A sweeping healthcare reform bill that became law last week in Maine rode a roller coaster to the desk of the governor, who signed off on a proposal much friendlier to hospitals than he had originally wanted.
Maine's controversial new law, if successful, could send more states toward the thrill ride called universal coverage.
Maine's landmark legislation creates Dirigo Health, a quasi-public state insurance program that will attempt to squeeze savings out of the system through cost-containment measures and use those savings to help cover the state's uninsured, as many as 180,000 people (June 9, p. 6).
"The cost-containment measures in the bill will decrease the rate of spending and decrease bad debt, charity-care costs and cost shifting," said Charlene Rydell, health policy adviser to Democratic Rep. Tom Allen, who worked with Gov. John Baldacci's office to help craft the legislation.
Under the final bill, signed last week by Baldacci, its lead advocate, the state will retroactively charge each insurance company an annual fee based on its savings from the bill's cost-containment measures.
The state will then use the revenue from those fees to subsidize health coverage for Maine residents not eligible for Medicaid but living below 400% of the federal poverty level. Savings also will finance Dirigo's quality-assurance, disease-prevention, disease-management and cost-containment programs.
The fee to insurance carriers will kick in during 2004, the second year of the bill's enactment, giving regulators time to determine how much savings Baldacci's health reform plan actually generates. According to Baldacci's office, the fee to each company would then amount to whichever is less-4.1% of annual premium revenue or the savings each organization realizes.
Quantifying any savings, however, may not be easy. "It's going to be a challenge to get an accurate measurement on savings," said Rick Cockrum, vice president of government relations at Indianapolis-based Anthem Blue Cross and Blue Shield, which covers 557,000 beneficiaries in Maine.
In its original form, the controversial bill would have authorized state regulators to control hospital revenue and expenses, a plan that made hospital leaders very nervous.
The Maine Hospital Association was successful in removing the rate-setting provisions, accepting as a compromise provisions to voluntarily hold consolidated operating margins to 3% and annual cost increases to no more than 3.5% for the fiscal year beginning July 1, 2003.
Hospitals in the state also will be expected to abide by a yet-to-be-determined cap on new construction projects and technology acquisitions. The bill is set to take effect in September.
Limiting expense growth to 3.5% "will be very difficult," said Steven Michaud, president of the MHA, adding that the state's hospitals nevertheless are "making a real effort to do it." For certain hospitals, especially those with labor contracts requiring a certain rate of wage increases, it will be even more problematic, he said.
"Anecdotally, in talking to our members we're talking tens of millions of dollars," Michaud said. "It's doable, but it will hurt. If 60% of our costs are labor, obviously (the cap) is going to affect workforce and delay or scale back projects."
Jud Knox, president of 80-bed York Hospital, located on the southern tip of the state, said he is concerned about staying under the 3.5% expense cap, especially given the wage and salary pressures that come with being so close to Boston and other competitive, high-wage areas.
Even Rydell acknowledged the challenges. "Some hospitals will not be able to meet it," she said of the voluntary cap on expense growth.
Knox said he will attempt to contain expenses as prescribed by the law, but "I am certainly going to proceed and do what's right for the community and the patients here," he said. "Without having any better rationale to convince me that 3.5% is the right thing, that's where my loyalty goes."
As for the overall potential for Dirigo to work as hoped, "I have some real questions that the financial foundation for the governor's program is there," he said. "In lauding the fact that everyone should be covered equally, we need to understand we're going to need more resources, and in my mind Dirigo Health falls far short of that."
The bill also asks employers to voluntarily pay as much as 60% of their employees' health insurance premiums. Michaud and others said that could spell trouble when some small businesses are unable to absorb those new costs.
"Overall we believe there is some reform in here, especially on cost containment, but the big question is will Dirigo ever really work?" Michaud said.
Others said time and experience will tell if Baldacci's plan can accomplish what federal and state regulators have struggled with for years-how to affordably provide universal health insurance.
"The jury is still out on whether it will work or not," said Anthem's Cockrum. Insurers were successful in keeping out a provision that would have imposed a 4.1% fee on annual premium revenue regardless of whether insurance companies realized that much in savings.
"The end product was much better for the people of Maine, for Anthem, for providers and for others," Cockrum said.
During the 2001-2002 legislative session, at least five states took up bills calling for some form of universal coverage, according to the Denver-based National Conference of State Legislatures. None of those bills has passed.