Dirigo Health Reform

1

• Dirigo Health Reform
• Financing Access Expansion Through
• Cost Containment Initiatives
• Peter Kraut
• Governors Office of Health Policy and Finance
• July 2008

2
Setting the Context

• 2002 lowest revenue to states since records
  kept.
• Goal recognizing that the US spends twice what
  developed nations spend and doesnt get better
  quality or outcomes
• focus on more effective use of what is already
  in the system, and expand access without new
  state dollars.

3
Dirigo Health Reform

• Not just expansion of access.
• System reform / focus on cost and quality
  necessary to make any access expansion
  sustainable.
• Multiple initiatives to address all three.

4
Overview of Enacted System Reform Initiatives

• State Health Plan, Capital Investment Fund,
  strengthened Certificate of Need
• Maine Quality Forum
• Voluntary Hospital Targets
• Increased Transparency
• Small Group Medical Loss Ratio
• Address hidden tax of bad debt charity care by
  covering the uninsured
• DirigoChoice insurance financed by re-channeling
  BDCC reductions other system savings

5
Original 2003 Proposal

• Global budget for hospital system.
• Negotiated, not regulated.
• Hospitals determine among themselves how to most
  effectively allocate statewide budget.
• Assessment on payers that cannot be passed
  through to consumers.

6
Competing Proposal

• Rather than systemic reform, expand access by
• eliminating individual market guaranteed issue
  and community rating, while
• implementing a High Risk Pool using similar
  funding mechanism (assessment on payers)

7
2003 Enacted Compromise

• Voluntary Cost Increase and Operating Margin
  Limits
• Savings Offset Payment (SOP)
• Cannot be levied unless savings are demonstrated.
• Cannot exceed 4 of claims.
• Can be passed on to consumers.
• Methodology to measure savings not spelled out in
  statute.

8
The SOP in Practice Controversy Over Methodology
to Measure Savings

• 2004 Proposal Rejected by Payors
• Observe historical relationship between health
  care spending in Maine and US.
• Project Maine spending in absence of Dirigo
  reform initiatives based on that relationship.
• Savings projected spending actual spending.

9
The SOP in Practice, cont.

• 2005 Amendment to Statute Establishes Current
  Process
• Dirigo Health Agency proposes Aggregate
  Measurable Cost Savings (AMCS) to Dirigo board.
• Dirigo board proposes AMCS to Bureau of Insurance
  (BOI) through adjudicatory hearing process.
• BOI determines final AMCS.
• Dirigo board determines amount of SOP (as in 2003
  statute, SOP cannot exceed AMCS or 4 of claims,
  whichever is lower).

10
The SOP in Practice, cont.

• AMCS hearings have been held in summer/ fall of
  2005, 2006, 2007.
• Five law firms representing private insurers and
  employers, bringing in natl consultants, vs DHA
  and small consumer advocacy group, with DHA
  spending approx. 1 mil / year on determining and
  defending savings.

11
The SOP in Practice, cont.

• After 2006 session, Governor convened Blue Ribbon
  Commission to recommend alternatives to SOP .
• Commission recommends sin taxes (soda, beer/wine,
  snack, tobacco)
• SOP replaced in 2008 session
• Beer (3/ 12oz. can), soda (7/ 20oz. bottle),
  wine (6/bottle) tax to generate 32 of funding
  need.
• 1.8 insurer tax to generate 60 (1.8 less
  than the average of 1st three SOPs dont need to
  document savings predictable no fluctuation
  year to year less than 4 maximum SOP).
• Money from Fund for Healthy Maine (tobacco
  settlement fund) to generate 8).
• 19 of this pooled funding goes to individual
  market reform beginning in SFY 2010 (reinsurance
  plan)

12
The SOP in Practice, cont.

• Because of peoples veto threat referendum to
  be on November ballot we had no choice but to
  proceed with SOP 4. Hearings will be this summer
  / fall.

13
AMCS Amounts (mil)
Tot yrs 1 3 appvd by BOI Year 4 proposed
CMAD 74.2 147.9
Phys Fee 23.1 Not proposed
BDCC 14.5 35.7
MLR Not proposed 6.6
Total 111.8 190.2
14
Financing Access Expansion By Creating
Re-channeling Health System Savings

• The fact that our experience has been contentious
  does not mean this concept cannot or should not
  be done -- after all, experts say that up to 30
  of medical service is unnecessary -- we are
  still moving ahead with system reform for greater
  efficiency.

15
Moving Ahead With System Reform For Greater
Efficiency

• New SHP from Advisory Council with new
  legislative representation
• Additional refinements to CON/CIF
• EMR pilot covering 40 of population
• All-payer Patient Centered Medical Home Pilot
• MQF leadership in Healthcare Associated Infection
  and Error Reporting Systems
• More transparency e.g., MHDO we-site with
  estimated price by provider, payer, service
• New Public Health Infrastructure
• Amended Hospital Cooperation Act
• Detailed cost-driver / variation study modeled on
  Dartmouth Atlas using all-payer claims database
  to identify specific inefficiencies so that we
  can start working with stakeholders on levers to
  reduce the waste