Sunny skies and beautiful beaches aren't the only reasons why Hawaii is considered a paradise.
In the U.S. healthcare reform debate, Hawaii is viewed as a potential national model for healthcare delivery.
Through a state-mandated, employer-paid insurance program enacted in 1974, the Aloha State currently provides healthcare coverage to about 98% of its 1.1 million residents, according to state health planners.
By contrast, about 14% of residents of the mainland United States, or about 37 million, are uninsured and don't receive a government subsidy.
Hawaii is so close in its efforts to extend universal access to medical care to all its residents that it's been studied in Congress and by other state governments as a possible reform model.
The Clinton administration, too, has cited Hawaii as the "working laboratory" for its proposals to overhaul the nation's healthcare system. Much like the Hawaiian system, Mr. Clinton's plan would use mandatory, employer-paid health insurance as the foundation for financing medical care for Americans.
But even those who are proponents of Hawaii's health plan recognize that the price tag for paradise is quickly rising. As healthcare costs escalate, Hawaiian business owners, who are the plan's major payers, want financial relief in the form of larger employee contributions.
And despite the health policy innovations of the Hawaii plan, its critics question whether the plan can be emulated on the mainland because Hawaii is unlike other states demographically and geographically.
In addition, Hawaii's approach concerns some national policymakers, particularly those who favor reform proposals that emphasize "managed competition" but sidestep restrictions on patient choice and new regulatory bodies. They believe that healthcare costs won't come down when plans cause shakeouts in local healthcare insurance industry markets that are controlled by a few companies, as is the case in Hawaii.
However, Hawaii health executives say its system has many of the ingredients that are currently shaping reform in
Straub Clinic and Hospital is a referral center for
Pacific Rim patients seeking specialty medical care.
various markets on the mainland:
|Acceptance of the need for broad-based, universal access.
|Business and government activism to rein in healthcare costs and extend coverage to all residents.
|Health insurance market dominated by a limited number of payers.
|Efforts to form group/salaried medical practices that offer strong primary care and quality outcomes data.
|The creation of capitated, or prepaid, healthcare agreements.
|A major shift to outpatient medical care.
Under Hawaii's Prepaid Health Care Act of 1974, employers are required to pay for at least half the individual premium costs for people working more than 20 hours each week. Workers pay the rest, but never more than 1.5% of their monthly wages. The plan only requires coverage for employees, although, for competitive reasons, employers typically offer family coverage, insurance industry executives said.
Monthly premiums for single coverage offered by Hawaii Medical Services Association, the state's Blue Cross-Blue Shield plan and largest health insurer, averaged $99 in 1993.
Employer health plans must offer coverage that includes hospital stays of at least 120 days annually as well as surgical, medical, diagnostic, outpatient, emergency and maternity benefits. In 1976, Hawaii legislators amended the Prepaid Health Care Act to require employers also to provide coverage of substance-abuse and mental health treatment, well-baby care, mammograms and in vitro fertilization.
Companies that want to offer a health plan other than the state-approved model plans offered by area health insurance industry powerhouses HMSA and Kaiser Permanente must win approval by the state. If an employer's plan doesn't match or exceed the coverage provided in the two plans, the employer must pay half the cost of dependent coverage.
Some 23,000 Hawaiians who are unemployed seasonal workers or working but uninsured receive medical care through various subsidies provided under the State Health Insurance Program enacted in 1989. That agency has a yearly operating budget of $14 million to provide coverage for basic, medically necessary services.
Together, the Prepaid Health Care Act and SHIP extend healthcare insurance coverage to nearly all Hawaiians.
While states such as Florida, Tennessee and Washington are trying to extend basic benefits to their residents, the Aloha State is moving ahead with its second major strategic effort to expand its near-universal healthcare coverage plan.
HealthQuest, Hawaii's five-year Medicaid demonstration project, is designed to privatize and combine recipients of General Assistance, Medicaid and its State Health Insurance Plan into a healthcare purchasing pool. Officials expect to achieve near universal coverage by 1998, said Winifred Odo, Hawaii's Medicaid administrator.
HealthQuest, which is scheduled to start July 1, will include a basic benefits plan that will be offered to 88,200 beneficiaries through a state-managed purchasing cooperative.
Officials have indicated that the state may need to increase taxes to start the plan, but the estimated cost of implementing it hasn't been determined.
While Hawaii ranks among the top states in its cost of living-about 30% above the national average-its average health insurance premium is near the bottom. For example, the average premium for a Hawaiian wage-earner supporting a family is $279 a month, about half what residents in other states pay, according to HMSA estimates.
Yet critics of the Hawaiian system
Queen's Medical Center, Hawaii'slargest hospital, is studying thepossible formation of anintegrated delivery system.
are quick to note that market forces affecting the islands' healthcare system differ markedly from those affecting the mainland, indicating it may be difficult to duplicate Hawaii's program in the continental states.
|The multi-ethnic population of Hawaii's eight islands, in its tradition of ohana, or extended family, embraces the idea of mutual social responsibility.
|Hawaii's warm climate makes it easier for its residents to stay healthy.
|Dominated by two large health insurance carriers responsible for setting the fee structure paid to providers, hospitals and physicians have no choice but to keep fees down so they're in line with payers' demands.
|Because Hawaii is some 2,500 miles from the California coast, large companies that ordinarily might reject an employer mandate to pay workers' healthcare costs can't relocate easily to a nearby state to do business.
Still, state healthcare leaders and planners say Hawaii has almost 20 years of experience to bring to the national debate on healthcare reform.
John C. Lewin, M.D., Hawaii's director of health and possibly the most high-profile proponent of the Hawaiian healthcare system, characterizes as myths the four arguments critics use to dismiss Hawaii's healthcare experience: great weather, superior genetics, healthy lifestyles and geographic and economic isolation from the rest of the nation.
"These myths have lulled many valid observers in Hawaii and elsewhere to assume that what we've accomplished here isn't transportable to other states," Dr. Lewin said.
As the state's top salesman for universal healthcare coverage, Dr. Lewin travels the healthcare conference circuit spreading the word about universal healthcare "as a basic human right." Dr. Lewin's message is that states can provide health insurance for all citizens and keep costs down by emphasizing preventive medicine and forcing competition by requiring health insurers to go after the uninsured market.
Since the state's early sugar and pineapple plantation days, when healthcare was provided free or at a minimal cost to agricultural workers, Hawaiians have been building a healthcare system based on the idea that universal access to healthcare is virtually a right. This notion eventually evolved into a tradition of employers providing or subsidizing healthcare through early forms of direct contracts or fee-for-service insurance.
Salaried physicians in group practice also had an early start in Hawaii with the creation in 1921 of the Straub Clinic and in 1958 of the Hawaii Permanente Medical Group, which is affiliated with Kaiser. About 28% of non-government physicians in Hawaii belonged to physician groups in 1988, according to the Hawaii Medical Association.
And in some form or another, capitated payment agreements between providers and payers have been the norm in Hawaii even longer than in mature managed-care markets such as California and Minnesota.
Hawaii historians say physicians hired by plantations were typically paid on a capitation basis by insurers years before Kaiser Permanente entered the market.
Today, most of the state's residents have some kind of medical insurance
Straub Clinic and Hospital is a 175physician group practice in Honolulu.
Executives acknowledge that paradise has its shortcomings. Health inflation in Hawaii is running about 10% a year, state estimates show.
largely through HMSA and Kaiser, the state's largest health maintenance organization with 162,713 enrollees.
HMSA offers a fee-for-service health insurance product, but it also operates various HMO product lines and contracts that cover 50,000 of its 548,702 beneficiaries.
Because the state traditionally has had low ratios of hospital beds to population and short lengths of stay, the trend to outpatient care has always existed. Historians say this idea evolved from the plantations, where injured workers were considered non-productive, and patients were encouraged to recover at home. Kaiser and HMSA are credited with instituting such policies to help reduce plantation owners' healthcare expenses.
Additionally, the state's health department has made preventive medicine a key policy. Immunization, prenatal care and child welfare programs long have been provided in Hawaii.
Yet, Dr. Lewin and other Hawaii healthcare executives readily acknowledge that, despite its achievements, paradise has its shortcomings.
One is the system's inability to restrain healthcare costs. Health inflation in Hawaii is keeping pace with the rate on the mainland, running about 10% a year, state estimates show.
As a result, local healthcare leaders have made cost control a top priority, said Richard E. Meiers, president and chief executive officer of the Healthcare Association of Hawaii, a local trade group representing the state's hospitals and nursing facilities.
Marvin Hall, president of HMSA, said he's certain that rival Kaiser struggles to keep down its costs as much as his organization does.
HMSA works to restrain healthcare spending by extending coverage that emphasizes non-hospital care, Mr. Hall said, noting that HMSA doesn't pay fully for all inpatient care under any of its contracts.
Like its mainland counterparts, the Hawaiian system also is plagued by cost-shifting. Employers continue to bear the burden of increased healthcare costs as hospitals are left with unpaid medical bills for tourists who don't pay their bills
A physician and patient at Straub Clinic and Hospital. The hospital's president and CEO believes those in solo practice soon will be forced to consider joining a group practice like the one at Straub.
and the uninsured from other Pacific islands who go to Hawaii to get top-notch medical care.
Arthur A. Ushijima, president of Queen's Medical Center, Hawaii's largest hospital, estimates that 23% of patients treated in its emergency department are uninsured. Last year, the 520-bed Honolulu hospital wrote off $14 million in charity care. Its parent organization, Queen's Health System, which also operates 30-bed Molokai (Hawaii) General Hospital and various other ambulatory, home healthcare and managed-care companies, had revenues last year of $350 million.
One new concern for Hawaii health planners is that the islands' business community is becoming increasingly reluctant to be the healthcare system's primary financier. As operational costs rise, some of Hawaii's small-business owners have begun to skirt the employer mandate by hiring only part-time workers.
According to a survey of 500 Hawaiian small businesses conducted last year by the Menlo Park, Calif.-based Kaiser Family Foundation, 17% of the respondents said they limit the wages they pay to pay health insurance premiums. About 15% of the respondents said they recently had reduced their work forces "a great deal" to cut expenditures.
On the provider side, physicians also have been slow to embrace the need for future market reforms in Hawaii.
Blake E. Waterhouse, M.D., president and chief executive officer of Straub Clinic and Hospital, a 175-physician group practice in Honolulu, said solo practitioners in the state haven't felt compelled to change their employment status. However, he noted that the state is ripe for publicly held physician management companies, health systems and insurers to begin wooing physicians.
"During the next five years, changes in our local market will force those in solo practice to consider joining a group like us or Kaiser," Dr. Waterhouse said.
Queen's Mr. Ushijima said executives at his hospital also have recognized the hesitation physicians and hospitals are feeling about joining the reform and integration movement. Mr. Ushijima said Queen's is studying the possible formation of an integrated delivery system.
Queen's Health System has organized a task force charged with designing the system's strategic plans through the year 2000. Health system trustees, hospital managers and physicians are identifying ways to improve the system's quality and cost-containment strategies as well as medical services, Mr. Ushijima said.
Although some changes are expected to come in the first six months of the year, Mr. Ushijima said the health system hasn't decided whether it will pursue any arrangements with physicians, other health systems or insurers.
Straub physicians also are exploring "some opportunities for growth and networking," Dr. Waterhouse said. However, he declined to elaborate on its plans. Straub, which had revenues exceeding $250 million last year, has carved out some new business from the international market by establishing itself as a referral center for Pacific Rim patients seeking specialty medical care and transplants.
The Healthcare Association's Mr. Meiers notes that area providers are grappling more with local economic concerns than with their place in the reform scene. "Executives are thinking about reform and talking about it among their own organizations, but there isn't a very strong movement here to find a partner," he said. "There's more a rush to find new ways to remain competitive," noting that the Hawaiian economy has realized it no longer can rely on business from tourists to keep it afloat.
Meanwhile, Dr. Lewin and various Hawaii healthcare executives are busy writing legislation that they hope to propose this month that would create "seamless" healthcare in Hawaii.
As it's envisioned, a public-private partnership would establish a healthcare system offering consumer choice and maintaining high-quality healthcare. The state would determine the services to be provided and would allow the private sector to control operation of the system. In addition, the state would set a flat rate of payment for each service.
Dr. Lewin's proposals also call for reform of the insurance underwriting market to mandate health insurers' use of community rating, as well as restructuring the delivery system, tort reform to relieve malpractice litigation, global budgeting for healthcare providers, cost-containment and quality control.
Mr. Meiers said one major policy question being asked by hospital executives is what will happen to Hawaii's healthcare system if Congress passes some form of universal coverage legislation.
Hawaii healthcare leaders want to keep current programs, or at least retain the state's flexibility in reconfiguring its system to comply with the federal government's plan. The Hawaii congressional delegation already has made it clear that any healthcare reform legislation must bestow such autonomy on the state.
Critics say Hawaii'smuch-touted health planhas an expensive price tag
By Della de Lafuente
Ms. de Lafuente is Los Angelesbureau chief