States Make Own Plans for Health Insurance

Nearly 46 million people in America lack health insurance, according to the U.S. Census Bureau, and the cost to the country adds up to tens of billions of dollars.

Directly or indirectly, the states pick up much of this tab. Uninsured individuals flood state-subsidized clinics and emergency rooms. States also bear the treatment costs for chronic illness among the uninsured. And a population that is not well cannot function to full capacity, hampering a state’s productivity.

The issue is so pressing that in the last two legislative sessions, more than a dozen states have moved to overhaul coverage for those without health insurance. In the absence of federal policy or Washington leadership ready to take on the issue, more states are making the uninsured a priority.

Late last month, Vermont became the third state to approve near-universal health insurance. Crafting the Catamount Health plan required three years of wrangling among the state’s Republican governor, Democratic-majority legislature, top state officials, doctors, insurance providers and private citizens.

Vermont Secretary of Administration Michael K. Smith said a single imperative propelled this cumbersome process: “We all agreed that if we didn’t start curbing these costs, we were going to be broke.”

The Vermont experience reflects a growing national trend, said healthcare analyst Laura Tobler of the National Conference of State Legislatures. “States are moving ahead with reform because there is no momentum at the national level.”

A lack of federal action also prompted new state laws encouraging greater use of renewable energy and limiting greenhouse-gas emissions. Several states filled a federal law vacuum on the use of stem cells. And with no movement in Washington, some states have moved to raise their minimum wage.

On the topic of health insurance, legislators are responding to clamor from voters who say they cannot afford the kind of regular medical maintenance it takes to stay well -- and really cannot afford treatment if they get sick. State lawmakers know they keep their jobs by creating policy that people want and need, Tobler said.

As large and small employers slash insurance benefits -- sometimes eliminating coverage entirely -- much of the states’ efforts are directed at the working poor. Health insurance premiums have climbed so high that some people cannot afford coverage even when they are eligible, Tobler said.

“The uninsured have always been there, but states now are moving ahead to cover them,” she said.

The means by which states tackle the problem vary but generally involve an attempt at universal health insurance, a public-private insurance partnership or a revised implementation of Medicaid, the federal-state shared program that provides insurance for low-income people, the disabled or those who need long-term nursing care.

Medicaid, conceived duringPresident Lyndon B. Johnson’s administration, became “an unplanned substitute for people who didn’t have coverage,” said professor Robert Blendon of the Harvard School of Public Health. Most states that have addressed the insurance question have taken the Medicaid route by shifting funds from Medicaid or redefining eligibility for the program.

To steer these measures into existence, some lawmakers and governors must overlook sharp differences. The overwhelmingly Democratic Legislature of Massachusetts, for example, worked diligently with Republican Gov. Mitt Romney to draft the nation’s most comprehensive health insurance package. The bill became law in April.

Along with Maine, Massachusetts and Vermont -- the only states with universal coverage plans -- Arkansas, Florida, Oklahoma, Tennessee, Kentucky and Montana recently passed laws that seek to reduce the ranks of the uninsured. Iowa, West Virginia, Hawaii and New Mexico also have enacted measures targeting this issue.

Maine kicked off the trend three years ago with the Dirigo Health plan, designed to provide universal coverage in a small state with a large working-poor population.

Today, even its most ardent supporters call Dirigo a work in progress because so few people are enrolled -- about 10,000. Dirigo was intended to bring coverage to 130,000 uninsured or underinsured Maine residents over a five- to six-year period. About half of those on its slender roster were previously uninsured, and the remainder were underinsured.

The plan, which started in early 2005, was touted as a vehicle for employees and owners of small businesses to reduce insurance costs. But some business owners have shied away, saying it is no cheaper than private plans.

Already, the Massachusetts program has become Romney’s national calling card. Touring the country as he explores a bid for the 2008 Republican presidential nomination, Romney touts his state’s plan as a potential model -- even before it has gone into full operation.

Other states -- including Florida, Kentucky, West Virginia and Idaho -- have rearranged the way Medicaid money is spent rather than setting up state-sponsored insurance systems. These states promote their approach as a way to encourage consumer choice and foster personal responsibility.

But Cindy Mann, director of the Center for Children and Families at Georgetown University’s Health Policy Institute, said the states’ real goal is to reduce state spending, not to expand coverage.

“They are, at best, moving chairs on the deck,” Mann said. “They all seek to limit the states’ spending on Medicaid. So there is a risk that there will be reductions in coverage.”

Many of the new insurance plans take advantage of a federal waiver that provides subsidies to states that reduce their uninsured populations. Some states also have devised creative financing schemes. Starting next month, for example, Vermont will boost cigarette taxes to help fund Catamount Health.

This state-subsidized plan aspires for near-universal coverage and will be sold by private health insurance companies. Vermont also approved a companion bill that addresses chronic-disease treatment.

As they target the large number of working poor Americans, the new plans rely on contributions from employers as well as individuals.

In Nashville late last month, the state assembly approved a program called Cover Tennessee, aimed at working residents ages 41 to 65 who earn less than $35,000 per year. State studies showed 83% of the working uninsured in Tennessee are in full-time, permanent positions. Eighty percent of those surveyed said they did not buy insurance because they could not afford it.

Cover Tennessee works parallel to a system called TennCare, according to Michael Drescher, a spokesman for the state’s Department of Finance and Administration. Democratic Gov. Phil Bredesen said TennCare, launched in 1994, had become a “big government entitlement program” that no longer served working families.

The new program will be administered by private insurance companies yet to be named. The plan will cost an average of $150 per month per participant, Drescher said. That fee will be divided equally among the state, the employer and the individual. If a business owner balks, the employee can pay two-thirds of the fee, or about $100 per month, Drescher said.

Blendon, the Harvard health policy specialist, said a major goal of the state programs is to provide coverage for people who fall outside the definition of absolute poverty but cannot afford health insurance. The variety of approaches shows that states do not want a standard plan but do share “a series of common goals and incentives that allows them to make their own choices,” Blendon said.

This variety avoids some of the ideological debates that turned past discussions about national healthcare into endless quagmires, he said.

The Vermont plan, according to Smith, is designed to serve about 61,000 uninsured people -- about 10% of the state’s population, one of the country’s lowest uninsured percentages. The state’s population also is aging, Smith said, “and the more we can do to keep people healthier, the better.”