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Sunday, March 21, 2004
EYE ON AUGUSTA: Beth Kilbreth
Removing the Albatross
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The initial investment in public dollars required to launch Dirigo, of course, seems counterintuitive to many during the current budget crunch. And Baldacci this week said he may be willing to delay the program if that would help balance the state budget for the 2004-05 fiscal year. The fact is, however, that Maine can't afford not to proceed with the Dirigo program, which begins July 1. Maine's health-care system is under enormous strain and insurance premiums have become an albatross around the neck of Maine businesses. The owner of a small business in Portland commented recently how hard it is to expand his business. "When I pay an entry-level worker $18,000 and health insurance for him is $13,000, it's almost like paying for two workers to get one." Large employers, too, are adjusting budgets to accommodate burdensome health benefit costs. The University of Maine system, for example, saw the cost of health benefits for its employees rise by 47 percent over the last contract period - an increase that took a bite of about 10 percent out of the university system's overall budget. We are caught in a vicious spiral where rising costs prompt increasing numbers of people to drop insurance coverage or switch to high deductible policies; but the result is that when they incur a major medical expense, they can't afford to pay the bills. Medical bills are now the No. 1 cause of personal bankruptcy in the country. Hospitals, clinics and doctors all feel the strain as the costs from uncompensated care provided to the ill and uninsured climb. Last year, something on the order of $200 million in health-care services in Maine had to be recouped by providers for uncompensated care - a cost the rest of us pay through mark-ups on medical charges. Stabilizing health-care financing and coverage in Maine requires two things: first, getting everyone covered so they get early and preventive care and the burden of uncompensated care is eliminated; and second, bringing the growth rate of health-care costs more in line with the rest of the economy. These two goals are precisely what the Dirigo program is designed to attain. The program will make affordable health coverage more widely available by expanding MaineCare - Maine's Medicaid program - and by offering small business and personal health insurance with discounts for low- and moderate-income Maine families. Dirigo also sets in place a long-term planning strategy for health services in Maine with the goal of allocating resources where needed, reducing unnecessary duplication, and promoting preventive health care. The planning effort, which has the goal of bringing the rate of growth of health-care spending in line with the growth of Maine's economy, was jump-started this year by voluntary agreements from hospitals, doctors and insurers to try to keep cost increases and margins within 3 percent. The most innovative and, in my view, the most ingenious feature of the Dirigo program is its mechanism for future funding. Money to allow ongoing discounts in future years will come through an assessment on the premium revenues of private insurers in the state - but only if this new expense is offset by savings to the system from reductions in uncompensated care and slowed growth in health-care spending. So if the current $200 million in uncompensated care is pared back, some of these savings will be plowed back into the health sector by funding future discounts for low-income people who are uninsured. But the funding arrangement has a circuit breaker, too. If the savings are not realized, the assessment funds will be forfeited and the discount program will be discontinued. With the current funding crisis in the state Medicaid budget - more than $60 million in Medicaid cuts are planned - the expansion of MaineCare as part of the Dirigo program has come under particular scrutiny. Some have gone so far as to blame MaineCare for rising health-care costs and the financial distress of hospitals. In my view, this is a little like blaming the boy with his finger in the dike when the embankment crumbles and the sea pours in. Growth in MaineCare has been (and continues to be) a response to the crisis in the health-care system. It is not its cause. Maine has the dubious distinction of having the fastest growth rate in health-care spending during the past decade. We are now 10th among states in total, per capita health costs, while 37th in average household income. No single factor is responsible. The cumulative effect of many forces drive health cost inflation, including new technologies, rising hospital costs and the introduction of many new and expensive drug therapies. Nationally, one of the major cost-drivers, for example, has been an unprecedented 76 percent increase in the cost of outpatient services in the past five years. In this same period, Maine's inpatient spending rose by 36 percent. Nationally, by contrast, inpatient hospital costs increased less than 2 percent. MaineCare payment rates are low and, as costs rise, they lag further behind. There is no doubt that under-payment contributes to the stress facing health-care institutions. But consider the alternative. MaineCare covers around 240,000 of Maine's most vulnerable citizens. In the absence of this program, the ranks of the uninsured would be tripled and MaineCare payments would be replaced by bad debt and charity care. The status quo will not remain a viable option for much longer. We cannot sustain double-digit inflation in the health sector, siphoning off resources from other economic sectors. Under current conditions, the private insurance market will collapse, the crisis in Medicaid will accelerate, and hospitals and doctors will be faced with increasing numbers of uninsured patients. The Dirigo program could benefit everyone. Those now insured, hospitals and doctors will all benefit if more Mainers are brought in as participants in the insurance system. Insurers not only have the opportunity to bid on Dirigo business, but also should benefit if cost-containment efforts stabilize health-care costs and allow more affordable and varied insurance products to compete in the market. Of critical importance, of course, is that many businesses and people now uninsured can gain the protection afforded by health coverage.
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