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Maine’s Health-Care Difficulties Could Foreshadow National ‘Public Option,’ Critics Say
Last November, Maine voters resoundingly rejected a tax on soda-pop, flavored water, and alcoholic beverages as a way to pay for the state's health care program, which includes a government-funded health care option that competes with private insurers.
(CNSNews.com) – Last November, Maine voters resoundingly rejected a tax on soda-pop, flavored water, and alcoholic beverages as a way to pay for the state’s health care program, which includes a government-funded health care option that competes with private insurers.
The program, called Dirigo Health Agency, which includes DirigoChoice, was established in 2003, making Maine the first state this decade to implement a universal-coverage health care plan. Now both supporters and opponents of the plan say that national lessons can be learned from Maine.
The program passed on the promise that it would pay for itself in savings and cover the uninsured. However, it only insured about 36 percent of the previously uninsured, and 64 percent of those in the program left their private insurer for the public option, according to the 2008 annual report.
Meanwhile, the state’s taxpayers have spent $154.8 million to keep the program operating, premiums have increased, and the average subsidy cost is $300 per person per month.
The Maine Legislature recently approved a tax on paid health care claims that lawmakers say will generate $38 million to help pay for the costs of the program.
A “public option” to compete with private insurance companies is a central component of the health care package being promoted by President Barack Obama and many congressional Democrats.
The difference is that the Maine plan was created by the state government but is administered by private insurance. The public option proposed by the Democrats in Congress does not contract the administration out to a private company.
“Its core set up is the public plan,” Tarren R. Bragdon, chief executive officer of the Maine Heritage Policy Center, told CNSNews.com. “We’re spending a lot [here] on a plan that is not covering the uninsured. We could replicate that nationwide, where we might cover a lot of people under a public plan but do not make a significant dent in the uninsured.”
About 3,400 (36 percent) of the enrollees in the Maine plan were uninsured before joining the plan. The remainder (64 percent) left their private insurer to be in the state plan.
“There was no restriction on individuals going into this public plan that they be uninsured, and two, that they be uninsured for any period of time,” Bragdon said.
Maine went from being ranked 15th in the nation for the number of people insured to fifth after the Dirigo plan was implemented, said Trish Riley, director of the Office of Health Policy and Finance for Maine Gov. John Baldacci.
“Our goal was not just to cover the uninsured. Our goal was to provide affordable, quality coverage to every Mainer,” Riley told CNSNews.com.
“The average income of our subsidized population was under $10,000” she said. “So even if these were folks buying coverage in the individual market, they were underinsured.
“They were buying coverage that was probably a high deductible plan and not covering them for much, and they were people that didn’t have the money to pay for deductibles if they did get sick,” Riley added.
“So they would show up in a hospital where a $15,000 deductible plan and a $30,000 income, and they certainly couldn’t pay that. So we don’t make apologies for covering underinsured people,” she said.
Senate Minority Leader Mitch McConnell (R-Ky.) spoke about the Maine health care experience on the Senate floor last month.
“Six years ago, Maine instituted Dirigo Health as a government option after advocates made the same promises about what it would do to bring down costs and increase access that the advocates of a nationwide government health plan are making right now in Washington,” McConnell said.
“Yet six years later, the Dirigo experiment has turned out to be a colossal - and extremely costly – failure,” he added.
“Despite initial promises, it hasn't covered most of the uninsured,” he said. “And yet it has led to higher taxes on thousands of Maine residents who were already struggling to pay for private coverage. In short: Dirigo turned out to cause the same problems in Maine that some of us are predicting for all Americans, if Congress rushes to approve a national government plan.”
Meanwhile, Maine’s two moderate Republican senators, Susan Collins and Olympia Snowe, have expressed skepticism about the Obama-backed health care initiative. Collins cited Maine’s Dirigo experience in The New York Times, and Snowe told The Times a public plan should only be established as a last resort.
The two Maine senators signed a letter with other moderate Democrats asking Senate leaders to proceed with caution on the health care legislation.
But Riley thinks Maine is a national model.
“Whether it’s totally successful or not, the fact that we’ve pushed the rock up the hill gives you lessons for the nation,” Riley said. “But I do think it’s not a public plan as envisioned by the national reform, because it’s run by a private insurance company.”
Costs rose significantly since the program began, according to a report by the Maine Heritage Policy Center.
“The odd DirigoChoice subsidy structure coupled lower deductibles and lower out of pocket limits with higher premium subsidies, which meant the people paying the least for their DirigoChoice plan also had the smallest amount of cost sharing,” the study said.
“This created an unsustainable utilization which leads to skyrocketing premium increases and the related subsidy costs paid by taxpayers. Premiums increased an astounding 74 percent in just four years – between the DirigoChoice product introduction in January 2005 and January 2009,” it added.
The plan also discourages small businesses from signing up, the study said.
“The Dirigo plan is tiered, so that the more you make, the higher your premium [is] if you work for a small company and the higher your deductible and higher your out-of-pocket maximum [are],” Bragdon said.
“So you’re paying more for less benefit, which is a really tough sell. Typically, the decision makers in the company have the highest income and typically would be paying the most out of pocket for the plan and get the worst coverage out of all their employees,” Bragdon added.
Premiums for the state-funded insurance plan grew four times faster than those of the state employee health plan. To meet the challenge of rising costs, the state placed an enrollment cap on the program in September 2007.
Benefits also had to be cut. The plan kept most deductibles the same for four years but reduced the hospital payments from 80 percent to 70 percent by 2008.
“To put this in perspective, consider someone who enrolled in the unsubsidized DirigoChoice Plan 2 and immediately was hospitalized,” the Maine Heritage study said.
“In 2005 this individual would need to have $21,000 in medical costs before reaching the maximum out of pocket limit of $5,600.
“In 2009, that figure was just $14,583 to reach this same $5,600 max out of pocket limit. DirigoChoice Plan 2 enrollees would pay out of pocket for the 26 percent of costs in 2005 but 38 percent of the bill in 2008, before reaching the out of pocket limit,” the study added.
Premiums would have gone up by more without the plan, Riley said. Before the state program, she said, Maine premiums grew by 13 percent annually and now grow by 6.4 percent a year. The average for New England is 8.1 percent per year, she said.
Riley said Maine’s program has been more expensive than anticipated, but the state did document about $160 million in savings since the program was implemented compared to what would have been spent, she said.
“We didn’t get the financing right. In our initial plan, we were going to reach universal coverage in five years,” Riley said.
Baldacci had proposed a four percent tax on insurers that could not be passed on in premiums, and requirements that the insurance companies clean up waste and inefficiencies and negotiate better deals for consumers.
Baldacci also wanted what he called “global budgets” to require hospitals to negotiate their prices with the state. In exchange, the state would exempt hospitals from anti-trust laws to allow them to coordinate prices.
“It is informative to the national debate, because what happened in the discussions in our eagerness to get a bipartisan bill, we compromised away the four percent assessment that couldn’t be passed through,” Riley said. “We gave up the global budgets in exchange for voluntary targets. As a result, we got significantly less money than initially intended.”
Though other states such as California, Oregon, and Massachusetts have promoted universal health care, Maine and Tennessee are the only two states to have established a public health care option to compete with private insurers, according to Merrill Matthews, director of the Council for Affordable Health Insurance.
Tennessee’s TennCare was established in 1994 and fell on tremendous financial problems. (See Previous Story)
Seal of Maine
The program, called Dirigo Health Agency, which includes DirigoChoice, was established in 2003, making Maine the first state this decade to implement a universal-coverage health care plan. Now both supporters and opponents of the plan say that national lessons can be learned from Maine.
The program passed on the promise that it would pay for itself in savings and cover the uninsured. However, it only insured about 36 percent of the previously uninsured, and 64 percent of those in the program left their private insurer for the public option, according to the 2008 annual report.
Meanwhile, the state’s taxpayers have spent $154.8 million to keep the program operating, premiums have increased, and the average subsidy cost is $300 per person per month.
The Maine Legislature recently approved a tax on paid health care claims that lawmakers say will generate $38 million to help pay for the costs of the program.
A “public option” to compete with private insurance companies is a central component of the health care package being promoted by President Barack Obama and many congressional Democrats.
The difference is that the Maine plan was created by the state government but is administered by private insurance. The public option proposed by the Democrats in Congress does not contract the administration out to a private company.
“Its core set up is the public plan,” Tarren R. Bragdon, chief executive officer of the Maine Heritage Policy Center, told CNSNews.com. “We’re spending a lot [here] on a plan that is not covering the uninsured. We could replicate that nationwide, where we might cover a lot of people under a public plan but do not make a significant dent in the uninsured.”
About 3,400 (36 percent) of the enrollees in the Maine plan were uninsured before joining the plan. The remainder (64 percent) left their private insurer to be in the state plan.
“There was no restriction on individuals going into this public plan that they be uninsured, and two, that they be uninsured for any period of time,” Bragdon said.
Maine went from being ranked 15th in the nation for the number of people insured to fifth after the Dirigo plan was implemented, said Trish Riley, director of the Office of Health Policy and Finance for Maine Gov. John Baldacci.
“Our goal was not just to cover the uninsured. Our goal was to provide affordable, quality coverage to every Mainer,” Riley told CNSNews.com.
“The average income of our subsidized population was under $10,000” she said. “So even if these were folks buying coverage in the individual market, they were underinsured.
“They were buying coverage that was probably a high deductible plan and not covering them for much, and they were people that didn’t have the money to pay for deductibles if they did get sick,” Riley added.
“So they would show up in a hospital where a $15,000 deductible plan and a $30,000 income, and they certainly couldn’t pay that. So we don’t make apologies for covering underinsured people,” she said.
Senate Minority Leader Mitch McConnell (R-Ky.) spoke about the Maine health care experience on the Senate floor last month.
“Six years ago, Maine instituted Dirigo Health as a government option after advocates made the same promises about what it would do to bring down costs and increase access that the advocates of a nationwide government health plan are making right now in Washington,” McConnell said.
“Yet six years later, the Dirigo experiment has turned out to be a colossal - and extremely costly – failure,” he added.
“Despite initial promises, it hasn't covered most of the uninsured,” he said. “And yet it has led to higher taxes on thousands of Maine residents who were already struggling to pay for private coverage. In short: Dirigo turned out to cause the same problems in Maine that some of us are predicting for all Americans, if Congress rushes to approve a national government plan.”
Meanwhile, Maine’s two moderate Republican senators, Susan Collins and Olympia Snowe, have expressed skepticism about the Obama-backed health care initiative. Collins cited Maine’s Dirigo experience in The New York Times, and Snowe told The Times a public plan should only be established as a last resort.
The two Maine senators signed a letter with other moderate Democrats asking Senate leaders to proceed with caution on the health care legislation.
But Riley thinks Maine is a national model.
“Whether it’s totally successful or not, the fact that we’ve pushed the rock up the hill gives you lessons for the nation,” Riley said. “But I do think it’s not a public plan as envisioned by the national reform, because it’s run by a private insurance company.”
Costs rose significantly since the program began, according to a report by the Maine Heritage Policy Center.
“The odd DirigoChoice subsidy structure coupled lower deductibles and lower out of pocket limits with higher premium subsidies, which meant the people paying the least for their DirigoChoice plan also had the smallest amount of cost sharing,” the study said.
“This created an unsustainable utilization which leads to skyrocketing premium increases and the related subsidy costs paid by taxpayers. Premiums increased an astounding 74 percent in just four years – between the DirigoChoice product introduction in January 2005 and January 2009,” it added.
The plan also discourages small businesses from signing up, the study said.
“The Dirigo plan is tiered, so that the more you make, the higher your premium [is] if you work for a small company and the higher your deductible and higher your out-of-pocket maximum [are],” Bragdon said.
“So you’re paying more for less benefit, which is a really tough sell. Typically, the decision makers in the company have the highest income and typically would be paying the most out of pocket for the plan and get the worst coverage out of all their employees,” Bragdon added.
Premiums for the state-funded insurance plan grew four times faster than those of the state employee health plan. To meet the challenge of rising costs, the state placed an enrollment cap on the program in September 2007.
Benefits also had to be cut. The plan kept most deductibles the same for four years but reduced the hospital payments from 80 percent to 70 percent by 2008.
“To put this in perspective, consider someone who enrolled in the unsubsidized DirigoChoice Plan 2 and immediately was hospitalized,” the Maine Heritage study said.
“In 2005 this individual would need to have $21,000 in medical costs before reaching the maximum out of pocket limit of $5,600.
“In 2009, that figure was just $14,583 to reach this same $5,600 max out of pocket limit. DirigoChoice Plan 2 enrollees would pay out of pocket for the 26 percent of costs in 2005 but 38 percent of the bill in 2008, before reaching the out of pocket limit,” the study added.
Premiums would have gone up by more without the plan, Riley said. Before the state program, she said, Maine premiums grew by 13 percent annually and now grow by 6.4 percent a year. The average for New England is 8.1 percent per year, she said.
Riley said Maine’s program has been more expensive than anticipated, but the state did document about $160 million in savings since the program was implemented compared to what would have been spent, she said.
“We didn’t get the financing right. In our initial plan, we were going to reach universal coverage in five years,” Riley said.
Baldacci had proposed a four percent tax on insurers that could not be passed on in premiums, and requirements that the insurance companies clean up waste and inefficiencies and negotiate better deals for consumers.
Baldacci also wanted what he called “global budgets” to require hospitals to negotiate their prices with the state. In exchange, the state would exempt hospitals from anti-trust laws to allow them to coordinate prices.
“It is informative to the national debate, because what happened in the discussions in our eagerness to get a bipartisan bill, we compromised away the four percent assessment that couldn’t be passed through,” Riley said. “We gave up the global budgets in exchange for voluntary targets. As a result, we got significantly less money than initially intended.”
Though other states such as California, Oregon, and Massachusetts have promoted universal health care, Maine and Tennessee are the only two states to have established a public health care option to compete with private insurers, according to Merrill Matthews, director of the Council for Affordable Health Insurance.
Tennessee’s TennCare was established in 1994 and fell on tremendous financial problems. (See Previous Story)
