officer at Intermountain Healthcare.
Intermountain is a not-for-profit system of 23 hospitals, almost 120
outpatient clinics, and a health insurance plan. We supply more than
half of all care delivered within the State of Utah. The short version
of our mission statement is ``the best medical result at the lowest
necessary cost.'' We provide that care to all people in our service
area, regardless of insurance status. As a result, we are the source of
much of the charitable care currently delivered in the State. We have
been identified by external evaluators as one of the highest quality,
most efficient care delivery organizations in the United States--or,
for that matter, in the world. For example, the Dartmouth Atlas has
asserted that if the rest of the country delivered the same care that
is found within Intermountain, national Medicare costs would fall by
more than 30 percent while clinical outcomes would significantly
improve.
The key to health reform is payment reform. We believe that the
evidence clearly shows that efforts to extend health insurance to all
citizens, whether at a State or national level, will rapidly fail
unless we are able to control the rapidly rising costs of health care
delivery.
We recently completed a study, currently under review for
publication, that applied quality improvement (sometimes also called
process management) principles to estimate waste within current care
delivery. The advantage of using a process management approach is that
such quality-based waste is, by definition, actionable waste. The same
tools that identify the opportunities can be used to reduce operating
costs by improving patient outcomes. Our model identified five nested
categories. We were able to obtain synthetic national estimates for two
of those categories. The three categories for which we could not
generate robust estimates, at this time, were of a size roughly
comparable to the two that we could estimate. Even then, we judged that
almost half of all current expenditures in health care delivery are
non-value adding from a patient's perspective. (Unfortunately, one
person's waste may be another person's income.)
Our analysis distinguished between two important factors that
determine health care costs. The first is ``unit costs''--the actual
cost of a single procedure, service, or other item used in health care
delivery. The term is fractal, in the sense that it can evaluate
granular items such as a single blood test, an imaging exam, a dose of
a drug, an hour of acuity-adjusted nursing care, or a minute in
surgery. It can also ``bundle up'' individual, granular, items into
cases, such as a total hip arthroplasty (artificial hip joint
replacement), a hospitalization for congestive heart failure, or the
total cost of an outpatient visit to a specialist, with testing and
imaging. The second factor is utilization--the ``number of units'' used
to deliver care to a patient or to a defined population. Total cost is
``number of units'' multiplied by ``cost per unit.''
In the past, most governmental efforts to control the rate of
growth of health care expenditures centered around unit costs alone.
Typically, payment rates in government-related health care delivery
programs are not negotiated with care providers. The controlling agency
set payment rates, then care providers chose whether they would
participate. However, such price control mechanisms do not address
utilization rates--how many cases are performed, each paid at the
mandated payment rate.
Our analysis addressed both unit costs and utilization rates.
However, the largest opportunities for savings came through utilization
rates, by better matching care delivery to patients' true needs and
desires (patient-centered care).
To illustrate, over the past 3 years we have been working closely
with government-run care delivery systems in western Canada. Clinical
leaders of those systems report that, despite universal insurance
coverage, as many as one-third of the individual citizens for whom they
are responsible have difficulty in obtaining timely access to primary
care physicians. The patients with the most difficulty in getting
access are those who need it the most--patients with chronic disease.
The root of the problem appears to be unit-based payment structure:
Physicians can make more by seeing a large number of relatively
healthy, simple, patients (the ``worried well'') than by spending the
necessary time with a smaller number of complex patients. This has had
a secondary effect of increasing waiting lines for already
overburdened, and more expensive, specialists. The ``payment per unit''
was set by government policy within a province. Physicians have a
strong financial incentive to increase the ``number of units''
(visits), but shortening the time spent per unit.
To support State-level health reform, for patients with chronic
diseases we are structuring bundled payments to groups of allied
primary care physicians, specialists, and hospitals. This approach
relies upon coordinated care. It centers around (a) physician-led
primary care clinics; (b) with embedded nurse care managers; (c)
supported by evidence-based best practice protocols, built into
clinical work flows; (d) tightly linked to an effective network of
specialists and, when necessary, hospitals. An electronic medical
record is essential. It helps implement evidence-based best practice,
and greatly enhances communication among all members of the team
(patients, care management nurses, primary care physicians, and
specialists). A series of careful studies have shown that this
structure produces very significant improvements in both patient
outcomes and patient experience of care, while significantly reducing
costs. Some call this approach a ``medical home.'' (We were a little
slow in coming to the catchy title, but have had such care in place, in
some clinics, for more than 6 years.)
In conjunction with the Mayo Clinic, we have assessed the
contributions of this coordinated practice style as compared to
financial incentives to patients built into insurance plans (e.g.,
copayments). While both factors contributed to cheaper care, the level
of practice organization dominated insurance design.
While about one-third of the physicians practicing in
Intermountain's networks are employed by the system, the majority are
community-based, independent physicians. This reflects a sea-change
that is currently underway within the healing professions: We are
moving away from a care delivery model based on a chaotic mixture of
individual expert clinicians, to one that recognizes that most modern
care is delivered by teams of clinicians, and that coordination among
clinical teams is essential for good care. While such coordination does
not require that physicians enter employment with some specific group
(a common emerging model), it does require a local consolidator
(sometimes called an Accountable Care Organization).
We are presently moving to bundled payment in support of
coordinated care delivery. Under bundled payment, an accountable care
delivery group is given a fixed annual payment for all services for
patients with chronic diseases (clinic visits; testing; imaging;
hospitalization; end-of-life care). The payments are risk-adjusted
based upon the number, type, and level of intensity of the chronic
diseases involved. This payment structure directly addresses a major
defect in current unit-based payment systems: Under current
governmental payment systems, care providers are paid more when
patients suffer complications (in sound byte form, ``we are paid to
harm our patients''). Such circumstances require more care, which means
more utilization (the consumption of more units of service). For
example, a care delivery group can make much more money by
hospitalizing a patient who has congestive heart failure, than by
managing that patient so well in an outpatient setting that
hospitalization is not necessary. Under a bundled payment system, the
care delivery group has strong financial incentives to prevent
complications, avoid preventable procedures and hospitalizations, to
reduce operating costs, and increase operating margins (sometimes
called ``shared savings'' payment models).
Quality measurement is essential. Over the past 20 years, our
ability to measure care outcomes has improved dramatically. This
primarily came about by using quality improvement (process management)
theory. The resulting evidence demonstrated that quality is very highly
``process specific.'' That is, the fact that a care delivery group does
well on one process (e.g., open heart surgery), does not mean that the
same group will necessarily do well on any other process (e.g.,
management of congestive heart failure). It is now possible to (a)
prioritize care delivery processes; then (b) generate measurement
systems biggest to smallest, one at a time, specific to each condition.
(Each of the individual measurement systems are unique--there's some,
but not a lot, of overlap among them.)
A prioritized approach helps get the most benefit to the most
patients, in the face of limited resources. Care delivery concentrates
massively. For example, within Intermountain, 104 of about 1,400
clinical care processes accounts for about 95 percent of all the care
that we deliver.
Even with major advancements in measurement, for most clinical
conditions quality measurement is not sufficiently precise to
accurately rank physicians, hospitals, or practice groups (references
available on request). That fundamental truth has another face: It is
easy to scientifically demonstrate that, for most clinicals conditions
it is impossible to build an evidence-based best practice guideline
that perfectly fits any patient. As a result, achieving 100 percent
performance on most quality measures means that a subset of patients
received substandard care. On that foundation, a set of key principles
for the appropriate design of quality measurement systems has emerged:
Methods exist that build quality measurement and
accountability in ways that don't depend on ranking providers.
Measurement systems must contain a feed-back loop (called
``gauge theory'' in the quality sciences). At a technical level, when
quality measurement finds a performance outlier, it (precisely) means
that: ``If I carefully analyze this outlier, I will (with high
probability) be able to find its true cause.'' With new data systems--
even carefully constructed clinical measurement--many of the initial
outliers track back to the measurement system (the gauge). This
provides opportunity to ``fix'' the measurement system over time, and
is the method by which reliable measurement systems emerge.
Measurement must blend into clinical workflows:
(a) The things most needed for solid quality measurement and
accountability tend to be those elements that front-line clinicians
need to deliver good individual patient care;
(b) Embedded data tends to be much more timely and accurate
(clinicians use the data, and so help produce both timeliness and
accuracy);
(c) If accountability measurement is not embedded in work flow,
then the measurement system will compete for resources (time and
people) at the front line, potentially damaging clinical performance
(quality);
(d) Embedded measures lend themselves directly to change--they lead
to improvement (in other words, use of ``after-the-fact'' measurement
not only competes for resources with care delivery, it also competes
for resources with improvement).
To support State-level health reform, Intermountain is building
embedded quality measures as an entry ``gateway'' for groups to receive
bundled payment. We place thresholds at a high enough level that any
participating group must put in place effective process management
systems, but not so high that compliance with an external standard will
damage some patients (as is clearly happening within the current CMS
measures).
As a result, Intermountain's evidence-based best practice
protocols, and the quality measurement systems that are part of them,
are the opposite of ``cook book'' medicine. Under the reality of
current ``state-of-the-art'' quality measurement, where ``it is almost
always impossible to generate a guideline that perfectly fits any
patient,'' being too high (a statistical outlier) on a performance
measure is just as concerning as being too low on the same measure (a
statistical outlier on the other side). Both require the same sort of
follow-up, learning, and adjustment.
In summary, health care reform is advancing rapidly within Utah.
Key lessons learned include:
The key to universal access is controlling the rate of
increase of health care costs.
The key to controlling health care costs is managing
utilization rates.
Bundled payment for chronic disease, through Accountable
Care Organizations, provides a very attractive mechanism to match
utilization to patient needs, as seen by the patient.
Quality measurement and accountability is an essential
part of bundled payment.
A series of well-established principles form the
foundation for effective quality measurement.
Thank you for your time and attention.
Attachment.--Principles for Effective Measurement of Quality for the
Purposes of Accountability
BACKGROUND INFORMATION
Quality measurement has improved significantly over the past three
decades:
W. Edwards Deming linked quality to underlying work
processes. He suggested that every process produces three parallel
classes of outcomes: quality, cost, and service. This provided a robust
structure for quality measurement, in context.
Health services researchers (Nelson, James) further broke
medical quality into four major subdivisions, which greatly simplified
measurement within much more consistent categories. Those four major
subdivisions are:
1. appropriateness (indications),
2. complications,
3. therapeutic goals (biologic performance as seen by a health
professional), and
4. patient functional status (biologic performance as seen by a
patient).
These advances have led to validated quality measures
within well-defined patient populations.
Despite those advances, quality measurement still has major
limitations:
There are widespread problems with incomplete science,
incomplete assessment, incomplete documentation, and incomplete data
extraction from fragmented, dispersed medical records.
``Availability bias.''
Problems with attribution (most care is delivered by
teams, so clinician-to-clinician comparisons tend to fail).
Any quality measurement system itself contains variability, which
can obscure underlying care delivery performance:
There is a clear need for feedback and follow up on the
data system itself, using well-established methods found in industrial
quality control theory (gauge theory);
No national groups currently employ this critical element;
and
Example of how it works: condition-specific measurement
within Intermountain Healthcare.
As a result, it is currently impossible for quality measures to
accurately rank providers in most circumstances:
A very robust scientific literature supports this
conclusion (will supply on request); and
Good quality accountability therefore needs to use
approaches that do not rely on ranking--effective non-ranking
approaches do exist, primarily derived from quality improvement theory.
Provider quality performance is highly condition specific:
Three decades of investigation have found no reliable
general quality indicators (the fact that a provider does well or
poorly on one condition does not imply that the same provider will do
well or poorly on other conditions);
However, care delivery concentrates massively. About 10
percent of clinical conditions account for over 90 percent of all care
delivery; and
Therefore, build in measures by condition, in size order,
to address the most good for the most patients.
Poorly-constructed quality measurement systems often lead to ``data
gaming'' (principle: it is easier to look good than to be good):
There are three ways to get a better number (Deming):
1. Improve the underlying process,
2. Shift resources to the area under the measurement spotlight, at
the expense of areas not under the measurement spotlight (very often,
the peripheral damage outweighs the focused gain), and
3. Game the number.
Deming: ``as one attaches greater rewards or punishments
to achieving a number, one gets increasing proportions of (2) and (3)
'';
Extrinsic rewards tend to destroy intrinsic motivation,
damaging professional oversight; and
It is very clear that type (2) and (3) activities are
becoming common among U.S. hospitals, relative to the CMS measures.
Transparency is not the same as accountability:
High-quality care delivery usually involves a series of
decisions around sequential care delivery choices;
Patients usually make those decisions in the context of a
caring relationship, with a physician or nurse advisor;
``Transparency'' means that all participants--the
clinician advisors as well as the patients--have sufficiently accurate,
detailed information to make wise choices at each step in the chain;
and
Accountability measures, that reduce the problem to a
single patient choice of a hospital or a physician, can directly
undermine the true transparency that is essential to high quality care.
There are 2 primary approaches to quality--(1) measurement for
selection (accountability) versus (2) measurement for improvement:
measurement for improvement contains measurement for
selection/accountability--the opposite is not true (measures for
accountability, mandated from above, do not create capacity for actual
quality management and improvement at the front line);
measurement systems designed for accountability often
consume limited front-line resources and actively damage quality of
care (Casalino; NEJM; 1999; Wachter et al.; Ann Int Med; 2008); and
there are rigorous methods for generating reliable front-
line, embedded data systems that minimize burden and maximize data
quality (NQF SFB report). These methods stand in contrast to the
political methods currently used by most national reporting groups.
References
Berwick DM, James BC, Coye MJ. Connections between quality measurement
and improvement. Med Care 2003; 41(1 Suppl):I30-I38 (Jan,
supplement).
Casalino LP. The unintended consequences measuring quality on the
quality of medical care. New Engl J Med 1999; 341(15):1147-50 (Oct
7).
Institute of Medicine Subcommittee on Performance Measurement.
Performance Measurement: Accelerating Improvement. Washington, DC:
National Academy Press, 2006.
James BC. Information systems concepts for quality measurement. Med
Care 2003; 41(1 Suppl):I71-I79 (Jan, supplement).
Wachter RM, Flanders SA, Fee C, Pronovost PJ. Public reporting of
antibiotic timing in patients with pneumonia: lessons from a flawed
performance measure. Ann Intern Med 2008; 149(1):29-32 (Jul 1).
Senator Bingaman. OK, thank you very, very much. Thank all
of you for your presentation, and let me see if Senator
Kennedy--did you have?
The Chairman. I'll join in----
Senator Bingaman. OK. Let me ask a question or two, just to
get started.
One of the issues that, obviously, we have to grapple with,
and I guess each of your States has grappled with it in a
different way, is this issue of whether or not to mandate
coverage, or mandate that people go out and obtain insurance if
they're not covered by a plan.
Massachusetts has chosen to do that, and believes that that
has been a key factor in the success that they've had. The
other States have not--the other States represented here--and I
guess in Vermont, Dr. Chen, you were indicating, Ms. Besio, you
were indicating that this is a decision that was consciously
made the other way, in Vermont.
Let me just ask those of you from Vermont to explain your
decision a little more, as to why you think it wasn't the right
thing to do in Vermont and what you recommend we consider doing
here.
Dr. Chen. Sure. In terms of the mandate, I was on the
Conference Committee when we were negotiating the healthcare
reform bill, and we really found that people--I'll use the
euphemism--on the right of us and on the left of us, both of
them, really, were opposed to the mandate. Some of the concern
was, could we afford it, and I think, that really came down to
the issue of affordability. If we had mandated, and everybody
had taken advantage of it, we wouldn't have enough money. From
a fiscal point of view, we couldn't implement a mandate.
Now, as we develop our products, as we work toward our goal
of 96 percent insured, we put in our bill a chance, an
opportunity, to re-look at that mandate. If we didn't make
enough progress, that's certainly something we would consider,
I believe, in this upcoming year, 2010.
Senator Bingaman. Have you been able to implement some of
the insurance market reforms? I mean, in an earlier roundtable
discussion that we had, the strong message that I picked up
from some of the representatives of the insurance industry was
that they would support a mandate--or they would support
insurance market reforms such as prohibiting them from
excluding people for pre-existing conditions, requiring
guaranteed coverage, or guaranteed coverage--but they would
only support that if it was in the context of a mandate, where
everybody had to sign up. Have you been able to implement any
of these insurance market reforms? And, if so, how does that
work?
Ms. Besio. We actually have, in Vermont, guaranteed issue,
and we also have community rating, meaning that we don't
differentiate, in terms of the cost of products, according to
age, or geographic location, or any other thing that's out of
an individual's control. We have a very high standard in terms
of our market, and the standards behind it.
The dilemma--in terms of affordability for the individual
mandate--is that you have to provide products that are
affordable for everyone. If you have a standard that we, in
Vermont, believe is very important, that you want to have low
out-of-pocket cost in your benefit design to encourage people
to actually access care early and use that insurance in the way
that it was initially designed, and not just be catastrophic
coverage, then you've got a relatively expensive product, or
products, that are going to be offered on the market.
The way to make those affordable are either to have a high-
risk pool that helps cover those high-risk cases, or to offer
premium assistance. Either of those options costs money to
bring down the cost of the coverage.
I think that's the dilemma, from our perspective, really
around the mandate, and can we provide affordable,
comprehensive coverage that people would have access to, and
can we afford that?
Senator Bingaman. And you determined that you can not
afford it?
Ms. Besio. We can not afford it at this point in time, and
in the foreseeable future, given the current state of our
economy.
Senator Bingaman. Let me ask Mr. Kingsdale if he had any
comment on this issue, this set of issues?
Mr. Kingsdale. Just that, actually, I think that Ms. Besio
articulated the issue quite well. In Massachusetts, we also had
adjusted community rating, guaranteed issue, guaranteed
renewal, prior to the individual mandate--I believe there are
five States in the country that do. We in Massachusetts--and I
believe this is true of the other four--without the mandate and
some other reforms, experienced what any economist or
underwriter would predict, which is, a shrinking market for--
made up largely of older, sicker people--buying a product that
nobody who wasn't pretty sure they were going to use a lot of
it would buy voluntarily on their own part.
The thing about the individual mandate is--definitely
expensive, because you're trying to get everybody insured, and
that's expensive. You have to subsidize people of lower income.
It does create what an underwriter or an actuary would call
a statewide credible risk pool. It brings in the young
invincibles and others, so that actually the premium rate for
the cost of coverage for people who were previously buying
nongroup insurance actually fell as a result of reform, and as
a result, we have a lot more product, we have more than doubled
the size of our non-group market in just the first year of
reform.
It's expensive, I think you've described the challenge
very, very aptly, but that's the challenge of getting universal
coverage.
Senator Bingaman. Senator Kennedy, did you want to ask a
question? Or Senator Enzi? What's your preference? Senator
Enzi? Mike, why don't you go ahead.
Senator Enzi. OK.
I thank everybody for the brevity of their statements so
that we can have questions. And I want you to know, that from
each of you, I learned something that will help us on
healthcare reform, and I think it's because you kept your
statements very succinct, but I do have a few questions, and
one of them will be for Ms Liu. What do you attribute to
California not being able to pass their bill? There probably
were a lot of roadblocks, but what ones could you share with
us?
Ms. Liu. Certainly there were a number of roadblocks, as
you said, one of them actually was a lot of controversy around
a number of the policy issues that we were trying to pursue,
one of them being the individual mandate, frankly.
We were able to take a lot of the stakeholders who normally
would not support an individual mandate, and discuss with them
the reason that it was required in order to get universal
coverage. That's really what the Governor had asked us to do.
Absolutely, there needed to be a number of market reforms
that were in place in order to achieve guaranteed issue under
an individual mandate, and we took a lot of precautions in
trying to move those forward.
Why didn't it pass in California? You know, there are a
number of reasons. We built a very large stakeholder coalition,
but obviously not quite large enough. I think a lot of it also
had to do with the timing of the proposal. It did pass, the
Governor signed it, and it did pass the Assembly Health
Committee, but by the time it got to the Senate Health
Committee, a few days prior to that, notice had come out that
California had a budget deficit of $14.5 billion. At the time,
that, frankly, was the cost of the new reform proposal, which
would have been $14.5 billion.
Now, we had financed that completely separate from the
State budget, so there wouldn't have been an impact on State
revenues, but that made it difficult for us to get that message
across.
I could go into a number of other reasons, but I'll leave
it there, for now.
Senator Enzi. Well, as you think of others, you could write
them down for us, and we'd appreciate that.
Ms. Liu. Certainly.
Senator Enzi. But, I just want to mention that our budget
deficit dwarfs yours.
Ms. Liu. Fair enough. That's the only place that does,
actually, dwarf California's budget deficit.
[Laughter.]
Senator Enzi. For the other States, one of the things I
keep--I'm very proud of the Wyoming legislature and the volume
of bills that they're able to pass. One of the things I always
watch is to see how many correction bills they have to do. Any
time you pass something major, there's usually something that
got left out. Could one person from each of the States kind of
mention some things that they're still mulling over that
probably need to be fixed?
If you don't have anything, that's OK, too.
Mr. Kingsdale. I'll take a crack at it.
Obviously, as I said in the opening statement, I think it's
often--it's generally recognized--we took on access with a nod
toward cost containment, but I think the real battle over cost
is still to be fought in Massachusetts.
I would point out that our reforms did not exacerbate the
cost issues in Massachusetts, or any of the other, sort of,
national problems that characterize healthcare delivery in the
United States. Everybody now recognizes that, in Massachusetts,
that near-universal coverage is simply not sustainable,
financially, unless we do address healthcare costs.
I think we now, sort of, confront that issue from the moral
high ground of a commitment--a moral commitment--to universal
access and maintaining and protecting that. That's clearly a
major piece still to be dealt with.
There have been a number of other, sort of, smaller issues
that--all the way from technical corrections to recognizing,
for example, that the already growing national problem of
inadequate, or shrinking, primary care supply is an issue
that--if we're going to deal with finances, we ought to deal
with labor supply, as well. There's legislation that passed
last August, Chapter 305 of the Acts of 2008, which build on
some private efforts to fund retention and recruitment of
primary care physicians and nurse practitioners in
Massachusetts, and I understand that 92 such physicians and
nurse practitioners have been recruited and retained as a
result of that program.
Massachusetts----
Senator Enzi. I don't want to cut you off.
Mr. Kingsdale. Sure, OK.
Senator Enzi. I do want to hear from others, and my time is
running out. If you think of some more, let us know, because
you're the laboratory for us to work from.
Vermont, do you have any corrections?
Ms. Besio. Let me just say that our reforms were very
comprehensive, and we didn't set up a lot of study groups.
Actually, in our legislation, we created things like loan
forgiveness funds, loan repayment funds, to help with our
primary care workforce, and workforce area, in rural areas.
However, the two things that have continued to be discussed
over the last two legislative sessions--and there have been,
actually, bills that have been passed to augment on the first
bill, 2006 reform legislation--primarily dealt with increasing
our Blueprint for Health, which is our effort to change the way
care is delivered at the local level. That includes payment
reform, community care teams, it's a multipayer approach, to
support primary care practices, both in terms of prevention and
managing chronic conditions better.
On the coverage side, there's been a lot of discussion
about expanding access to our new product, the Catamount Health
product, and the premium assistance programs, and honestly, the
roadblock there has been money. Can we afford to do any more
expansions, allow more people into that premium assistance
program, and access that product that's subsidized by the
State? That has been a roadblock for us, consistently, over the
past 2 years.
Senator Enzi. Thank you.
Utah?
Speaker Clark. Thank you very much.
Utah's on a--well, I'm just a Southern Utah banker by
profession, so I try and make things simple. Numbers are what
I'm more comfortable with, so I've taken our healthcare and
said it's a 1-3-6-10 as our formula. Our first year of effort,
a 3-year path, we identified six major areas of which we think
we need to implement reform, including insurance modernization,
which we're talking about here, but we anticipate that it'll
take us a decade to fully implement that. This is a long and
major process.
We are beginning to take, what I call, the old carpenter
rule. We have a good health system in the State of Utah--high
quality, low cost. We are attempting to do the carpenter rule
where you measure twice and cut once, before you do anything.
So, we're having a very measured process, and one which we
continually look back in the rear view mirror to make sure that
our course correction is providing us where we thought we'd be,
and not the unintended consequences.
Now, let me take and put my legislative hat on. What I
want, when I'm sitting in this chair, is somebody sitting at
this microphone, giving me succinct answers on what I need to
know about what the problems are. What you've heard across here
is, in fact, that it's dollars. It is, truly, a very, very
costly process to go through this. Massachusetts was
approaching some serious problems with a large Medicaid
retraction, and they needed to make some alternative direction,
so they began looking at finding what they can do to retain
that money, and still work within the system.
In Utah, we never got the deposit slip--we never got to the
bank to get that money. Dish payments, according to different
States--I don't know if there's anyone here from New Hampshire,
I was told there was $8,300 for every man, woman, and child.
Wyoming, I don't think, receives any, they're 50th--49th is
Utah. We get less than $100 per person. The tools we have to
solve these problems that are flowing from Washington are
entirely different. That's what allows--and I think why it's so
important for each State to retain its own autonomy, to try and
have some maneuverability in this process--it is really
critical.
I would hope that if nothing else, perhaps a 5-year
partnership--give us a demonstration project. The opportunity,
the flexibility to come back and report--I think it's going to
take a partnership between all 50 States, and the Federal
Government to find the right solution. But the bottom half of
those solutions might be as independent as all 50 States.
Very simple, let me tell you one of the challenges we have
and why it's important we work in partnership. Right now,
ERISA, in the State of Utah, covers the large employers, States
off Federal mandate, Federal guidelines, we have no say,
whatsoever. That's one-third of my market, completely gone.
Government, Medicare, Medicaid, CHP--while we do have some
influence, statewide--most of the guidance and direction and
the--what we do comes from the Federal Government, the State
maneuvers slightly through there, but we've got just this much
movement in our wrist, and the Federal Government controls most
of it.
I have a 30 to 32 percent of the market that I'm trying to
influence and control with a limited source of resources, and
you start taking and putting mandates and guarantees--I have
these whole other markets I don't impact, but all of the
adverse selection and the narrow trouble it comes to, gets
funneled down right directly onto that 30 to 32 percent--the
small businesses around the country that are carrying the
burden on this.
In my State, 70 cents out of every dollar paid for
insurance comes from an employer-based program. I have to be
careful and be mindful of the business community and their
efforts, and make sure that we're responsive to those needs,
and not continue to layer back on top of them. That work is
just beginning.
Senator Enzi. Thank you very much.
I apologize for running over so dramatically. I usually
don't do that, but I hope this----
Senator Bingaman. No, no, this was very useful, I think.
Senator Enzi. I hope those were questions that were in a
general spirit, rather than to make a point.
Senator Bingaman. They're very good questions, and answers,
too.
Senator Kennedy, did you want to----
The Chairman. Just very quickly, Mr. Chairman, one thing
that I've been thinking on as we've gone through these
excellent questions and that is, what we know is that an
enormous fraction of our healthcare costs are generated by the
very small proportion of patients with serious illness. How can
we reduce that, through better care and coordination?
We have all of these pressures that we find out, and in
particular, as we listen to so many of those who have testified
and have done so well today. I think we're going to hear from
some of those who have been dealing with healthcare challenges,
that all of us are going to be faced with--those on this
committee and those who aren't on this committee--and we're
going to have the macro-costs that are going to come in there.
We are also going to be faced with these enormous amount of
costs that are going to be coming our way, and we're all going
to be asked how we're going to be able to deal with those.
We have also seen the situation where some of the costs of
these individuals that we've heard about, go through a rather
small window, and yet they have a large window that they're
going to have to pay out through, that's going to come through
in terms of expenditures.
How general is your sense about these costs that we are
going to be facing over a period of time? There's nothing new
in this comment, but what I think is something we all ought to
be reminded about, and that is what we can do to try and help
the States to constantly work so that the States themselves
have a reasonable opportunity for success.
Senator Bingaman. Mr. James, go right ahead.
Dr. James. I first ought to correct that--I'm trained
originally in surgical oncology, so----
Senator Bingaman. Speak up.
Dr. James. I trained originally in surgical oncology, so I
make the second physician on the group.
In my specialty area, the first is, that higher quality
care usually costs less. I think we did the first clinical
demonstration of that in Utah way back in 1986. We've shown it
consistently since. That's why my colleagues, partners in
Boston are spending so much time out in Utah right now.
The second part is, that we understand which parts of it
really doesn't serve patient needs, and really need to be
modified. Just as one example, about 30 percent of all Medicare
expenditures go into end-of-life care. We measure it different
ways--6 months of life, the last 6 months, the last year,
occasionally you can actually identify the actual episode.
There are significant differences across the States in terms of
how much that spend is. Dartmouth Atlas currently identifies
Utah--specifically inter-mountain--as the most efficient. We
spend about $12,000 for a Medicare enrollee who dies. Los
Angeles is actually the highest right now--$58,000. For the
same course of care--interestingly, the same group shows that
the quality of care in Utah is higher. Five times more expense,
worse medical outcome.
My favorite term for that is ``rescue care.'' We're
understanding it fairly fully--when I talk about approaching 50
percent waste in the system, that's what I mean. Right there.
It's not care delivered in good service to patients.
Very often this care--if they were given a fair choice--is
not what they would have selected or chosen. We need to get it
right, frankly, within the healthcare professions.
Senator Bingaman. Dr. Chen did you want to comment?
Dr. Chen. Sure. I think Dr. James raised a very good point
about the variation in the healthcare spending in medicine, and
there's been some wonderful work done by Elliot Fisher using
the Dartmouth Atlas.
I think there's certainly a lot of opportunity to deal with
some of the waste in medicine there. I think I would also turn
our attention to another part of medical care, and that's what
I will call effective care. Those are the things that we know
that people need with their chronic diseases, so when you have
diabetes, we know you need that eye exam, we know you need that
urinalysis, we know you need that foot exam.
It is very important that these people get that care,
because that prevents more expensive complications down the
line. What Vermont has done is created this--what was
originally a chronic disease management program, the Blueprint
for Health--we've enhanced it, we've put the, as we say, the
Blueprint's on steroids and we put it into medical home
projects, in demonstration projects throughout Vermont. Where
people will be tied together by information technology, and
following standard protocols where there is a unified payer,
reimbursement based on a per member, per month to provide this
kind of case management. And where there's a community care
team that makes sure they deal with all of the other patient
needs, whether it be mental health needs, whether it be making
sure the patient has transportation to get to the doctor's
appointment, or to make sure that the patient has enough money
to pay for nutritious food.
That's all of, I think, what you're going to have to
address, when you try to deal with those very costly people
that end up having the chronic disease, and that's where we
spend 70 percent of the healthcare dollars, on those 20 percent
of the people.
Senator Bingaman. Go right ahead.
Ms. McAnneny. There is a growing focus in Massachusetts
among employers on workplace wellness initiatives. I think
we're increasingly of the sentiment that the best way to
control cost is not to incur them at all. Folks are trying to
keep their employees healthy--large employers can use a very
holistic approach--they change the food offerings in the
cafeteria, they set up walking paths and so forth.
For smaller businesses that don't have those resources,
they're collaborating with our State's Department of Public
Health, trying to give them the toolkit they need to make some
changes into focus on wellness
Ms. Liu. If I could just add, very briefly, that what this
really revolves around is over-utilization in care, and what we
need in place is changes in our care delivery system and our
payment system, so that we're incenting value-based care, as
opposed to volume of care delivered.
Certainly, at Kaiser Permanente, that is what we focus on,
about giving people the right care at the right time, in the
right place. We have some of those tools in place to be able to
allow us to do that. So, when you're thinking about
affordability, that's what I would focus on.
The Chairman. Thank you very much.
Senator Coburn. Can I jump in?
Senator Bingaman. It's your turn, so why don't you just go
ahead and ask your question.
Senator Coburn. All right, well, we've heard about payment
reform. The classic study is at Duke, where they opened a
congestive heart failure clinic, and they lowered
hospitalizations by 25 percent but, they had to shut it down,
because they couldn't get recognized for the payments. Under
our payment system under Medicare and Medicaid to drop this
magnificent amount of money by putting people back in the
hospital, rather than going to a managed, accountable care
organization or medical home where we're actually having
performance for pay, rather than pay for performance--where you
perform and you get paid.
Duke modeled this and they said, ``We've got a plan that
works,'' but the payment reform is key on this. The payment
reform is key on retention of primary care. We have a payment
system that is broken, and it's broken in the government's
payment system, and it's broken in the private insurance model.
I'm interested to ask the folks from Vermont, how are you--
without an individual mandate, you've moved 2 percentage points
in terms of coverage--most of the people we've had testify
before this committee and in the study groups that are going
around here is you can't have guaranteed coverage if you don't
have an individual mandate.
How have you done that? Have you incentivized so well, in
terms of the co-payments, or the subsidization? Is that how
you've moved people?
Ms. Besio. I think it's to--that is part of it. The premium
assistance program has been very powerful in terms of getting
people enrolled. Actually, when we did our initial reforms--
prior to doing our reforms, we did a statewide survey that
indicated that half of the people who were uninsured were
already eligible for our existing Medicaid programs and
expansion programs but had not enrolled. Seventy-seven percent
of those folks, of all of our uninsured said it was because of
cost. Well, Medicaid's free.
Part of what we did as a strategy, when we developed our
new Catamount Health Plan and our Premium Assistance Programs,
we did integrated marketing with the private carriers that
offered the new Catamount Health Plan. Our message to
Vermonters was, ``Every Vermonter needs insurance.'' That was
it. ``Every Vermonter needs insurance,'' here's the 800 number,
and we asked people to call that number and we would help
them--help determine which program they might be eligible for.
And we think that that message actually got out.
We have an employer contribution component to help finance
our healthcare system, so that's also helped, I think. But our
most recent survey, that gave us our new numbers, which just
happened this fall, showed us that only about .5 percent of
Vermonters have experienced a loss of employer-based insurance.
Our employers, while they may be increasing cost sharing,
they are still continuing to offer that insurance, and we think
it's because we've put that message out there and people have
taken it to heart.
Senator Coburn. A couple of questions for Massachusetts, in
looking at your own administrative budget and reading all the
press reports we hear about the difficulties. You have a
mandate and you have guaranteed issue, and yet we see the cost
rise. One of the statements I think you said earlier, is that
it didn't have anything to do with the plan, in terms of the
cost increases. I wrote it down, exactly what you said. You
said, the plan didn't affect the cost, the costs were there
anyway. You also said the most impossible challenge that we
have is cost.
How are you all going to address the cost? As I read what's
published about the Massachusetts plan, that's a big issue for
you, and where do you go? Since you've got coverage, but now it
looks like you can't afford the coverage because you've got
cost. How are you going to handle that challenge?
Dr. Kingsdale. That's a great question, it's the question
of the hour in Massachusetts, I believe.
I would point out that the major new coverage program we
have, Commonwealth Care, that comes out of the connector, we
actually had a premium reduction from this year to the----
Senator Coburn. I'm talking about your administrative
budget, I'm not talking about those--my question was related to
your total cost--you've got a 33 percent increase in your
administration of it this year, over 2008.
Dr. Kingsdale. Actually we're going to come in at just
about flat, but we also have a lot more members this year.
I think your real--as I hear it----
Senator Coburn. The real question is cost.
Dr. Kingsdale [continuing]. The real question is about
underlying cost of healthcare, yes. I actually have--I am very
enthusiastic, I spent 30 years trying to design coordinated
care systems and endorse some of the comments made earlier
about systems and your own comments about payment reform and
payment systems being broken. But I do believe that all that
stuff takes a long, long time to develop, and these systems,
you don't just change them overnight.
This is a long struggle. Frankly, part of it is putting
less money out. We have extremely, extremely smart doctors and
health plan administrators and hospital administrators, and if
we give them the right incentives, I believe it's much better
for them to figure out than for government to micro-manage
changes in the delivery system. But that is going to take time.
We have one cost containment policy in this country, we
have only one that I'm aware of. We ration access to health
insurance, so we have 50 million people who don't get care
because of that, and I think we need a better cost containment
policy than that.
Senator Coburn. Yes, you all don't have that option in
Massachusetts right now, so what you do is going to be a great
model for us to look at, in terms of how you handle it. Do you
have the flexibility, being a single State, to modify some of
the things you need to, to get to the cost issue?
Dr. Kingsdale. Well, you know, Medicare is the biggest
payer, it's 18, 19 percent of the healthcare sector, and we
are--there's a payment reform commission set up by the--Chapter
305, I mentioned, was passed in August. They are actively
considering, they've already sort of voted to recommend
movement over the next 5 years to global budgets, as a way of
paying and away from fee-for-service. And we probably would, if
we can legislate that, seek something like a Medicare waiver to
try to involve the biggest payer in the country in that. It is
a challenge when you're at the State level.
Senator Coburn. One short follow-up--is everybody looking
at accountable care organizations?
Ms. Besio. Yes.
Senator Coburn. Everybody?
Ms. Besio. Yes.
Senator Coburn. OK, thank you.
Senator Bingaman. Senator Sanders.
Senator Sanders. Thank you, Mr. Chairman.
Welcome to all of our guests. This is, in fact, an
important hearing, because as Representative Clark and Orrin
Hatch and others have pointed out, a lot of interesting things
are happening at the statewide level and we want to include
those experiences and any ideas that we have for national
legislation.
In fact, in that regard, while I suspect my ideas may be
different than Speaker Clark's, we have introduced legislation
that would provide five States of the country, who want to go
forward with universal healthcare, waivers to do it their way.
You may do it in Utah one way, Vermont may choose to go a
single-payer route, but let's analyze the results of those and
see how it's applicable to national legislation. Does that make
sense to you?
Dr. James. Absolutely, I think the incubation--what we're
talking about--I mean, I look at Utah and Massachusetts.
Massachusetts began this process of their reform by going to
the public sector first, doing that reforming, and now they're
beginning to look at the private sector.
Senator Sanders. Let me just jump in, but the idea of
giving States the freedom to have support from the Federal
Government, do the waivers you mentioned, ERISA, so you can
have those waivers to go forward in the way that you think
makes sense. Make sense to you?
Dr. James. It does if I can add COBRA, HIPAA, Department of
Labor, and the tax code, yes.
Senator Sanders. Yes, OK. And that's, Mr. Chairman, what we
have introduced, and I think we can learn from those
experiences. I think what States will do will be very
different. I think Utah will be different than Vermont, let's
look at those results.
No. 2, we have--obviously the theme of the hour is cost all
over the country. I want to say some good news here, which is
that in the Stimulus Package, we have put $2 billion more,
we've doubled the funding for community health centers, a
program that Senator Kennedy developed some 40 years ago.
We have tripled the funding for the National Health Service
Corps to provide debt relief for those physicians who want to
go into primary healthcare, and dentists and nurses as well.
The beauty of that, is that what the studies tell us is that if
you have strong primary healthcare in a medical home, you save
money at the end of the day. Does anybody not think that we
should continue that effort in strengthening primary healthcare
and the National Health Service Corps? Is that a good idea?
Anyone think it's not a sensible idea?
Mr. Speaker.
Speaker Clark. Well, the devil's always in the detail. The
30,000-foot view you said right there, I think we're all in
complete agreement.
Senator Sanders. OK, great.
The one issue, when we talk about the cost healthcare that
has not come up, and it amazes me that it hasn't, is that we
spend almost twice as much per person on healthcare as any
other industrialized Nation, and yet we have 46 million
Americans without any health insurance, and we're the only
industrialized country in the world without a national
healthcare program.
I know it will shock people to hear this, but the one
program, as I understand it, that has more support from
physicians than any other program in the country, is called
single-payer. At least 15,000 physicians, a number of State
legislators have come on board. The single-payer concept and
the strength of the single-payer concept is that it eliminates
all of the waste, administrative costs, bureaucracy,
profiteering, that currently takes place within private
insurance companies.
So we talk about saving money, I wonder how we do not talk
about the fact that there are private insurance companies who
take 25, 30 percent or more of every healthcare dollar for
administration, rather than putting that money into doctors,
nurses, medicine, etc. Does anyone want to comment on whether
or not we think we have a good system if some private insurance
company is making 30 cents of every dollar in bureaucracy and
billing and every other thing, driving everybody nuts, in terms
of the billing process? We don't talk--are we not allowed to
talk about that issue? Are the private insurance companies
quite so strong that we're not allowed to raise it? Jesus, OK.
Dr. Kingsdale. I'll address it if you want.
Senator Sanders. OK.
Dr. Kingsdale. We run two exchanges. One of them, the
largest one, run about 8 percent administrative costs and the
exchanges can function, I think, to take that part of our
health insurance industry, which has the highest administrative
cost, the highest cost of distribution and no--on the order of
15, 20 percent, and I'm talking about the nongroup market--and
introduce substantial efficiencies into the distribution of
insurance. When you have guaranteed issue, guaranteed renewal,
community adjusted rating, and we get 80 percent of our
applications in our private market online, you can actually
take 10, 12 percent out of the cost of nongroup insurance.
I'm not going to address your larger question, I know there
are issues about waste and billing and claims and so forth, but
there is a concrete way to take a substantial chunk out of
that.
Senator Sanders. I think it was Dr. Chen who made the
point, maybe I'm paraphrasing him, that coverage is not
coverage. We have to get into the specifics. You can have a
catastrophic plan which really doesn't mean much, huge
deductibles, co-payments, so what. You're on a statistic that's
covered, but it's not a good plan.
Now, let me ask Dr. Kingsdale, I have a statistic, tell me
if I'm right. This is on the Massachusetts plan. As I
understand it, and I know you don't have the figures in front
of you, but tell me if this sounds right. As of December 29,
2008, fairly recently, a 56-year-old--why we selected 56, I
don't know--56-year-old middle income person, man, would spend
$4,872, that's the cheapest plan available to that person. The
policy has a $2,000 deductible, it has a 20 percent co-payment
of up to $3,000. That means if a guy has a bad year, breaks his
leg, he could be spending $10,000, has exposure of $10,000 for
a middle income guy. Is that what is true for the Massachusetts
plan?
Dr. Kingsdale. You're right, I don't have the numbers in
front of me, but I think--for an individual, that would be
$5,000 not $10,000. And yes, healthcare is God-awful expensive.
Senator Sanders. No----
Dr. Kingsdale. In that example----
Senator Sanders [continuing]. That's not $5,000. Under the
Massachusetts plan, an individual is $4,800, is that correct
for an individual?
Dr. Kingsdale. I don't want to argue with the numbers, I
think it's $5,000. But your point, nevertheless, whether it's 5
or 10, is a huge amount of money. Somebody else made the
observation that that's really financial protection.
Now, that bill could well be $100,000, of which the
insurance only covers $95,000. And yes, $5,000 is outrageously
expensive, but that's medical care in this country.
Senator Sanders. No I understand that, my only point was,
before we look at Massachusetts as some kind of Utopian
solution, to understand that a middle income person who breaks
his leg could be spending $10,000 a year. That is not a
solution, frankly, that is just far too much money. That's all.
Senator Bingaman. Senator Alexander.
Senator Alexander. Thank you very much.
I wonder if any of you looked at the Tennessee experience
with TennCare in trying to see what mistakes you could avoid.
You know, back in the 1990's I remember riding along and
hearing on the radio after I was Governor of the State that we
were going to cover twice as many people for the same amount of
money, and I thought, ``That probably won't work'' and for a
while it seemed to, because there were a high level of children
insured at a relatively low cost, but a few years later it was
threatening to consume 40 percent of the State budget. The
current governor has had to--even recommend taking 170,000
people off the rolls, which is a very painful experience.
I wonder if that provided any lessons that you were able to
avoid in developing your plans or it wasn't relevant to your
plans?
Yes, sir.
Dr. Chen. Yes, I think that we did actually learn about the
TennCare lesson in Vermont. I would say that throughout our
expansions, both in Medicaid and also in the Catamount Health
Program, we've put in what we'll call circuit breakers. There
was always an ability to stop enrollment when we thought that
enrollment was going too strong and costs were going to
overwhelm the system itself, so that was a lesson we did learn
from TennCare.
Senator Alexander. Mr. Clark, you talked about Federal
regulatory barriers preventing States from pursuing wellness
initiatives or personal responsibility elements of a health
reform program. Do you want to specify some examples of that?
Speaker Clark. Right now there are--as I carved out--there
is about two-thirds of the market that we have no impact on
whatsoever or very, very little when it comes to the government
program. It's always a matter of asking them for a waiver for
direction. The ERISA plans are out of bounds, so we have our
small commercial burr, so right around, the funnel starts to
come down.
When it comes to incentives, a lot of regulatory issues
that deal with how we do incentives. What would be wrong with
incenti-
vizing an individual, a diabetic, 5 years down the road, to
receive back a portion of their premium if they were able to
drop or share it with a physician that is able to improve the
quality of health? You've got a baseline medical, you drop that
down, they show the improvement, here you are.
Right now, IRS code--there's all kinds of challenges out
there that are almost insurmountable to try and move forward.
I'll answer that question, if I can take 10 seconds--I know
the Senator left, but we don't have 37 percent administrative
costs in the State of Utah. The companies that we deal with--if
they did, I would give them about 24 months and they would be
in Chapter 7. I am a little bit disturbed sometimes at the
abstract numbers that get pulled out. There may be those around
here, but they are the outliers, they are not the mainstream
performers that have viability and substance over the term.
Senator Alexander. Thank you, Mr. Chairman.
Senator Bingaman. Thank you.
Senator Hagan.
Senator Hagan. Thank you, Mr. Chairman.
One of the challenges I think we face in passing a
healthcare reform bill this year, is convincing the 250 million
people in our country who currently have health insurance and
convincing them that reform will be as good for them as it will
be for the 50 million people who don't have insurance.
With the uninsured, our goal is fairly straightforward,
even if accomplishing it is not. We want to get them into an
affordable, reasonable plan. For the people who have insurance
now, the challenge isn't quite as clear. Of course, we need to
make sure that the people who are happy with their insurance
can keep it, but we also need to improve the system in such a
way that even the people who are already covered see the
benefits.
For example, I think it's generally true that health
insurance is a source of stress even to the people who
currently have it. I believe Kaiser conducted a poll late last
year that showed that 29 percent of the people who have health
insurance are worried, are very worried about losing it, and
another 20 percent are somewhat worried about losing it. As
we're trying to get more people covered, half the people who
are already covered are worried about losing their insurance.
With that background, can those of you who have been a part
of the efforts in Massachusetts and California, address the
reactions of the insured population to the plans that were
proposed in those States and any lessons we can learn at the
national level, on how to best ensure the buy-in of those who
have health insurance?
Ms. McAnneny. Thank you. I think in Massachusetts, for
those that had insurance prior to healthcare reform, I would
put, at least for the employer community, I would categorize
them in three different buckets, if you will.
The first would be the large self-insured that were
mentioned. I think through healthcare reform, they were largely
unaffected. There certainly were some implications for them,
but they continued to purchase as before.
I think for the very small employers, those with 11 or
fewer full-time equivalents, they too were unaffected because
we chose to exempt them from healthcare reform, or at least any
responsibility.
For that smaller employer community, with more than 11, but
still in the fully insured market, it has been a challenge.
Those are the folks who have faced the greatest new
responsibilities under healthcare reform. I think for all
employees who get their KIA through the employer-sponsored
system, as healthcare costs continue to rise, it is a growing
concern, because there has been more of a cost sharing with
employees. I think that in this down economy, that will
probably only exacerbate.
I think that it is a critical point and I think, from the
employer community, one that we're watching very closely, in
Massachusetts we chose to expand coverage first. The employer
community's preference would have been to tackle the cost
containment issue. We do have payment reform efforts underway,
we're watching them closely and we do think that that's
absolutely necessary if we are going to contain costs. I agree
that for those who do get their insurance through their
employer, cost is important and I think they are very
concerned.
One of the issues with the individual mandate that I would
like to raise has to do with--if you do have a mandate, it begs
the question, how much insurance is enough to satisfy that? In
Massachusetts the term is minimum credible coverage. That was a
very contentious issue because what we did not want to do in
Massachusetts was disturb the employer base. For those people
who had insurance, most people are satisfied with their
employer-sponsored coverage and wanted to keep it. We didn't
want to make employers have to significantly amend the
insurance that they offered.
At the same time, we wanted to make sure it was more than
just catastrophic and provided coverage for a whole host of
things, like inpatient, outpatient, prescription drugs and the
like. That was one of the biggest challenges, in my opinion,
for Massachusetts. I think that that's still a work in
progress.
There are folks who want minimum credible coverage to be
more expansive than it is. The employer community continues to
push back, but you don't want it to be overly generous so that
it disturbs the market. So there is tension there.
Ms. Liu. Yes, in California, you're absolutely correct that
one of the lessons we learned and one of the things we focused
on is that we had to think about how the health reform proposal
was useful for people who currently do have insurance. One of
the things that we took a look at, No. 1, there was the issue,
as you said, of people being afraid of losing their coverage,
especially in these kind of economic times.
We were moving, in California, from an underwritten market
to a market of guaranteed issue, so that people would be sure
they could get products when they needed it. We also put in
some market reforms that would lower the cost of care for
people who had health conditions. We are going to phase out
health status rating. That's the kind of things that the public
wanted.
Now, in order to make that work, we needed to have in
place, because we have such a highly underwritten market, an
individual mandate to make sure that you could offer guaranteed
issue at an affordable rate.
One of the other things that we looked at in terms of cost
containment, for people who currently do have insurance, is
tackling something that we called the hidden tax, and that's
how we talked about it with people. What we really meant by
that is that today, if you purchase through the commercial
market, you're paying for your premium, but you are also paying
for those who are uninsured, and you are paying for the
underpayment, frankly, of public programs, especially in
California, the Medi-Cal program significantly has very low
reimbursement rates.
As part of our health reform process, we increased Medi-Cal
reimbursement rates by over $4 billion, and that really--the
focus there was to say we want to lessen the cost shift on the
people who are currently purchasing coverage, as well as make
sure for people who might lose that coverage, that they have
that security that you were talking about.
Senator Bingaman. Senator Merkley.
Senator Merkley. Thank you very much, Mr. Chair.
Very quickly, in Massachusetts when folks do not comply
with the individual mandate, how do you address that, what is
the combination of incentives or punishments, if you will, that
create the framework for that?
Dr. Kingsdale. I mentioned earlier that health reform is a
campaign and first of all, we compliment the individual mandate
with an assessment on employers to make--if they don't make a
fair and reasonable contribution with significant subsidies for
low-income uninsured, and I think Susan referred to the cost of
that. Beyond that, we implement the individual mandate with
sort of a--we phased it in, we made additional coverage
programs available before it went in effect. It didn't have any
penalties attached to it for the first 6 months less 1 day. It
had a modest penalty in the first year, 2007, that goes up in
2008 and 2009. We have a very robust appeals process, which the
connector runs.
We basically try to run it and we compliment it with this
campaign of shared responsibility. We use the Red Sox, the No.
1 brand name in New England, as Connector day, has a whole
Connect to Health. We tried to message that health insurance is
good for you and administer the mandate from that perspective
rather than a sort of got 'cha perspective, we're going to bend
over backwards to try to penalize you. We try to bend over
backwards not to penalize people.
Senator Merkley. Thank you very much, Doctor.
I have a number of questions, so I'm going to just keep it
moving quickly here.
One of the questions on cost containment is how you create
incentives, and there's been a lot of observation in various
forms that when you have fee-for-service, you incentivize
doctors to do lots of services, lots of tests, and so forth.
It has also been pointed out that the Mayo Clinic has one
of the least expensive but highest quality services, and that
one of the components of that is that the doctors are paid on
salary, thereby eliminating incentives for them to do,
additional tests. Is that part of the discussion in any of your
States?
Ms. Liu. Briefly, I'm actually with Kaiser Permanente, and
we agree with you because that's how we pay our doctors as
well, is on salary, and that makes the financial incentives
work for people, so that you do have the incentive to give the
member appropriate treatment since you're getting a capitated
payment and you're salaried, but you don't have the incentive
to over treat.
At the State level, it's really hard to implement a lot of
strategies.
Senator Merkley. Do you have the reverse problem, by the
way, in which doctors receive more reimbursement if they
provide less services or is it just the same regardless. Is the
salary fixed?
Ms. Liu. The salary is fixed.
Senator Merkley. It is fixed.
Ms. Liu. Yes, absolutely. The doctors make the decisions
about what care is appropriate. It's not the health plan making
the decisions. What I'm saying is the incentives are in place
because obviously you need to manage that members' care as
effectively as possible because they are your member and you're
getting paid a capitated fee on that.
I think, at the national level, you have a much broader
opportunity to make those changes in care delivery and payment
reforms that States are a little bit in a bind in terms of
making, but I don't know if any of the other colleagues want to
chime in.
Senator Merkley. Dr. Chen.
Dr. Chen. In Vermont a significant proportion of the
physicians, actually probably half, are employed by hospitals
or hospital systems, so to the extent that we already have some
of that in place, we can tailor some of the reform, whether it
be the blueprint--enhanced medical home toward that using--
taking advantage of that.
I think the rest of the physicians are small, very small
practices of individual practitioners, but really would be hard
to change that culture, in terms of trying to contain cost.
Senator Merkley. I see I'm starting to run out of time, so
I'm going to throw one more question in and, Mr. Speaker, I'd
be happy to get your follow up to that afterwards. You're, in
fact--it is Speaker isn't it? Speaker Clark.
I think if I captured it right, doesn't it make sense for
someone to get compensated for managing their diabetes, was
that the comment? There's also been--the CEO of Safeway was
here saying,
``Hey, we and our self-managed health plan have a
number of incentives we've incorporated, combined with
real opportunity and encouragement to address disease
management regarding diabetes, regarding heart
conditions, certainly regarding smoking and smoking
cessation.''
Have any of your States succeeded in overcoming the
bureaucratic obstacles or the cultural issues? Has it been a
useful application of these sort of incentives to encourage
people to make themselves healthier and help lower the cost of
healthcare in the process for all?
Mr. Speaker.
Speaker Clark. The wellness aspect of this, I think is one
that's been probably the deepest richest vein, but hasn't been
tapped as much as it needs to be. In Utah, part of our health
system reform is involving a number of demonstration projects
with large models that will allow them, both to do bundle
pricing so that the entire product now--the physician, the
hospital--is all one price and they have to manage to that
price for the quality that they deliver. We're looking at other
demonstration projects where we can enhance just what we talked
about here, let us find out what it is we can do to try and
find proper incentives.
We spent a considerable amount with a task force this last
summer and tried to drill down what the different insurance
that are in our State, what they do for incentives. Some have
gathered the vision, some call an incentive a gift card, if
you'll do certain things, we'll mail you a gift card to Target.
Now those might be a--I think they're falling short of what I
would call a wellness program. We need to do a more holistic
program and we're trying to do some demonstration projects of a
large enough scale that we can find out statistically and try
and move forward in a major process.
Ms. Besio. In Vermont, we have just passed legislation that
allows our carriers, even though we do have community rating,
to offer incentives, monetary incentives in their different
products for people adhering to wellness initiatives. That's
just getting underway, so we don't have any data.
I do want to make the point that we do have these
integrated medical home pilots that are incentivizing
practitioners, primary care providers, as well as their
patients to adhere to better practices by using evidence-based
care, having community care teams to support those patients
that the doctors don't have time to support in 15-minute
visits, giving them health information technology to know how
many people on their panel need foot exams this year, I mean
this month. Most providers don't have that kind of information,
getting the lab test in so that when you go to a specialist,
they don't have to be repeated, another unnecessary cost and
concern for patients themselves.
But Medicare is not at the table. We can not get Medicare
at the table. So we've got Medicaid and our three primary
insurers all agreeing to provide the same monetary incentive to
providers for evidence-based care, agreeing to support the same
community care teams, they're all paying for this community
care team, and agreement to, in the future, in a year from now,
if those show that they're cost-effective, to take the money
that's currently being invested in their 1-800 disease
management program and support moving this integrated model
statewide. We can't afford to do it without Medicare's
involvement, and because Medicare is so rigid in their
demonstration programs and their approaches to States, we can't
get their involvement because we need to apply to be part of a
singular Medicare demonstration project, which makes no sense
when you're at the provider level trying to manage care for
your entire patient panel.
Senator Bingaman. Thank you.
Senator Enzi.
Senator Enzi. Mr. Chairman, this has been tremendously
helpful. I always feel that roundtables are the best way to get
the information if we're all working toward a common goal. Of
course our common goal is to get everybody covered, and
hopefully not to put States in particular constraint either.
I've got pages of notes here, but I'm also curious as to
what the benefit packages are in each of these States and how
you derive that and how you change it and how long it takes to
make changes.
What we've gotten is just valuable beyond calculation, so I
hope that you'll answer questions from myself and others that--
maybe even some that weren't here--but I'll be sharing my notes
with a number of people.
Thank you very much.
Senator Bingaman. Thank you.
Senator Merkley, did you have any other questions that you
need to ask at this point?
Senator Merkley. I do have a couple if it would be
appropriate.
Senator Bingaman. Why don't you go ahead.
Senator Merkley. Senator Coburn mentioned pay-for-
performance as a reform. I'm not sure that I understand that
exactly, but rather than just pay for tests, I assume it's the
outcome or a successful treatment of a disease. Have any of you
incorporated pay-for-performance, exactly how have you applied
it, and what are the results?
Dr. Chen. I think that it's fairly common, in the insurers
in Vermont at least, that following well described evidence-
based metrics, if you do X, Y, and Z on your patient, you get
an enhanced payment. That happens with Blue Cross/Blue Shield
and MVP, the two nonprofit insurers.
One of the things that we tried to stress, so that
providers and physicians aren't really going crazy with all
these different metrics, is that the blueprint says everyone
will use the same metrics. Whether you're a Blue Cross, whether
you're MVP, or whether you're Medicaid, we're going to follow
the same thing, but we'll come to agreement on what they look
like in the beginning. So we are doing it. It is certainly a
part of healthcare in Vermont at this time.
Senator Merkley. When you talk about evidence-based
practices, you've applied and determined that here are the best
cost-effective steps for addressing a particular situation. If
the medical practitioner follows those steps, they get an
incentive payment or a bonus or a reward. It's not based on the
outcome or the effectiveness, that the person is healed, if you
will, it's based on following the process.
Dr. Chen. Right, it's a process-based measure, at least the
classic pay-for-performance is process-based.
Ms. Besio. I just want to point out that incentives can
also take other forms. Giving those practitioners the kind of
information technology tools that they need, that will help
guide them in their care delivery, is also a form of incentive
to help them provide that better care.
We've used a tool called DocSite that we're starting to
provide to any practitioner in Vermont--we're starting with
primary care practices--that literally has in it, embedded, the
evidence-based practices that we are trying to promote, that
also has in it preventive care--evidence-based practices for
preventive care--not only to chronic disease management. It
gives doctors reminders of the preventive care that people need
when they show up. When people come to their office, you can
get a printout on how they compare to the national norms or to
the State norms or regional norms on different indices to show
what they're at risk for, etc.
There's not only payment incentive, but also giving
practitioners the tools and resources that they need in order
to better manage care.
Senator Merkley. Have you all extended the best practices
into the formulary world?
Speaker Clark. That's a very interesting question. I think
the formulary has probably been more focused on cost rather
than best practice. I think it's been more driven by the
dollars, but there has been some effort to try and do that. I
just want to emphasize that--I wish Dr. James were here. What
he has done has been recognized worldwide, in those particular
efforts that you talked about here and best practices, quality
measurements. In fact, I've heard him speak numerous times
where he says that the cost, access, and quality, typically the
three-legged stool is not a three-legged stool, but is a linear
equation, and that if you want to have lower costs, then you
need to make sure you have the quality. You get that and you
will then solve the axis question accordingly.
Dr. Chen. I think in terms of the formulary, there are some
certain items, like an ace inhibitor if you're diabetic and
you're spilling protein, that are recommended, and those are
part of, in some areas, the evidence-based guidelines, but as
Speaker Clark mentioned, a lot of the other best practices and
formulas come down to, is there a better, equally effective
drug that costs a lot less? It's really a cost issue, which is
important.
Senator Merkley. I'll just wrap this up here. In Oregon we
had a lot of discussion of formulary, and essentially the
strategy was to lay out the recommendation to the physician
that they adopt this drug first because of the evidence that
it's been most cost-effective. If they wished, they could waive
that recommendation. They had to fill out a form and say, ``I'm
waiving it.'' So a little bit of a hurdle, but there was no,
sort of, bonus involved. I found that quite interesting. It was
extremely controversial to have any sort of embodied advice, if
you will, or this is the best idea. Not an easy discussion to
hold as we were attempting to reduce costs.
Ms. Besio. We actually use formularies in our Medicaid
program. We don't provide incentives for it, but we actually
require that people go through a formulary process.
Speaker Clark. I think in many States, it is assumptive
that it's the formulary, and if you want to do something
outside of that, then it requires that additional effort on
behalf of the physician.
Senator Merkley. Thank you all very much, I appreciated
your responses.
Thank you, Mr. Chairman.
Senator Bingaman. Yes, let me just thank everyone as well.
I think it's been very useful, as Senator Enzi indicated. This
helps us to figure out what we ought to be trying to get
consensus on around here. Thank you very much.
That will conclude our roundtable discussion.
[Whereupon, at 4:09 p.m. the hearing was adjourned.]