Evaluation ofEvaluation ofMaine’s Dirigo Health Reform: Maine’s Dirigo Health Reform:

Initial Experience Initial Experience and Lessons for Other States and Lessons for Other States

Evaluation ofEvaluation ofMaine’s Dirigo Health Reform: Maine’s Dirigo Health Reform:

Initial Experience Initial Experience and Lessons for Other States and Lessons for Other States

February 1, 2008February 1, 2008

Debra J. Lipson and James M. VerdierMathematica Policy Research, Inc.

February 1, 2008February 1, 2008

Debra J. Lipson and James M. VerdierMathematica Policy Research, Inc.

2

AcknowledgmentsAcknowledgments Our co-authors

– Lynn Quincy, Shanna Shulman, Elizabeth Seif, Matt Sloan, Bob Hurley

Sponsors

– The Commonwealth Fund

– Changes in Health Care Financing and Organization (HCFO)—a national initiative of the Robert Wood Johnson Foundation

Our co-authors– Lynn Quincy, Shanna Shulman, Elizabeth Seif,

Matt Sloan, Bob Hurley

Sponsors

– The Commonwealth Fund

– Changes in Health Care Financing and Organization (HCFO)—a national initiative of the Robert Wood Johnson Foundation

3

Overview of PresentationOverview of PresentationOverview of PresentationOverview of Presentation

Background on Dirigo Health ReformBackground on Dirigo Health Reform

Evaluation questions & study designEvaluation questions & study design

Major findingsMajor findings

Financing subsidies from savings in Financing subsidies from savings in overall health systemoverall health system

Lessons and conclusionsLessons and conclusions

Background on Dirigo Health ReformBackground on Dirigo Health Reform

Evaluation questions & study designEvaluation questions & study design

Major findingsMajor findings

Financing subsidies from savings in Financing subsidies from savings in overall health systemoverall health system

Lessons and conclusionsLessons and conclusions

4

Background on Dirigo Health Reform and Its Coverage Expansions

Background on Dirigo Health Reform and Its Coverage Expansions

5

Dirigo Health Reform GoalsDirigo Health Reform GoalsDirigo Health Reform GoalsDirigo Health Reform Goals

Make affordable health care coverage Make affordable health care coverage available to every Maine citizen by available to every Maine citizen by 2009 (about 140,000 uninsured in 2003)2009 (about 140,000 uninsured in 2003)

Slow the growth of health care costs Slow the growth of health care costs through cost containmentthrough cost containment

Improve quality of careImprove quality of care——for example, for example, by comparing provider performance by comparing provider performance using quality measuresusing quality measures

Make affordable health care coverage Make affordable health care coverage available to every Maine citizen by available to every Maine citizen by 2009 (about 140,000 uninsured in 2003)2009 (about 140,000 uninsured in 2003)

Slow the growth of health care costs Slow the growth of health care costs through cost containmentthrough cost containment

Improve quality of careImprove quality of care——for example, for example, by comparing provider performance by comparing provider performance using quality measuresusing quality measures

6

Dirigo Health Coverage Expansion Initiatives

Dirigo Health Coverage Expansion Initiatives

DirigoChoice – subsidized insurance product for small groups, self-employed, and individuals

Increased Medicaid eligibility for parents of dependent children – from prior max. of 150% FPL to 200% FPL

DirigoChoice – subsidized insurance product for small groups, self-employed, and individuals

Increased Medicaid eligibility for parents of dependent children – from prior max. of 150% FPL to 200% FPL

0%

50%

100%

150%

200%

250%

300%

350%

400%

Children Parents ChildlessAdults

Inco

me

as a

Per

cent

of F

PL

DirigoChoice (noteligible for subsidies)

DirigoChoiceSubsidy-Eligible

MaineCareExpansion-Eligible

Dual MaineCare/DirigoChoice Eligible

7

DirigoChoice FeaturesDirigoChoice Features

Individuals – could be previously insured

Small Firms:– 50 or fewer eligible employees– could have offered health benefits to employees

previously

Subsidies for premiums and deductibles for individuals with family income < 300% FPL

Comprehensive benefits – MH, preventive care, annual OOP cost limits

Jointly operated by state and private health plan

Individuals – could be previously insured

Small Firms:– 50 or fewer eligible employees– could have offered health benefits to employees

previously

Subsidies for premiums and deductibles for individuals with family income < 300% FPL

Comprehensive benefits – MH, preventive care, annual OOP cost limits

Jointly operated by state and private health plan

8

Illustrative Dirigo EnrolleeJohn, Age 56, Self-employed

Illustrative Dirigo EnrolleeJohn, Age 56, Self-employed

2006 annual income: $18,000

2007 DirigoChoice premium– Before subsidy: $857/mo.– With subsidy: $521/mo.

Major Surgery Costs: ~$80,000 John’s costs:

Deductible: $1,600Co-pays: $5,200

2006 annual income: $18,000

2007 DirigoChoice premium– Before subsidy: $857/mo.– With subsidy: $521/mo.

Major Surgery Costs: ~$80,000 John’s costs:

Deductible: $1,600Co-pays: $5,200

9

Evaluation Questions and Design

Evaluation Questions and Design

10

Research QuestionsResearch QuestionsResearch QuestionsResearch Questions

Are low-income uninsured people gaining coverage Are low-income uninsured people gaining coverage under DirigoChoice or Medicaid?under DirigoChoice or Medicaid?

How have small employers responded to the How have small employers responded to the availability of DirigoChoice? availability of DirigoChoice?

Are the DirigoChoice subsidy financing sources Are the DirigoChoice subsidy financing sources adequate and sustainable enough to cover many adequate and sustainable enough to cover many more low-income uninsured?more low-income uninsured?

Which aspects of Maine’s approach to health Which aspects of Maine’s approach to health coverage expansion are relevant elsewhere? What coverage expansion are relevant elsewhere? What can other states learn from its experience?can other states learn from its experience?

Are low-income uninsured people gaining coverage Are low-income uninsured people gaining coverage under DirigoChoice or Medicaid?under DirigoChoice or Medicaid?

How have small employers responded to the How have small employers responded to the availability of DirigoChoice? availability of DirigoChoice?

Are the DirigoChoice subsidy financing sources Are the DirigoChoice subsidy financing sources adequate and sustainable enough to cover many adequate and sustainable enough to cover many more low-income uninsured?more low-income uninsured?

Which aspects of Maine’s approach to health Which aspects of Maine’s approach to health coverage expansion are relevant elsewhere? What coverage expansion are relevant elsewhere? What can other states learn from its experience?can other states learn from its experience?

11

Study DesignStudy Design Qualitative & Quantitative Methods Qualitative & Quantitative Methods

Study DesignStudy Design Qualitative & Quantitative Methods Qualitative & Quantitative Methods

• Analysis of DirigoChoice & Medicaid administrative Analysis of DirigoChoice & Medicaid administrative data on enrolled firms and individualsdata on enrolled firms and individuals

Survey of small businesses in MaineSurvey of small businesses in Maine

Key stakeholder interviewsKey stakeholder interviews

Comparison of Maine to other states vis-a-vis: Comparison of Maine to other states vis-a-vis: – health insurance coveragehealth insurance coverage– small group and individual market regulationssmall group and individual market regulations– health care delivery systemhealth care delivery system– Medicaid policiesMedicaid policies

• Analysis of DirigoChoice & Medicaid administrative Analysis of DirigoChoice & Medicaid administrative data on enrolled firms and individualsdata on enrolled firms and individuals

Survey of small businesses in MaineSurvey of small businesses in Maine

Key stakeholder interviewsKey stakeholder interviews

Comparison of Maine to other states vis-a-vis: Comparison of Maine to other states vis-a-vis: – health insurance coveragehealth insurance coverage– small group and individual market regulationssmall group and individual market regulations– health care delivery systemhealth care delivery system– Medicaid policiesMedicaid policies

12

MAJOR FINDINGSMAJOR FINDINGS

13

Cumulative Net Enrollment in DirigoChoice,January 2005–September 2006

Cumulative Net Enrollment in DirigoChoice,January 2005–September 2006

0

2000

4000

6000

8000

10000

12000

J an-

05

Feb-

05

Mar-

05

Apr-

05

May-

05

J un-

05

J ul-

05

Aug-

05

Sep-

05

Oct-

05

Nov-

05

Dec-

05

J an-

06

Feb-

06

Mar-

06

Apr-

06

May-

06

J un-

06

J ul-

06

Aug-

06

Sep-

06

IndividualSole proprietorSmall group

Individual enrollment begins

Sole proprietor/Individual enrollment cap reached Sole proprietor/Individual

enrollment cap lifted

14

Enrollment in Dirigo HealthEnrollment in Dirigo HealthMedicaid Expansion GroupsMedicaid Expansion GroupsEnrollment in Dirigo HealthEnrollment in Dirigo Health

Medicaid Expansion GroupsMedicaid Expansion Groups

0

5000

10000

15000

30000

Sep-0

2

Nov-02

Jan-0

3

Mar

-03

May

-03

Jul-0

3

Sep-0

3

Nov-03

Jan-0

4

Mar

-04

May

-04

Jul-0

4

Sep-0

4

Nov-04

Jan-0

5

Mar

-05

May

-05

Jul-0

5

Sep-0

5

Nov-05

Jan-0

6

Mar

-06

May

-06

Jul-0

6

Sep-0

6

Nov-0

6

Date

Mo

nth

ly C

asel

oa

d

Childless Adults Medicaid Expansion to Parents

January 05: DirigoChoice began

March 05: Childless adult freeze instituted

July 06: Childless adult freeze lifted

2500025000

April 05: Parent Expansion (150-200%FPL)

2000020000

15

Previous Health Coverage Among DirigoChoice Members Enrolling in 2006

Previous Health Coverage Among DirigoChoice Members Enrolling in 2006

4%4%3%9%Responses not usable

31%28%30%37%Uninsured

65%68%67%54%Prior coverage

All Members

IndividualsSole

proprietorsSmall firm members

Source: MPR tabulation of Dirigo Health Agency Administrative Data

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More Low-income Enrollees Qualified for Higher Subsidies than Expected

More Low-income Enrollees Qualified for Higher Subsidies than Expected

Income Level Projected Enrollment

Enrollees as of 9/06

Ever Enrolled as of 9/06

Medicaid-eligible 11% 1% 1%

<150% FPL 3 49 46150-199% FPL 6 16 16

200-249% FPL 29 10 11

250-299% FPL 26 4 5

> 300% FPL 24 20 22

Total 100 100 100

17

Fewer Small Firm Workers Enrolled in DirigoChoice Than Expected

Fewer Small Firm Workers Enrolled in DirigoChoice Than Expected

Projected Enrollment

Enrollment as of 9/06

Ever Enrolled as of 9/06

Small group members

90% 30% 35%

Sole proprietors

10%

28% 26%

Individuals 42% 38%

All members 100% 100% 100%

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Small Employer SurveySmall Employer SurveyFirm Characteristics by Offer TypeFirm Characteristics by Offer Type

Small Employer SurveySmall Employer SurveyFirm Characteristics by Offer TypeFirm Characteristics by Offer Type

Average wage

12%*32%**17%18%Mean percent who earn more than $18 per hour

33%* 43%**39%38%

Mean percent who earn $12 to $18 per hour

55%**26%**45%44%Mean percent who earn less than $12 per hour

5.0**17.7**6.78.1Mean number of employees

143(18%)

121(16%)

509(66%)

773(100%)All firms

Coverage offered

None Another plan DirigoChoice All firmsFirm characteristics

*p < .05 ** or ++ p < .01

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Average Change in Employer ContributionUnder DirigoChoice

Compared to Prior Coverage

Average Change in Employer ContributionUnder DirigoChoice

Compared to Prior Coverage

16%

33%

32%

20%

52%

47%

0% 10% 20% 30% 40% 50% 60%

Premium

contribution

Annual

deductible Lower

Same

Higher

20

Why Firms That Considered Why Firms That Considered DirigoChoice Did Not Enroll DirigoChoice Did Not Enroll Why Firms That Considered Why Firms That Considered DirigoChoice Did Not Enroll DirigoChoice Did Not Enroll

Too costly or not affordable Too costly or not affordable

Benefits offered do not fit Benefits offered do not fit employees’ needsemployees’ needs

Did not qualify for DirigoChoiceDid not qualify for DirigoChoice

Other reasonsOther reasons

Too costly or not affordable Too costly or not affordable

Benefits offered do not fit Benefits offered do not fit employees’ needsemployees’ needs

Did not qualify for DirigoChoiceDid not qualify for DirigoChoice

Other reasonsOther reasons

45 (58%)45 (58%) 45 (58%)45 (58%)

19 (25%)19 (25%)

6 (8%)6 (8%)

8 (10%)8 (10%)

n = 78 of 773n = 78 of 773

21

DirigoChoice Subsidy Financing

and the

The Savings Offset Payment

DirigoChoice Subsidy Financing

and the

The Savings Offset Payment

22

DirigoChoice Financing Sources - 2006

DirigoChoice Financing Sources - 2006

SavingsOffset Payment

31%

DirigoChoiceMember Contribution

40%

State General Funds(carryover from 2005)

29%

Sources: 2007 Dirigo Health Agency allocation request to the Maine legislature;Dirigo Health Agency, 2006, Annual Report: Program Overview 2005 & 2006.

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Savings Offset PaymentSavings Offset Payment

SOP assessments on insurers and 3rd-party administrators equal to estimated “aggregate measurable cost savings”

Potential Savings Sources– Fewer uninsured due to Dirigo Health expansions,

leading to reduction in bad debt/charity care

– Hospital savings from voluntary cost controls

– CON and capital fund savings from lower capital investments

– “Provider fee savings”: less cost shifting to other payers due to increased Medicaid provider rates

SOP assessments on insurers and 3rd-party administrators equal to estimated “aggregate measurable cost savings”

Potential Savings Sources– Fewer uninsured due to Dirigo Health expansions,

leading to reduction in bad debt/charity care

– Hospital savings from voluntary cost controls

– CON and capital fund savings from lower capital investments

– “Provider fee savings”: less cost shifting to other payers due to increased Medicaid provider rates

24

Savings Offset Payment IssuesSavings Offset Payment Issues

Type of savings to count

Assumptions, data and methods used to estimate savings

Method for capturing provider savings– Insurers expected to recover SOP by reducing Insurers expected to recover SOP by reducing

provider payments and passing on savings to provider payments and passing on savings to consumers via lower premiums, but did notconsumers via lower premiums, but did not

Insurers & employers filed legal challenge to SOP

Type of savings to count

Assumptions, data and methods used to estimate savings

Method for capturing provider savings– Insurers expected to recover SOP by reducing Insurers expected to recover SOP by reducing

provider payments and passing on savings to provider payments and passing on savings to consumers via lower premiums, but did notconsumers via lower premiums, but did not

Insurers & employers filed legal challenge to SOP

25

Estimated v. Actual Savings2006-2008

Estimated v. Actual Savings2006-2008

Dirigo Health Board Estimate

Approved by Insurance Superintendent

2006 $110.6 M $43.7 M

2007 $41.8 M $34.3 M

2008 $78.1 M $32.8 M

26

Lessons and ConclusionsLessons and Conclusions

27

Financing Coverage ExpansionsFinancing Coverage Expansions

Financing insurance subsidies for low- and middle-income people from savings in the private health system is vulnerable to opposition from those expected to pay for subsidies– Capturing cost savings from reduced bad

debt/charity care and other cost containment efforts can be just as hard as raising taxes

Medicaid eligibility expansions can be effective in increasing coverage, but may be politically controversial in many states– Issues of budget cost, income levels covered,

“crowd out” of private insurance

Financing insurance subsidies for low- and middle-income people from savings in the private health system is vulnerable to opposition from those expected to pay for subsidies– Capturing cost savings from reduced bad

debt/charity care and other cost containment efforts can be just as hard as raising taxes

Medicaid eligibility expansions can be effective in increasing coverage, but may be politically controversial in many states– Issues of budget cost, income levels covered,

“crowd out” of private insurance

28

Program Design and ImplementationProgram Design and Implementation

Incremental, voluntary coverage programs can help offset premium costs and raise health coverage rates -- but unlikely to achieve universal coverage

Inevitable trade-off between scope of benefits and affordability of premiums

Maintaining or expanding small employer offer rate is hard in high-cost states

Incremental, voluntary coverage programs can help offset premium costs and raise health coverage rates -- but unlikely to achieve universal coverage

Inevitable trade-off between scope of benefits and affordability of premiums

Maintaining or expanding small employer offer rate is hard in high-cost states

29

Relationships with Private Health Insurance Plans

Relationships with Private Health Insurance Plans

Using competition among health plans to lower price not an option in some states– May not be enough plans

State-sponsored plans that co-exist, or compete, with private plans:– Risk adverse selection if benefits are

better– Have limited potential to raise insurance

rates or attract firms & individuals, if benefits are lower and enrollment is voluntary

Using competition among health plans to lower price not an option in some states– May not be enough plans

State-sponsored plans that co-exist, or compete, with private plans:– Risk adverse selection if benefits are

better– Have limited potential to raise insurance

rates or attract firms & individuals, if benefits are lower and enrollment is voluntary

30

Caveats & LimitationsCaveats & Limitations

Data Limitations

– Annual CPS data for Maine are too imprecise to measure declines in uninsured at state level

– No state household survey since 2002

Evolution of Dirigo Health Coverage Reforms

– Changes to DirigoChoice benefits, administration, marketing

– Impact of Dirigo cost containment and quality improvement initiatives not yet known

Data Limitations

– Annual CPS data for Maine are too imprecise to measure declines in uninsured at state level

– No state household survey since 2002

Evolution of Dirigo Health Coverage Reforms

– Changes to DirigoChoice benefits, administration, marketing

– Impact of Dirigo cost containment and quality improvement initiatives not yet known