THE URBAN INSTITUTE Health Policy for Low-Income People in

Jack A. Meyer and Stephanie E. Anthony

llinois, described as a microcosm of State Characteristics America, has a mix of metropolitan areas—including the third-largest Sociodemographic Profile city in the country—small towns, and vast farmland. A crossroads In 1994–95, Illinois’s population was between east and west, Illinois is a 11.8 million, which has remained relatively TE POLICIES TE POLICIES major transportation hub and has steady in recent years. The age distribution A A a strong industrial base, partic- of the state’s population closely reflects ularly in the area. that of the nation. Children under age 18 Traditionally, many in- comprise 27.3 percent of Illinois’s Idustries in the state have offered population, compared with 26.8 generous employee benefits, Movement percent of the total U. S. popu- and, as a result, Illinois lation. The corresponding boasts a high employer- toward managed figures for the elderly sponsored health in- care in the Illinois health population are 11.7 surance rate and a percent and 12.1 low uninsurance care market has occurred percent, respec- rate. Managed care tively. penetration in Illinois is much less rapidly than in Virtually the same significantly lower than the nation as a proportion of people in the national averages for both Illinois are non-Hispanic the private and public sectors. In whole. whites as in the nation (72.5 NEW FEDERALISM

NEW FEDERALISM general, the sweeping changes tak- percent and 72.6 percent, respec- ing place in health care markets across tively). Among the remaining one- the country have not created the level of fourth or so of the population, there are

HIGHLIGHTS OF ST disruption in Illinois as elsewhere. proportionately more non-Hispanic blacks HIGHLIGHTS OF ST The low-income population in Illinois has in Illinois than in the United States (15.7 per- also benefited from widespread employer- cent versus 12.5 percent) and slightly smaller sponsored insurance. Medicaid is an equally proportions of Hispanics and other groups important source of coverage for the low- (such as Asian-Americans) (table 1). income population, despite the state’s historically Although the southern part of the state is A product of strict eligibility rules. Under the Children’s largely rural, Illinois is more urbanized than “Assessing the Health Insurance Program (CHIP), Medicaid the country as a whole. About 85 percent of New Federalism,” eligibility will be expanded, covering thou- the state’s population live in urban areas, in an Urban Institute sands more children in the state. contrast to about 78 percent nationally. Program to Assess Changing Social Policies Highlights, IL Health, December 1998 2 NEW FEDERALISM: HIGHLIGHTS OF STATE POLICIES Health Economic Party ControlofHouse(Lower) (1997) Sociodemographic AIDS CasesReportedper100,000(1996) Violent Crimesper100,000(1996) Premature DeathRate(Years Lostper1,000)(1995) Infant Mortality Rate(Deathsper1,000Live Births)(1996) 260,202 Low g)(1995) Birth-Weight Births(<2,500 Vaccination Coverage ofChildren Ages 19–35Months(1996) Percent Childrenbelow Poverty (1994) Percent below Poverty (1994) 11,766 Unemployment Rate(1997) Employment Rate (1997) Percent ChangeinPersonalIncome(1995–96) Percent ChangeinPerCapitaPersonalIncome(1995–96) Per CapitaIncome(1996) Population Growth (1995–96) Percent Nonmetropolitan(1994–95) Percent NoncitizenImmigrant(1996) Percent Non-HispanicOther(1994–95) Percent Non-Hispanic White (1994–95) Percent Non-HispanicBlack(1994–95) Percent Hispanic(1994–95) Percent 65+(1994–95) Percent under18(1994–95) Population (1994–95)(inthousands) Party ControlofSenate(Upper)(1997) Governor’s(1998) Affiliation Political .NationalConferenceofState Legislatures. p. Association. NationalGovernors’ o. FBI. DepartmentofJustice, m.U.S. 1996)asthedenominator. toJuly1, 1990, July1, Series, 1995)asthenumerator andpopulationestimates(U.S.BureauoftheCensus.ST-96-1. EstimatesofthePopulation ofState Tapes, Ratewas calculatedusingyearsofpotentiallifelostfrom age65(NationalCenterforHealthStatistics.MultipleCauseof l. 1997. PublicHealthService, MD: Hyattsville, andDeathsforJune1996.” Divorces, Marriages, NationalCenter forHealthStatistics.“Births, k. 1997. NationalCenterforHealthStatistics, MD: supp.Hyattsville, 1995.” and T.J.45 (11), Mathews. “Advance ReportofFinalNatalityStatistics, S.C.Curtin, J.A.Martin, S.J. Ventura, j. andthree oneormoredosesofany MCV, doses of threeormoredosesofpoliovirus vaccine, fouror moredosesofDTP/DT, 4:3:1:3series: i. .CentersforDiseaseControlandPrevention. n. 1996.” Immunization Survey, National CenterforHealthStatistics CentersforDiseaseControl andPrevention, U.S.Department ofHealthandHumanServices, h. model. where1994isthecenter year)editedusingtheUrbanInstitute’s TRIM2 microsi CPSthree-year average (March1994–March1996, g. Employment rateiscalculatedusingthecivilian noninstitutionalizedpopulation16yearsofageand over. f. U.S.BureauoftheCensus, c. of citizenship. where1996isthecenteryear)editedbyUrbanInstitutetocorrect Three-yearaverage oftheCPS(March1995–March1997, b. microsimulation model.Excludesthoseinfamilies withactive militarymembers. 1995and1996. These files areeditedusingtheUrbanInsti Two-year concatenatedMarchCurrentPopulation Survey (CPS)files, a. .U.S.DepartmentofLabor. e. January1998. U.S.DepartmentofCommerce, BureauofEconomic Analysis, d. April 1.1996populationasofJuly Haemophilus influenzae a ,f e, d tt n einlUepomn,1997 Annual Averages. State andRegional Unemployment, Morbidity andMortality Weekly Report ttsia btato h ntdSae:1997 Statistical Abstract oftheUnitedStates: e a a o g c type bvaccine. rm nteUie tts 1996 Crime intheUnitedStates, h oenr,PltclAflain,adTrso fie 1998. and Terms ofOffice, Political Affiliations, The Governors, m a b g p p a a a 97Pria opsto,May7Update 1997 Partisan Composition, n HIV/AIDS SurveillanceReport j d l State Characteristics d k Table 1 etme 8 1997. . September28, ,i h, 6(9.Hatvle D uy2,1997. July25, MD, 46 (29).Hyattsville, 17heiin.Wsigo,D,1997.1995populationasof DC, (117th edition). Washington, 2,1996. 8 (2), . DindicatesDemocrat andRindicatesRepublican. SL9-8 ahntn C eray2,1998. February27, DC, USDL 98-78. Washington, 60D-58R 28D-31R Monthly Vital StatisticsReport 2,4 $24,426 $26,848 liosUnitedStates Illinois 08 21.7% 14.3% 63.8% 20.8% 12.8% 65.3% 21.8% 72.6% 12.5% 12.1% 26.8% 15.1% 72.5% 15.7% 11.7% 27.3% 50 77.0% 75.0% aur 5 1997. January 15, 8. 634.1 886.2 .%4.9% 5.6% 4.6% 4.7% 5.4% 6.4% 4.9% 4.2% 10.7% 5.9% 2.8% 8.9% .%7.3% 7.9% 0.5% 8625.2 46.7 18.6 49.3 . 7.2 8.1 R Monthly Vital StatisticsReport Death Mortality 45 (12). :Annual Time s: misreporting tute’s TRIM2 0.9% . “National or more mulation Economic Indicators the vaccination rate among toddlers (19 nois. For fiscal year 1999, education Illinois residents, as a whole, have to 35 months in age) is slightly lower in funding will increase by $614 million above-average income compared with Illinois than nationwide (75.0 percent while Medicaid funding is expected the nation. Per capita income in Illinois versus 77.0 percent). to increase by only $251 million.3 was $26,848 in 1996, about 10 percent The premature death rate for all greater than the national average of age groups is somewhat worse in Illi- The Health Care Market $24,426. In addition, the employment nois than in the United States (49.3 rate in Illinois is higher than the nation- years of potential life lost before age 65 Movement toward managed care al average (65.3 percent versus 63.8 per 1,000 population versus 46.7). in the Illinois health care market has percent), while the unemployment rate Notably, the violent crime rate in Illi- occurred much less rapidly than in the is slightly lower than the national aver- nois is much higher than in the country nation as a whole. An estimated 17.4 age (4.7 percent versus 4.9 percent). as a whole. There were 886 violent percent of the state’s residents were In 1994, 12.8 percent of Illinois’s crimes per 100,000 people in Illinois in enrolled in health maintenance organi- population lived below the federal 1996, about 40 percent higher than the zations (HMOs) in 1996, slightly less poverty level (FPL), versus 14.3 per- national average. Finally, Illinois com- than three-fourths of the U.S. average cent for the U.S. population overall. pares favorably to the United States (24.0 percent). The gap is even more

This gap is narrower for children liv- overall in its incidence of AIDS: 18.6 pronounced among publicly insured HIGHLIGHTS OF STATE POLICIES NEW FEDERALISM: ing in poverty, as 20.8 percent of chil- cases per 100,000 reported in 1996, residents. Only 7.0 percent of Medicare dren in Illinois lived below the FPL, compared with a national average of beneficiaries had joined risk-based compared with the national average of 25.2 cases per 100,000. HMOs in 1997, compared with 12.5 21.7 percent (table 1). percent nationwide. Moreover, only The economy of Illinois is primar- Politics and Budgetary Policy 13.7 percent of Medicaid enrollees ily dependent on manufacturing, min- Illinois is known as a “swing state” were in an HMO or primary care case ing, and transportation, with support in national elections, and the voters tend management (PCCM) program in from agriculture, tourism, and energy. to elect moderate political leaders. 1997, versus 47 percent in the country The manufacturing sector accounted for Moderate Republican governors (James as a whole.4 a 9 percent greater share of total earn- R. Thompson and Jim Edgar) have led HMO penetration is greater in ings in Illinois than for the nation as a the executive branch for more than two Chicago than in the smaller cities and whole. The state is the largest employer, decades. Currently, both chambers in rural areas of Illinois. But the man- with 82,000 jobs; the largest private the state legislature are almost evenly aged care market in Chicago is char- employers are Jewel/Osco, Caterpillar, divided between Republicans and acterized by rather broad provider and . The Forbes 500 lists 57 Democrats: Republicans have a slight networks and prevalent point-of- Illinois firms.1 majority in the Senate, while Demo- service options. As a result, most con- Illinois manufactures mostly in- crats have a thin margin in the House. sumers have open access to providers dustrial machinery (especially farm and Democrats generally enjoy large major- across the community. Fully integrat- construction equipment), fabricated ities of Chicago votes, while Republi- ed health care systems are not as com- metal products (e.g., steel), electronic cans typically garner substantial votes mon in Chicago—or in other parts of goods, and chemicals. There are 29 in most other parts of the state. Illinois—as in many other areas of the active coal mines in the state, placing State revenues totaled roughly $32 country. Indemnity insurers, such as Illinois fifth in coal production among billion in fiscal year 1997, $7.7 billion Aetna and Blue Cross, are still preva- the states. Illinois’s transportation sector of which were federal funds. Medicaid lent in Chicago’s health care market. is built around railroads and airline trav- represented 19.2 percent of state gener- In September 1998, Blue Cross and el, and includes the nation’s busiest air- al fund spending in 1995, a sharp Blue Shield of Illinois merged with port, O’Hare. The state is also second increase from 11.8 percent in 1990. Blue Cross and Blue Shield of Texas, in the nation in miles of railroad net- When outlays outside the general fund although the deal is being challenged works and third in miles of interstate (including other state funds and federal in Texas.5 highways. aid) are accounted for, Medicaid out- Chicago has experienced some lays in Illinois reached 28.1 percent of important restructuring in the hospital Health Indicators the state’s total budget for 1995, sector since the 1980s. Several hospitals Illinois has slightly less favorable greater than the proportion allocated closed as hospital utilization and length incidence rates for certain health to elementary and secondary educa- of stay began to decline, reducing the problems than the nation as a whole. tion (20.0 percent) or to higher educa- substantial excess bed capacity in the For example, the incidence of low tion (10.4 percent) for that year. Total area, and others merged in an effort to birth-weight babies in Illinois—at 7.9 state Medicaid outlays in Illinois expand their market share. For example, percent—is higher than in the United grew at an average annual rate of 23.2 the Evangelical system merged with States as a whole, at 7.3 percent (table percent over the 1990–95 period.2 Lutheran General to form the Advo- 1). The infant mortality rate also is Spending increases in Medicaid have cate system. As of October 1998, an higher in Illinois than the national aver- slowed considerably over the past two Arizona-based health care management age (8.1 deaths per 1,000 live births ver- years, however, as education has firm and a group of Chicago physicians sus 7.2 deaths per 1,000). In addition, become the top budget priority in Illi- had entered into negotiations with 3 Columbia/HCA to purchase two of its Health Insurance living in households with income less hospitals—Michael Reese, a large Coverage than 133 percent of the FPL, and chil- teaching hospital, and Grant. Further, dren ages 6 to 15 with family income Columbia/HCA has agreed to sell three Illinois has proportionately fewer under 100 percent of the FPL. As of other facilities in the Chicago area, people without health insurance than October 1, 1999, this group will be potentially leaving the organization the national average. Some 11.3 percent expanded to include age 16 and will with only one hospital in the area.6 of the nonelderly residents of the state then increase by one year annually Academic health centers (such as lack coverage, more than one-fourth until all poor children under age 19 University of Chicago and North- below the national average of 15.5 per- are covered. Prior to 1998, Illinois western) are doing better financially cent in 1994–95 (table 2). Moreover, met, but did not go beyond, these than many of their counterparts in proportionately fewer children are with- minimum federal standards, with one other large American cities. The suc- out health insurance in Illinois than the exception: Older teenagers not yet cess of these academic health centers national average (6.6 percent compared included in the federal mandate were and other teaching hospitals in Chica- with 10.4 percent). These gaps reflect covered if their household income go has been attributed to their ability the more widespread presence of was below 50 percent of the FPL. Eli- to maintain financial flexibility employer-based coverage in Illinois. gibility rules have expanded under through periods of fluctuation and The proportion of nonelderly people CHIP, as described below. change in the health care market. This with employer-sponsored coverage in Illinois has opted to support a flexibility is based on charging high Illinois was 71.9 percent, nearly six per- medically needy program to assist prices, which have yielded significant centage points above the U.S. average low- to moderate-income families profits, stable reserves of cash and of 66.1 percent in 1994–95. The higher that “spend down” into Medicaid eli- investments, and employee productiv- rates of employer-sponsored health gibility because of costly medical ity.7 The slow growth in managed insurance may result, in part, from the expenses that reduce their incomes. care has likely helped preserve the industrial mix of the state’s economy. The income and asset limits for financial viability of these hospitals As noted above, a larger-than-average qualification are substantially below as well. proportion of the state’s economy is in the national averages, however. The Chicago Business Group on the manufacturing and mining sectors, Despite its somewhat stringent Health, a subsidiary of the Midwest where collective bargaining agree- criteria, Illinois’s Medicaid program Business Group on Health (MBGH), ments and employer practices have covers a relatively large share of the organized large, self-insured corpora- made health coverage relatively more state’s low-income population (table tions in the Chicago area to contract prevalent than in the service sector. 2). Nearly 2 million people were selectively with hospitals through an Among the poor and the near- enrolled in Medicaid in 1996. Of organization called CCN, Inc. (for- poor (people in households with these, 126,000 (7 percent) were elder- merly called Community Care Net- incomes less than 200 percent of the ly, 297,000 (16 percent) were blind work), in an effort to negotiate lower FPL), proportionately fewer were and disabled, 419,000 (22 percent) hospital charges and establish quality uninsured in Illinois than in the United were adults, and 1,048,000 (55 per- standards. The effectiveness of the States overall (17.9 percent versus 25.3 cent) were children. About the same group is questionable since most hos- percent). One reason is that the rate of proportion of Medicaid enrollees in pitals are in the CCN network and the employer-based coverage among low- Illinois are cash assistance recipients group represents less than 5 percent income children and working-age as in the United States as a whole— of the market. An attempt to organize adults is greater in Illinois than in the 53.4 percent versus 54.3 percent, the city’s smaller employers into a country as a whole (38.5 percent ver- respectively. purchasing cooperative in 1996 failed sus 33.9 percent). Lower-income The number of Medicaid benefi- NEW FEDERALISM: POLICIES HIGHLIGHTS OF STATE when the employers backed out as the households in Illinois also get a boost ciaries has dropped since the mid- group purchasing activity was about from the somewhat higher penetration 1990s. This change largely reflects a to begin.8 of Medicaid in the state’s low-income decline in the number of people re- More recently, MBGH helped population (38.6 percent versus 34.1 ceiving cash assistance (one route to organize another subsidiary group of percent). receiving Medicaid); the decline is eight large Chicago employers, generally attributed to a strong econ- including Ford, the state of Illinois, Medicaid omy and welfare reform. In Illinois, First Chicago NBD, and the Universi- the number of persons receiving cash ty of Chicago, to negotiate with, and assistance through Aid to Families with purchase health services from, area Eligibility and Enrollment Dependent Children (AFDC)/Tempo- HMOs.9 This group, called the State Medicaid programs are rary Assistance for Needy Families Healthcare Purchasing Group, repre- required to cover certain categories of (TANF) fell by 18.5 percent over the sents 97,000 individuals in the Chi- persons who receive cash assistance, 1994–97 period. This drop, although cago area. as well as other federally mandated significant, is lower than the corre- groups. The latter include pregnant sponding decline of 23.2 percent in women and children under 6 years old the United States over this period.

4 enrollment fell in absolute terms for all Table 2 categories of beneficiaries, while ex- Health Insurance Coverage penditures per enrollee, especially for the blind and disabled, continued to rise Illinois United States Health Insurance, 1994–1995 (table 4). DSH payments totaled roughly Nonelderly Population $15 billion in the United States in 1996, Percent Uninsured a 11.3% 15.5% down from almost $19 billion in 1995, Percent Medicaid a 11.9 12.2 Percent Employer-Sponsored a 71.9 66.1 and are scheduled to be trimmed back Percent Other Health Insurance a, b 5.0 6.2 further over a period of five years under the provisions of the Balanced Budget 19–64 Population Act of 1997. Illinois spent $244 million Percent Uninsured a 13.5 17.9 Percent Medicaid a 6.5 7.1 in DSH payments in 1996, representing Percent Employer-Sponsored a 74.1 67.8 a much smaller proportion of total Percent Other Health Insurance a, b 5.9 7.2 Medicaid outlays (3.8 percent) than in the country as a whole (9.4 percent). 0–18 Population

Percent Uninsured a 6.6 10.4 HIGHLIGHTS OF STATE POLICIES NEW FEDERALISM: Percent Medicaid a 23.2 23.1 Medicaid Managed Care Percent Employer-Sponsored a 67.3 62.5 Percent Other Health Insurance a, b 2.9 4.0 As noted earlier, Illinois has a <200 Percent of the Federal Poverty Level, Nonelderly Population much smaller proportion of its Medi- Percent Uninsured a 17.9 25.3 caid population in HMO or PCCM Percent Medicaid a 38.6 34.1 models of managed care than do many Percent Employer-Sponsored a 38.5 33.9 other states (about 14 percent versus 47 Percent Other Health Insurance a, b 5.0 6.7 percent nationwide in 1997). In fact, the proportion of the Medicaid caseload a. Two-year concatenated March CPS files, 1995 and 1996. These files are edited enrolled in managed care has not been using the Urban Institute’s TRIM2 microsimulation model. Excludes those in fami- lies with active military members. growing in Illinois, while in many other b. “Other” includes persons covered under CHAMPUS, VA, Medicare, military states it has at least doubled in recent health programs, and privately purchased coverage. years. This situation results in part from the wholly voluntary nature of man- aged care enrollment among the Medi- Expenditures caid population in Illinois—many other almost $9,000 per elderly enrollee and states have made such enrollment Medicaid outlays in Illinois totaled almost $10,000 per blind and disabled mandatory for at least younger adults $6.5 billion in 1996 (table 3). This fig- enrollee (table 4). Expenditures per and children. Another factor is the rela- ure includes expenditures for benefits, elderly enrollee are lower in Illinois tively lower HMO penetration in the administrative costs, and disproportion- than the national average, whereas state. ate share hospital (DSH) payments, expenditures per disabled enrollee are An interesting manifestation of the which are allocated to hospitals based higher. state’s gradual approach to Medicaid on the amount of care they provide to Throughout the 1990s, Illinois’s managed care involves its Section 1115 uninsured and Medicaid patients. With Medicaid spending on both acute and waiver proposal, entitled Illinois a federal matching rate of 50 percent, long-term care services has generally MediPlan Plus Demonstration. In July the cost of Illinois’s Medicaid program increased more rapidly than the nation- 1996, after almost two years of debate was split evenly between the state and al average. However, growth rates in among state and federal policymakers, the federal government. Expenditures both Illinois and the country overall the Health Care Financing Administra- for benefits alone were nearly $6.0 bil- have decelerated significantly in recent tion (HCFA) approved the proposal for lion in 1996, with 34 percent spent on years, following double-digit growth in a five-year period. The goals of the pro- long-term care services and 66 percent the first half of the decade. The average gram, which will be implemented on a spent on acute care services. annual growth rate in Illinois’s program statewide basis, are to increase access Children, who make up 55 percent was 30.6 percent from 1990 to 1992, to providers and services, improve of those on Medicaid, accounted for falling to 11.9 percent from 1992 to quality of care, and hold down cost only 19 percent of the state’s Medicaid 1995, and 3.6 percent from 1995 to increases through mandatory enroll- outlays in 1996. In contrast, the elderly 1996. The corresponding U.S. growth ment of state Medicaid recipients in and those who are blind and disabled, rates were 27.1 percent, 9.7 percent, managed care. Unlike many other states combined, represented just 23 percent and 2.3 percent (table 3). Expenditure that have used Section 1115 research of enrollees but accounted for 63 per- increases in Illinois’s program can be and demonstration waivers to expand cent of 1996 outlays. On a per enrollee attributed more to growth in spending coverage to working families otherwise basis, the average expenditure per child per enrollee than to growth in number ineligible for Medicaid, Illinois’s waiv- was $1,171 in 1996, compared with of enrollees. In fact, from 1995 to 1996, er involves no eligibility expansion. 5 Table 3 Medicaid Expenditures by Eligibility Group and Type of Service, Illinois and United States (Expenditures in Millions)

Illinois United States Average Average Expenditures Annual Growth Expenditures Annual Growth 1996 1990–92 1992–95 1995–96 1996 1990–92 1992–95 1995–96 Total $6,494.3 30.6% 11.9% 3.6% $160,968.6 27.1% 9.7% 2.3% Benefits Benefits by Service 5,970.1 28.3 11.9 7.1 140,290.1 18.8 10.9 5.4 Acute Care 3,939.7 30.6 17.0 8.2 84,666.5 22.3 12.8 6.6 Long-Term Care 2,030.3 25.3 4.4 5.1 55,623.6 14.6 8.2 3.5 Benefits by Group 5,970.1 28.3 11.9 7.1 140,290.1 18.8 10.9 5.4 Elderly 1,130.3 28.9 8.1 – 0.2 42,418.5 16.7 8.4 3.7 Acute Care 342.6 28.1 17.5 4.1 11,229.3 18.9 12.7 8.6 Long-Term Care 787.7 29.1 5.0 – 2.0 31,189.2 16.0 7.1 2.1 Blind and Disabled 2,940.2 27.0 11.9 11.0 56,601.3 17.6 13.3 8.6 Acute Care 1,745.4 31.8 19.6 11.8 33,880.1 22.9 15.8 10.7 Long-Term Care 1,194.7 22.9 3.6 9.9 22,721.2 11.9 10.1 5.7 Adults 673.1 31.1 10.9 2.1 16,956.6 21.4 9.1 0.7 Children 1,226.5 29.1 17.3 8.2 24,313.8 23.8 11.4 4.4 Disproportionate Share Hospital 243.7 122.6 9.6 –41.0 15,102.6 263.4 2.0 –19.6 Administration 280.5 14.0 14.5 0.5 5,575.9 9.8 12.8 2.3

Source: The Urban Institute, 1998. Based on HCFA 2082 and HCFA 64 data.

Under the Section 1115 demon- do not, they are automatically assigned up to 200 percent of the FPL (formerly stration program, Illinois will contract to either an HMO or an MCCN. infants and pregnant women were eli- with HMOs, managed care community As of October 1998, plans to gible for Medicaid only up to 133 per- networks (MCCNs), and enrolled man- implement MediPlan Plus had been put cent of the FPL) and for children ages 6 aged care providers (EMCPs). MCCNs on hold. No implementation date has through 18 up to 133 percent of the FPL are provider-based organizations that been set, as the program is still in the (formerly only children ages 1 through will typically be developed by either an planning and design stages. 6 with family incomes up to 133 per- academic health center or county cent of the FPL, children ages 7 through health providers to provide or coordi- 14 up to 100 percent of the FPL, and nate health services exclusively for Current State Health youth ages 15 through 18 up to 50 per- enrollees in Illinois’s MediPlan Plus Policy Issues cent of the FPL were eligible for Medi- NEW FEDERALISM: POLICIES HIGHLIGHTS OF STATE program. Community providers who caid). This expansion will cover an want to form MCCNs are permitted to Children’s Health Insurance estimated 40,400 children. One bene- participate initially as prepaid health Program fit of the first phase of Illinois’s CHIP plans until they gain experience in plan is greater equalization of coverage operating managed care delivery sys- In December 1997, Illinois sub- within families. Previously, a family tems, and then they are classified as mitted its Children’s Health Insurance might have had a younger child eligible MCCNs. EMCPs include federally Program plan to HCFA to expand for Medicaid and an older child ineli- qualified health centers, rural health Medicaid coverage for near-poor gible for assistance. clinics, and physicians who agree to children on a limited, phased-in basis. Illinois formed a task force, com- provide PCCM services to enrollees. Although the first phase of Illinois’s prised of members of the governor’s While the MCCNs and HMOs will program, called KidCare, began in Jan- office, state agencies, and the General provide a full range of health services uary 1998, the program was not offi- Assembly, to develop the subsequent on a capitated basis, the EMCPs will cially approved by HCFA until April phases of CHIP, which are expected to provide only a gatekeeping function. In- 1998. cover an additional 157,000 children. dividuals participating in MediPlan Plus Under the first phase of the pro- Phase II of Illinois’s KidCare program, are given the opportunity to enroll in gram, the state expanded Medicaid cov- which has two components, was re- one of the three health systems; if they erage for infants and pregnant women cently developed by the task force and 6 Table 4 Medicaid Enrollment and Expenditures per Enrollee: Contributions to Total Expenditure Growth

Illinois United States Average Average Annual Growth Annual Growth 1996 1990–92 1992–95 1995–96 1996 1990–92 1992–95 1995–96 Elderly Total expenditures on benefits (millions) $1,130.3 28.9% 8.1% –0.2% $42,418.5 16.7% 8.4% 3.7% Enrollment (thousands) 126.2 5.9 3.9 –1.4 4,103.2 5.1 2.9 0.0 Expenditures per enrollee $8,958 21.6 4.1 1.2 $10,338 11.0 5.4 3.7

Blind and Disabled Total expenditures on benefits (millions) $2,940.2 27.0 11.9 11.0 $56,601.3 17.6 13.3 8.6 Enrollment (thousands) 297.4 11.9 8.3 –0.8 6,698.2 9.8 9.3 5.2 Expenditures per enrollee $9,886 13.5 3.4 11.9 $8,450 7.1 3.7 3.2 E EEAIM HIGHLIGHTS OF STATE POLICIES NEW FEDERALISM:

Adults Total expenditures on benefits (millions) $673.1 31.1 10.9 2.1 $16,956.6 21.4 9.1 0.7 Enrollment (thousands) 419.2 8.3 4.7 –3.2 9,225.0 11.4 5.0 –4.1 Expenditures per enrollee $1,606 21.0 5.9 5.4 $1,838 8.9 4.0 5.0

Children Total expenditures on benefits (millions) $1,226.5 29.1 17.3 8.2 $24,313.8 23.8 11.4 4.4 Enrollment (thousands) 1,047.5 7.8 5.3 –1.4 21,270.5 13.1 4.8 –1.6 Expenditures per enrollee $1,171 19.8 11.3 9.8 $1,143 9.5 6.3 6.3

Source: The Urban Institute, 1997. Based on HCFA 2082 and HCFA 64 data. Note: Expenditures exclude disproportionate share hospital payments and administrative costs. signed into law by Governor Edgar in may expand coverage to children in ments and advertising on radio and tele- August 1998. Children in families with families up to 200 percent of the FPL. vision; and coordination with other incomes from 133 to 185 percent of Under the federal Balanced Budget organizations such as Special Supple- the FPL who do not have employer- Act of 1997, which established CHIP, mental Food Program for Women, sponsored insurance available to them Illinois is eligible for $620 million in Infants, and Children (WIC), schools, will be enrolled in KidCare Phase II, a federal funds over the 1998–2002 peri- social service agencies, and day care Medicaid “look-alike” program that od. The coverage expansions called for centers. Other steps include simplifica- uses the same provider networks, in the first phase of Illinois’s CHIP pro- tion of the Medicaid application process reimbursement rates, and benefit pack- gram will cost $45 million for FY 1999, and off-site enrollment. age as the Medicaid program. However, of which the state’s share is $19 million. this component of the program will use To draw down the full allotment of fed- Insurance Market Reform a different identification card and will eral funds for the first year ($122 mil- Illinois has taken a number of require cost-sharing. Also under Phase lion), the state would have had to spend steps to assure initial access to, and II, children from families with incomes $51 million of its own money. However, continuity of, private health insurance from 133 percent to 185 percent of the states have two additional fiscal years to coverage. These reforms are aimed at FPL who have employer-sponsored spend the unused portion of the first- ensuring that people judged to be high insurance available to them (they may year allotment of federal money. risks in the insurance community or may not be currently enrolled in the An estimated 300,000 children are because of known medical conditions employer plan) will be eligible for cov- without health insurance in Illinois. Of are able to obtain insurance at afford- erage through a credit voucher program these, 100,000 are eligible for the regu- able rates and continue their coverage that will subsidize the cost of employer lar Medicaid program (prior to the when their job status, marital status, coverage. Phase II had not yet received CHIP expansion) but not yet enrolled. or other circumstances change. approval from HCFA as of October The state is trying to augment its out- The federal Health Insurance 1998. reach efforts to find and enroll these Portability and Accountability Act of Phase III of Illinois’s CHIP pro- children. It plans to sign them up at 1996 (HIPAA) requires health plans to gram is still to be developed and will schools, clinics, and community health (1) guarantee issue of all small group be based on a study, authorized by centers. The state will also employ insurance products to any group with 2 Phase II, of uninsured and low- door-to-door canvassing; distribution of to 50 workers, regardless of past claims income children in Illinois. This stage handbills; public service announce- experience or group health status; (2) 7 guarantee renewal of insurance policies Conclusion 7. William O. Cleverley. “Finan- to individuals and groups of all sizes cial Performance of Chicago Hospi- regardless of claims experience; (3) limit The state of Illinois is economical- tals.” Presentation to Chicago Health the exclusion period for preexisting ill- ly sound and has a strong industrial Policy Research Council, September nesses to 12 months for any condition base, contributing to a high rate of 18, 1998. that was diagnosed or treated up to 6 employer-sponsored insurance. The 8. Jack A. Meyer, et al. Employer months before the policy was issued; low-income population in Illinois, like Coalition Initiatives in Health Care (4) eliminate pregnancy as a preexisting the state population as a whole, is more Purchasing. Washington, DC: Eco- condition that may be excluded from likely to have employer-sponsored nomic and Social Research Institute, coverage; and (5) convert a group insurance than is the case nationwide. September 1996. enrollee’s coverage to a nongroup (or Perhaps as a result, Illinois has not been 9. American Health Line, January individual) policy if the person meets a major innovator in extending publicly 15, 1998. HIPAA eligibility requirements. financed insurance to the low-income Prior to HIPAA, many states had population. This level of stability and taken some legislative steps in the maintenance of the status quo extends direction of the federal legislation. Illi- to Illinois’s health care market; both nois, under a 1993 act, had required the insurer and provider markets have following: undergone little upheaval compared About the Authors ● Exclusion of coverage is permitted with many other markets in the country. for not more than 12 months for Managed care penetration has been Jack A. Meyer is the founder conditions treated or diagnosed up modest, and, where it exists, provider and president of the Eco- to 12 months prior to enrollment; networks appear relatively unrestricted. nomic and Social Research ● Exclusion periods elapsed under a Within the Medicaid program in partic- Institute. Dr. Meyer has con- previous policy must be credited ular, managed care participation is ducted policy analysis and under new policies (credit must be much lower than the national average. directed research on front- given if the gap between new and pre- Although the state has been slow to line issues in health care vious coverage is less than 30 days); adopt managed care for its Medicaid reform and social policy for ● Policies must be renewed except in program, it plans to begin statewide 20 years. He is the author of the cases of fraud, nonpayment, enrollment in capitated plans of many numerous books, mono- and so on; and beneficiaries in the near future. Other graphs, and articles on top- ● Rate bands must be used to limit changes underway that will affect the ics including health care, variations in rates for claims expe- low-income population are the decline labor market and demo- rience, health status, and duration in welfare participation, with associated graphic trends, and policies of coverage (35 percent above and declines in Medicaid enrollment, and to reduce poverty. Dr. Meyer below the mean). new health insurance coverage under is also the founder and pres- In addition, 15 years ago Illinois CHIP. Illinois’s insurance rates have ident of New Directions for enacted a legislative requirement to mirrored the national trend of rising Policy, a health care consult- allow people to convert from group to uninsurance over the past few years; it ing firm. nongroup coverage. remains to be seen to what extent wel- In 1997, Illinois enacted a law to fare declines and CHIP expansions will implement HIPAA. Provisions include alter this trend. the following: Stephanie E. Anthony is a ● Exclusion of coverage is permitted senior research associate at

NEW FEDERALISM: POLICIES HIGHLIGHTS OF STATE for not more than 12 months for Notes the Economic and Social conditions treated or diagnosed up Research Institute. Ms. to 6 (instead of 12) months prior to 1. Federal Reserve Bank of Anthony has conducted poli- enrollment; Chicago, 1998. cy research and analysis on 2. National Association of State ● Credit must be given if the gap federal and state programs Budget Officers, 1992 State Expendi- between new and previous coverage that improve the health of is less than 63 (instead of 30) days; ture Report (April 1993) and 1996 State Expenditure Report (April 1997). women, children, and fami- ● All products must be issued if 3. National Association of State lies. Her writing has focused applied for; and Budget Officers Web site: http://www. on health issues concerning ● A high-risk pool is used to cover nasbo.org. 1998. uninsured children, Medi- HIPAA-eligible individuals who 4. Health Care Financing caid managed care for per- convert from group to nongroup Administration Web site: http://www. sons with disabilities, public coverage. hcfa.org. 1998. hospital conversions, and Illinois did not enact a provision to 5. American Health Line, Sep- youth violence. guarantee renewability in the individual tember 18, 1998. market. Thus, HCFA is responsible for 6. American Health Line, August enforcing this provision. 20, 1998. 8 NEW FEDERALISM: HIGHLIGHTS OF STATE POLICIES 9 Randall Bovbjerg Robert E. Hurley Keith Watson and Watson Keith John Holahan, Joshua Project Project Joel Cantor, Kathryn Case Studies. Sharon K. Long, Gretchen G. Kirby, ANF Stephen A. Norton and Debra J. Lipson, Stephen . Frank Ullman, Bruen, Brian and John Gregory Acs,Gregory Norma Coe, Keith Watson, and Marsha Regenstein,A. Meyer, Jack Jennifer and Marsha Regenstein and Stephanie E. Anthony, and Stephanie E. Marsha Regenstein Joshua M. Wiener and David G. Stevenson,David and Wiener Joshua M. August 1998. Sheila R. Zedlewski,A. Loprest, Pamela Amy-Ellen and Kimball Lewis, Marilyn Ellwood, and John L. Czajka, Toby Douglas and Kimura Flores,Toby 1998. March Stephen A. Norton and Debra J. Lipson,A. Norton Stephen 1998. November Assessing the New Federalism the New Assessing . John Holahan,Wiener, Joshua M. Liska, and David July 1997. L. Jerome Gallagher, Gallagher, Megan Perese, Kevin Susan Schreiber, and Keith Occasional Papers from the the from Papers Occasional The Cost of Protecting Vulnerable Children:Vulnerable The Cost of Protecting Federal, Understanding State, Spending. Welfare and Local Child Rob Geen, Boots,Waters Shelley Tumlin, and Karen C. forthcoming. M. Wiener, and Susan Wallin, November 1998. of the Safety Net in Eight Communities. Portrait Public Policy, Forces, Market of Safety Net Providers. Viability and the September 1998. Report: Budget The Children’s in 13 States. Programs Analysis of Spending on Low-Income Children’s An Kimura Flores, Douglas, Toby A. Ellwood, and Deborah September 1998. Reform:Welfare under Assistance Child Care Early Responses by the States. Robin Kurka,Waters, and Shelley September 1998. Transition: in Assistance Cash The Story of 13 States. Duke, forthcoming. Competition in Health Care: of Market The Spread Implications for Low-Income Populations. and Jill Marsteller, forthcoming. the Low-Income Population: for Health Policy the from Major Findings One Year after Federal Welfare Reform: (TANF) Assistance for Needy Families Welfare Temporary State A Description of after Federal Year One Decisions as of October 1997. Watson, June 1998. for Medicaid Beneficiaries: Care Adapting Managed Adopting and Translation. An Imperfect The Medicaid Reform Debate in 1997 Reform Debate The Medicaid Side of Devolution:The Other and Local Governments. Shifting Relationships between State D. Gold,Steven August 1997. City:York in New Health Care Service Providers’ Market. Response to an Emerging Haslanger,Tassi, Anthony Weiss, Eve Kathleen Finneran, and Sue Kaplan, 1998. March Program: Health Insurance State Children’s A Look at the Numbers Holahan, March 1998. Programs. of Children’s and State Funding Federal Wallin,and Susan June 1998. Counting the Uninsured: of the Literature. A Review July 1998. TANF. Incentives under Work Analysis of the An Pay? Work Does Robert I. Lerman, July 1998. Recipients:Welfare for Prospects Job Out. Speak Employers Hicks,Dickemper July 1998. with Disabilities. Persons for Care Medicaid Managed August 1998. for the Elderly: Care Long-Term of 13 States. Profiles 20. 19. 13. 14. 15. 16. 17. 18. 6. 7. 1. 2. 3. 4. 5. 8. 9. 10. 11. 12. THE URBAN INSTITUTE Nonprofit Org. 2100 M Street, N.W. U.S. Postage Washington, D.C. 20037 PAID Permit No. 8098 Washington, D.C.

Address Service Requested NEW FEDERALISM: POLICIES HIGHLIGHTS OF STATE

Telephone: (202) 833-7200 ■ Fax: (202) 429-0687 ■ E-Mail: [email protected] ■ Web Site: http://www.urban.org

This series is a product of Assessing the New Federalism, a multi-year project to monitor and assess the devolution of social programs from the Funders federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health The project has received funding programs and their effects. In collaboration with Child Trends, Inc., the from The Annie E. Casey Founda- project studies child and family well-being. tion, the W.K. Kellogg Foundation, This brief is one of a series of short reports highlighting state health policy The Robert Wood Johnson Founda- choices. For 13 selected states that are the subject of intensive study by the tion, The Henry J. Kaiser Family Assessing the New Federalism project, there are companion reports high- Foundation, The Ford Foundation, lighting income support and social services policy choices, and also full- The John D. and Catherine T. length reports on health and on income support and social services. The 13 MacArthur Foundation, the Charles selected states are Alabama, California, Colorado, , , Stewart Mott Foundation, The , Minnesota, , , New York, Texas, Wash- David and Lucile Packard Founda- ington, and . Illinois is one of several additional states for which tion, The Commonwealth Fund, the health Highlights have been prepared. To obtain other reports in this series, contact the Urban Institute. Stuart Foundation, the Weingart Foundation, The McKnight Founda- tion, The Fund for New Jersey, and Publisher: The Urban Institute, 2100 M Street, N.W., Washington, D.C. The Rockefeller Foundation. Addi- 20037 tional funding is provided by the Joyce Foundation and The Lynde Copyright © 1998 and Harry Bradley Foundation Permission is granted for reproduction of this document, with attribution to through a subcontract with the Uni- the Urban Institute. versity of Wisconsin at Madison. For extra copies, call 202-261-5687, or visit the Urban Institute’s Web site (http://www.urban.org) and click on “Assessing the New Federalism.”