State Efforts Toward Universal Coverage: Part 2 of a series

California

Drawing on Massachusetts’ template to cover the uninsured, California’s proposal requires employers with 10 workers or more to buy insurance for their employees or pay a 4% payroll tax, physicians to pay 2% of their gross revenues, and levies a 4% tax on hospitals. Insurers would be prohibited from excluding applicants with pre-existing conditions and from spending more than 15% on administrative costs. Gov. Schwarzenegger plans to subsidize coverage of the nearly one in five uninsured Californians with the tax revenues mentioned above. He also plans to expand the SCHIP program by subsidizing families of four earning up to $60,000.

Roger Crumley, MD, MBA, Professor of Otolaryngology/Head and Neck Surgery at the University of California-Irvine, has struggled with the state’s low Medicaid reimbursement (60% of Medicare), and wonders how many more low-fee patients he and others can take on. Many doctors here don’t take Medi-Cal or Medicare because each case loses money. While a 2 percent tax on physician gross incomes sounds terrible it might not be so bad because those who have opted out low payers would then have to cover those of us who do treat these patients.

Another issue is California’s high managed care penetration rates, which have added to physicians’ low reimbursement rates, even for complex procedures. Dr. Crumley explains: Orange County has capitated Medicaid. Let’s say it’s 35 cents PMPM for 20,000 lives-$7000 a month for otolaryngology. One radical neck surgery sinks you. As for the governor’s funding mechanism, taxes on physician and hospital revenues, Dr. Crumley calls it an opening gambit for the negotiation to ensure that he gets something passed. There’s also talk about sweetening Medi-Cal reimbursement, which would help providers.

Maine

By creating Dirigo Health Agency, a state regulatory agency responsible for health care, Maine acted in 2003 to become the first state to legislate for universal access. Maine anticipated covering all 131,000 of its uninsured by 2009 through three core initiatives: Medicaid expansion, a state-designed and subsidized health insurance plan for individuals and employers, and regulation/cost controls.

Dirigo’s coverage is available to uninsured individuals, businesses, and municipalities with 50 or fewer employees, and to the self-employed. It provides discounts on monthly premiums, deductibles, and out-of-pocket expenses on a sliding scale. Private health insurers offering coverage through Dirigo must include Maine’s 45 mandated benefits.

One of Maine’s most significant contributions to the national debate on how best to cover the uninsured is its insistence on costs controls as the way to liberate money to subsidize care. Reducing its $275 million bad debt and charity care, a one-year moratorium on capital expenditures, tighter rules for certificates of need, and strengthened oversight of insurance rates are among Dirigo’s cost controls. One of the more controversial was the voluntary cap on provider costs and operating margins. Dirigo requested hospitals to limit their cost growth to 3% per year and their operating margins to 3.5%, and insurers to cap operating margins at 3.5%.