Profiles in Coverage: Maine Dirigo
Overview
Maine's comprehensive health care reform initiative, Dirigo (latin for "to lead"), set the goal of ensuring universal access to health coverage by 2009. Dirigo is a broad health reform strategy that includes three interdependent pieces: 1) a new insurance product called DirigoChoice to improve health insurance coverage; 2) new cost-containment strategies; and 3) statewide quality programs. SCI talks with Trish Riley, director of the Governor's Office of Health Policy and Finance, about Dirigo.
Dirigo Overview
1. The Dirigo Reform initiative has been described as a system wide effort. Can you explain the rationale for taking this approach?
Dirigo Health Reform is a statewide health system reform that recognizes that health reform is a long-term undertaking. It addresses costs, quality, and access to health care with the goal of establishing universal coverage within six years. The plan is designed to ensure sustainable long-term reform and recognizes comprehensive approaches are required. To address access alone will do little to make health care more affordable; addressing costs alone can have a negative impact on quality; addressing quality in a vacuum will have little impact on access. Dirigo Health Reform engages stakeholders and the state of Maine to rationalize the health care system, ensure appropriate incentives, and build a stronger health care system that serves all Mainers. The program begins as a voluntary effort, recognizing that additional actions may well be required as the program is implemented.
2. How did you build political support and maintain it through implementation?
The conversation about health reform has been active in Maine for some time. A referendum passed in the City of Portland supporting a single-payer system and the Legislature had established a single-payer study group. During the last gubernatorial election (2002), then-Congressman Baldacci ran on a health reform platform. A Green candidate ran with a single-payer plan and a Republican ran with market-based proposals. Once elected, Governor Baldacci viewed his election as a mandate for his health reform package. On Day 1 in office he created the Governor's Office of Health Policy and Finance to launch the reform and appointed the Health Action Team, a group of stakeholders appointed to design the specifics of the legislation and the program. The Health Action Team included six subcommittees and more than 60 individuals who volunteered long hours to help put the program together in three months based on the outline developed during the Governor's campaign. The meetings of the groups were public and well-covered by the press. This helped to continue the momentum for reform and engage many key stakeholders in its development.
The Dirigo Health Reform Act was a comprehensive and complex one that included significant activity around cost, quality, and access. As a result there was something in it for everyone to support and often something for everyone to reject, but opposition was fragmented around individual components of the proposal. The final bill was presented to a special Joint Committee on Health Reform established by the Legislature and extensive negotiations characterized the final deliberations. In the last hours of the Committee review, insurers and insurance regulators added language to clarify that the funding mechanism for Dirigo—an assessment on insurance revenues—could not be restricted. The original language in the bill stated that the assessments could not be passed on to premium payers but both the insurance regulator and insurance companies resisted that restriction. When it was lifted, business and union leaders rejected the funding mechanism fearing it would increase Maine's already very high premiums. As a result of negotiations the assessment was maintained but restructured as a Savings Offset Payment that could be captured only when Dirigo's cost-containment efforts could document reductions in health care cost growth. The bill was passed by unanimously the bipartisan Joint Select Committee and it won two-thirds majority in each House. Finally, we established a separate state agency with a Board of Directors, Dirigo Health Agency, to implement the program.
3. How did stakeholders react? (General public, hospitals, insurers?)
The public was broadly supportive of reform. Hospitals, who comprise fully one-third of the costs of Maine's health expenditures, vehemently resisted the plan's call for global budget to restrain hospital cost growth, protect hospitals from anti-trust action, and create a collaborative planning mechanism to better coordinate and fund hospital care statewide. Hospitals aggressively resisted. The global budget was replaced by expenditure limits in the State Health Plan voluntary cost limits and a Commission to Study Maine's Hospitals.
4. Critics of the program have labeled Dirigo, "a massive Medicaid expansion funded by an assessment on health insurance premiums." How do you respond to this?
The critics are misinformed. Maine's ability to embark on a program like Dirigo is based, in part, on its long-standing commitment to provide Medicaid coverage to a broad group of low-income Mainers. Already, Maine covers childless adults, elderly and disabled people up to 100 percent of the Federal Poverty Level (FPL), parents up to 150 percent of FPL, and children up to 200 percent of FPL. Under Dirigo, we build on this strong base with a modest expansion of coverage for adults.
As to the funding, the source of funds for the state share of Maine's Medicaid costs after Dirigo is the same as it was before Dirigo: Maine public funds. These include General Fund appropriations, tobacco settlement fund allocations, and two new sources of revenues: contributions paid by employers and employees who elect to enroll in Dirigo Health and, beginning in the second year of Dirigo's operation, "Savings Offset Payments" from insurers doing business in the state.
DirigoChoice Overview
5. One of the goals of DirigoChoice was to provide an affordable health insurance option to small businesses, the self-employed, and eligible individuals without access to employer-sponsored insurance. What program features are in place to keep premium costs low?
The primary feature that keeps premium costs low in the DirigoChoice product is the discount program and the requirement that employers pay a minimum of 60 percent of the employee-only share of payments. DirigoChoice establishes discounts for individuals and employees. Discounted monthly payments and deductible levels are tiered, based on ability to pay, up to 300 percent of the FPL. In addition, individuals and the self-employed are eligible for group coverage, which is less costly. In negotiations with the insurer, the Dirigo Health Agency established an experience modification program to share risks with the insurance company in order to keep costs low. This program acts as a reserve to provide funding should Anthem's costs exceed agreed-upon targets. In addition, in order to meet the demands of employers for low costs the program has a relatively high deductible level—although that deductible level is modified based on income. One clarification, Dirigo Choice is available to all employers whether or not they previously provided employer-sponsored insurance. As a matter of equity we felt it important to allow employers to participate in DirigoChoice.
6. What program features will attract small employers and the self-employed?
Self-employed individuals are for the first time eligible for a small-group health plan. In addition, the discount program for employees has proven to be a significant attraction. Further, employers who previously did not cover their employees are eligible for a cash reward up to $1,500 for supporting wellness. We've also found that small employers who have historically only had high- deductible plans affordable to them find the DirigoChoice product attractive because of the comprehensiveness of its benefits and the affordability of its price. In addition, the Dirigo Health Agency will provide an array of programs to help small employers navigate health care, such as the worksite wellness program, that will provide small employers access to support previously only affordable to larger businesses. Dirigo will in some ways operate like an association of small businesses working together to reduce costs and improve access and quality.
7. How is DirigoChoice different from pre-Dirigo options? (Individual market ratings rules, pre-existing conditions?)
DirigoChoice was designed to be familiar to employers and individuals, based on a fairly traditional insurance product, but adds DirigoChoice design features that make it unique. These include: no pre-existing condition exclusions; mental health parity in the small group and individual market; full first dollar coverage for preventive services; the Healthy Maine Reward program, which provides $25 in cash when an enrollee chooses a primary care physician and $75 when the enrollee meets with that physician and completes and health risk assessment; and the discount program.
8. The state of Maine went through a long process to ensure that a health plan would be in place to provide care. Dirigo was set up so if there was not a successful bid, the program would be self-administered. Does the state maintain the option to self-administer the program in the future?
Anthem and the Dirigo Health Agency have a two-year contract and the state maintains the option to self-administer the plan with legislative approval. The law was written to afford maximum opportunity for the Dirigo Health Agency Board of Directors to revise and redesign the program as needed to ensure its success in reaching the uninsured.
MaineCare
9. Explain the relationship between DirigoChoice and MaineCare?
DirigoChoice is administered by the Dirigo Health Agency (DHA), a public agency established by the Maine Legislature. Small employers and their employees who wish to enroll in DirigoChoice do so by making a contribution to DHA. To provide DirigoChoice coverage to participating employers, employees, and dependents, DHA has purchased a group health insurance policy from a private carrier (Anthem). It has also made arrangements through an interagency agreement with the state Medicaid agency, the Department of Health and Human Services (DHHS), to provide MaineCare coverage for participating employees and dependents that apply and are determined eligible for MaineCare. DHHS has entered into a separate comprehensive Medicaid risk contract with the same private carrier (Anthem). Dirigo/MaineCare enrollees have the deepest discounts, paying only cost sharing allowed by Medicaid law and regulation, and receive wraparound services from Medicaid if not included in the Anthem package. By relying on the same carrier, Dirigo Health ensures that workers (and their dependents) who move in and out of MaineCare eligibility but who are working for a Dirigo participating employer will be able to stay in the same plan with the same participating providers. This is an essential component of Dirigo Health—it reinforces incentives for MaineCare members to increase their earnings by eliminating the current eligibility "cliff" that occurs when a MaineCare member earns too much for MaineCare but too little to afford employer coverage.
10. How did prior changes in MaineCare pave the way for timely federal approval?
DirigoChoice does not require federal approval. Prior changes in MaineCare, such as the section 1115 waiver extending coverage to childless adults, apply to all individuals eligible for MaineCare, whether or not they enroll in MaineCare through DirigoChoice.
11. What type of federal approval did Maine receive?
CMS has approved the DHHS risk contract with Anthem discussed in question 9. DirigoChoice is not operating under a section 1115 waiver It is designed to be consistent with Medicaid law and regulation without the need for additional waivers.
12. Recently, Governor Baldacci announced a freeze on Medicaid enrollment. How did this affect access to DirigoChoice?
Maine's Childless Adult Waiver proved to be extremely popular and enrollment exceeded expectations. In addition, individuals who enrolled were significant users of health and mental health services. As the program is funded through a 1115 waiver and used our DSH cap in developing budget neutrality, the program's growth has meant that the DSH cap has been hit.1 We were therefore required to temporarily halt new enrollment and have sought legislative and CMS approval to redesign the benefit package. We anticipate these program actions will reduce the cost of the waiver so that we can reopen eligibility in the near future. The modest expansion of parents from 150 percent - 200 percent FPL began on May 2, 2005.
Financing
13. In 2004, the state of Maine allocated $53 million in state funds to Dirigo. Future financing envisions using savings from reduced uncompensated care. How is the state planning to measure reductions in uncompensated care? What are the challenges to measuring reductions in uncompensated care and how have stakeholders, particularly the hospital industry, reacted to this financing plan?
The Savings Offset Payment is determined based on all savings that are identified from the Dirigo Health reforms—not just the reduction in uncompensated care. In determining those savings we will measure the savings impact of the moratorium on the Certificate of Need; the implementation of a Capital Investment Fund to limit future Certificate of Needs post-moratorium; the impact of rate regulation in the small-group insurance market; voluntary targets on hospital expenditures; the infusion of new state funds to match Medicaid for increases in physician and hospital payments to reduce cost shifting; and the costs associated with savings in the system resulting from insuring the previously uninsured. The methodology to identify savings is now being reviewed among the stakeholders, however, a study conducted by Nancy Kane of Harvard University for the Dirigo-initiated Hospital Study Commission showed a dramatic reduction in uncompensated care following the initiation of the MaineCare Childless Adult Waiver.
Moving Forward
14. What are the plans for evaluating the program?
The plan is extremely visible and perpetually evaluated. A number of constituency groups have issued regular reports about Dirigo. The Board of Directors of the Dirigo Health Agency conducts monthly meetings that oversee implementation of the program. The Legislature remains a critically important partner and hears regularly about Dirigo's progress. No formal evaluation has yet been planned.
15. What were the biggest surprises in implementing the program? Was the program modified from the original design? Are any program changes anticipated?
Initially, we had hoped to require employers to pay 60 percent of family coverage but focus groups made it clear that employers could not afford that level of cost. (The current requirement is that the employer must pay 60 percent of employee-only coverage.) Among the biggest surprises has been the resistance to cost-containment. Only six states in the nation have premiums costs higher than Maine's and there is a generally accepted belief that our costs are too high but it is difficult to engage the public in discussions about appropriate ways to cut health care cost growth. Hospitals have been particularly resistant to a review conducted by the Hospital Study Commission. Program changes are expected throughout implementation to ensure the program is facile to respond as issues arise. A number of implementation issues have been addressed that are technical in nature related to the operations of the discount program, coordination with Anthem, and other programmatic concerns.
16. What are the lessons to other states considering similar initiatives?
- Political will is an essential element of success—health reform is hard work and it requires vigorous and persistent political leadership. Governor Baldacci and the Legislature have provided that in Maine.
- Even compromises like Dirigo Health do not fully bridge the ideological divide—advocacy for high-risk pools, AHPs, HSAs, and a roll back on insurance mandates continues.
- Employer skepticism is real—the product must be sustainable.
- Do not underestimate the level of risk aversion in private insurance.
- Support from the public, press, advocates, and elected official is key to success.
- Everybody wants lower premiums—but not the tough choices that go with reducing health care cost growth.
- Sustained leadership is essential—keep an eye on and political will to the task.
- It's hard work and requires vigilance and the capacity to change and revise as needed.
Additional Resources
Designing Maine's DirigoChoice Benefit Plan
Dirigo Health: Health Reform for Maine (Office of the Governor)
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1 Under the Health Insurance Flexibility and Accountability (HIFA) initiative, states are allowed to use unspent Dispropportionate Share Hospital (DSH) funds to meet federal budget neutrality requirements.
