More than three years after launching a groundbreaking effort to provide health insurance to all state residents, Maine lawmakers are debating big changes to the program.
Maine was the first state to pass legislation with the goal of universal health coverage when it approved the Dirigo Health Reform Act in 2003, but the program has suffered from lower-than-expected enrollment, along with legal battles over funding.
The Dirigio health reform created DirigoChoice, which offers insurance to individuals and small businesses through a private provider with sliding-scale government subsidies based on income. Initiatives, such as voluntary cost cutting in hospitals, were also enacted to slow the growth of health care costs, which are especially high in Maine because it is very rural and has a large elderly population.
The goal was to cover Maine's 130,000 uninsured by 2010. As of February 2007, the program covered 2,300 businesses and nearly 13,500 people, of whom 46 percent were previously uninsured. The slow growth has spurred talk of changes to the program and prompted Maine's Democratic Gov. John Baldacci to unveil a package of broad reforms for Dirigo on April 4.
"It is true that the states are laboratories and we have to play out some of these issues," said Trish Riley, director of the Governor's Office of Health Policy and Finance. "Going it alone, without federal help, is really challenging. Our job is to advance the ball as far as we can until the national government will pick it up."
One of the most controversial aspects of Baldacci's reform plan is a "pay or play" insurance mandate to draw in people who can afford insurance but choose not to buy. Because enrolling in DirigoChoice has been voluntary, many of those who enrolled are highly subsidized.
Baldacci's reform would make insurance mandatory for individuals with incomes above 400 percent of the federal poverty level by 2009, and for businesses by mid-2008. The insurance mandate was recommended earlier this year by the Blue Ribbon Commission on Dirigo Health, created by Baldacci to suggest improvements to the Dirigo plan.
The commission, which included representatives from the insurance industry, hospitals, businesses and labor groups, stressed finding ways to make insurance more affordable for people who are not currently eligible for large subsidies.
"The people who come in first are those who really need it," said Sandra Featherman, former president of the University of New England and chairwoman of the commission. "You need to find packages that are attractive to those that are younger and healthier ... that would lower the costs for everyone."
Several of Baldacci's reforms are aimed at driving down insurance costs before the mandates are put in place by creating a more competitive insurance market in Maine. Maine does not allow insurance companies to offer discounts on premiums to large companies, or to deny coverage to anyone. The number of insurance providers in the state has decreased since these regulations were put in place, and Maine has some of the highest health insurance premiums in the country.
The new plan would give insurance companies more freedom to charge higher rates based on factors like age, occupation and level of illness. It would also use state tax money to reinsure very high-risk patients.
According to Tarren Bragdon, the director of health reform initiatives for the conservative Maine Heritage Policy Center, the planned reforms will not go far enough in reversing what over-regulation has done to make the Maine market unattractive to insurance providers. "Mandating that people buy overly expensive insurance is just mean," Bragdon said. "We can start this conversation after we have made changes to the insurance regulations to make [the market] more competitive and affordable."
The enrollment rates for DirigoChoice also have complicated the plan for funding of the program. The state provided $53 million to establish the program, which was then supposed to generate funds primarily from money saved on fewer bad debt and charity cases.
When an uninsured individual seeks emergency care and can't pay for it, that cost is absorbed by the hospital, which then passes on the cost to insurance companies. So the Dirigo act established a funding mechanism called the savings offset payment to recapture those savings, as well as savings from hospital and doctor cost cutting. Insurance companies are then required to pay into the Dirigo program the amount the government calculates they would save, which was $44 million for 2004. About $34 million of the savings were due to voluntary cost cuts by hospitals.
"If hospitals hadn't stepped up to the plate on cost containment there wouldn't be a Dirigo system, they wouldn't have the money," said Maine Hospital Association President Steven Michaud. Hospitals created savings by controlling labor costs and postponing renovations or new services, a process that Michaud said is unsustainable in the long term. "There are limits to how long you can do that when you have to be competitive with wages for nurses and doctors," he said.
The savings offset payment became the most controversial part of the Dirigo program when insurance companies filed a lawsuit countering the calculated savings claim. Although the savings offset payment was upheld by a Superior Court judge in August 2006, the plaintiffs have taken their case to the state supreme court.
Baldacci's new proposal includes using a modified version of the savings offset payment for at least another year, and would raise funds from a premium tax on health maintenance organizations. He also incorporated legislation to make Dirigo self-insure, instead of continuing to contract with for-profit companies.
Serving small businesses
Andy Coburn, professor and director of the Institute for Health Policy at the University of Southern Maine, said many of the problems Dirigo has encountered stem from the fact that although DirigoChoice has been relatively successful at appealing to individuals, the program has been less successful at reaching the state's many small business owners.
"Covering small businesses as a strategy for dealing with the problem of the uninsured is inherently very difficult," Coburn said, because choosing to provide health insurance at a small company is a big decision that can have unknown consequences for the owner in several years.
Coburn said he expects that it will be difficult for the Maine legislature to come to an agreement over a budget plan to fund the program.
"Ultimately we are going to have to have a system where everyone participates in some fashion and everyone participates knowing they will share in the cost through some mechanism," Coburn said. "The only question is if there is enough political consensus around those ideas to get there."