OF STATE THE STATES January 2008 Rising To the Challenge OF STATE THE STATES 1 OF STATE T H ESTATES About the Photo This year’s cover image reflects both the struggle and determination of state efforts to expand coverage to the uninsured. With high expectations for blue sky ahead, a number of states are rising to the challenge of moving forward with meaningful health care reform – rocky, sometimes perilous terrain. States are climbing largely alone, with little Federal support and only the experi- ence of their peers and predecessors to guide them. However, their grip is sure and their eyes are looking up. The status quo is no longer an option. About SCI State Coverage Initiatives (SCI) is a national program of the Robert Wood Johnson Foundation (RWJF) administered by AcademyHealth. SCI works with states to plan, execute, and maintain health insurance expansions, as well as to improve the availability and affordability of health care coverage. For more information about SCI, please visit our Web site www.statecoverage.net. taBLE OF CONTENts 4 Executive Summary: Rising to the Challenge 7 Surveying the Landscape 15 Key Policy and Design Issues: The Building Blocks for Reform 25 State Strategies: The Status Quo is Not an Option 53 Medicaid: A Vehicle for State Coverage Expansions 57 Looking Forward 58 SCI Publications and Meetings 59 Endnotes Written By: Margaret Trinity, Enrique Martinez-Vidal, Isabel Friedenzohn, Amanda Folsom, Brynnan Cox Managing Editor: Isabel Friedenzohn Contributing Editors: Enrique Martinez-Vidal, Kristin Rosengren External Reviewers: Susan Besio, Jenny Hamilton, William Hayes, Rachel Nuzum, Joseph Thompson Art Direction: Ed Brown OF STATE THE STATES 3 OF STATE THE STATES Executive Summary RISING TO THE CHALLENGE For the sixth year in a row, the number of uninsured grew, reaching a recent high of 47 million. In 2007, states intensified their efforts by implementing planned reforms, passing new legislation, and debating ambitious reform proposals. Governors, legislators, and stakeholders politically feasible proposals that build on for obtaining health care coverage among demonstrated renewed optimism as they the current, mixed public-private health individuals and employers. Already, the moved forward with planning, enacting, insurance system. state has achieved several remarkable and implementing a wide array of reforms. Their actions demonstrated that the Despite new efforts to think beyond the status quo is no longer an option: the current paradigm and find new tools to Employer-Based Coverage lack of national movement to address the address health care reform, historically Stabilizes, but Children Continue issue of the uninsured, combined with difficult policy questions remain. States to Lose Ground growing political will among Governors currently considering the applicability The year capped a period of unprecedented and legislators fueled momentum for of comprehensive reforms in their state declines in employer-based coverage, which state coverage reforms. Stable financial will have to identify and prioritize their conditions also played a role, allowing goals, address the challenges of financing, dropped to 59.7 percent in 2006. And while a many states to move forward in ways that determine the viability of mandates, and stable economy and slowing premium growth were not possible during the early years of define affordability. It is the solutions have stemmed the erosion of employer- this decade when harsh fiscal conditions to these questions that will create the sponsored insurance, it remains to be seen forced states to retrench. building blocks for state health care whether the declines of the past few years will reforms to come. be reversed. These steady declines are mirrored State approaches to reform vary by an increase in the number of uninsured over considerably, often depending on Overall, states’ reform activities can be the course this decade. Children continued to the political and fiscal environment; grouped into three categories: lose ground, swelling the ranks of the uninsured demographic characteristics, insurance by 600,000 in 2006 and market dynamics, and other economic n Comprehensive reforms. Maine, accounting for more than variables also impact a state’s capacity Massachusetts, and Vermont forged one-quarter of the to act. Yet almost universally, states are ahead with ambitious reform programs growth in uninsured. considering health care reform in a very that aim to provide residents with pragmatic way. A single-payer system universal or near-universal coverage. These figures lent is generally not considered a politically renewed determination viable option; however, neither are Massachusetts continued to capture the to states’ efforts. reforms that rely completely on a free nation’s attention with the implementation market, consumer-driven health care of a sweeping reform program that system. Instead, most state reforms look to emphasizes shared financial responsibility OF 4 STATE THE STATES milestones: strong enrollment in its private market reforms and launched Many of these states used Medicaid as low income subsidy program, and the new purchasing mechanisms. For a vehicle to expand coverage, taking launch of the Commonwealth Health example, Washington enacted significant advantage of the new flexibility offered Insurance Connector, which helps small legislation that provides access to by the Deficit Reduction Act (DRA) of employers and individuals purchase coverage for all children by 2010, and 2005. States also used SCHIP expansions affordable insurance. Many states have begins a premium subsidy program for as a strategy for expanding coverage, expressed interest in the Connector model families. The state also plans to develop although uncertainty in the long term and its promise of easing the access and a Massachusetts-style Connector to financing of SCHIP may limit those market hurdles so often experienced increase opportunities for employers to efforts moving forward. (After months of by the uninsured. In fact, although offer affordable coverage to low-income negotiation, lawmakers could not agree on the Massachusetts model was initially workers. In Oregon, Governor Ted a reauthorization plan the SCHIP program; viewed as unique and holding little Kulongoski specified a detailed timeline the program has been extended in its potential for transferability, other states for developing a full-scale health reform current form until March 2009.) are now borrowing key components of proposal. A slew of other states are Massachusetts’ approach. gearing up to undertake substantial A discussion of coverage in 2007 would reforms in 2008 and beyond. not be complete without addressing While Massachusetts garnered the most the wealth of state activities aimed at headlines, Maine and Vermont moved n Incremental strategies. Many states system-wide improvements in quality, forward quietly with ambitious coverage moved forward with incremental care coordination, and cost containment. reform agendas of their own. Maine reforms that expanded health Increasingly, states are coupling continued to encounter challenges with coverage for subpopulations within coverage expansions with strategies its Dirigo Health Program, which has the uninsured. In 2007, momentum that target chronic conditions, wellness experienced disappointing enrollment continued for guaranteeing access and prevention, the uptake of health and has suffered from a controversial to health coverage for all children. information technology, and public funding mechanism. Vermont began The Illinois All Kids program, the reporting of information on cost and enrollment in its Catamount Health first program of its kind to guarantee quality. With these efforts, states are plan, which like Massachusetts’ approach, universal coverage to children, exceeded aiming not only to improve quality, but includes mandatory requirements for enrollment expectations but faces also to control costs and improve the value employers. Policymakers are watching several challenges as it tries to maintain of public and private programs. closely the results of the state’s outreach the momentum of its inaugural year. efforts and the success of protections Following in the footsteps of Illinois, a LOOKING FORWARD designed to discourage crowd out of variety of states are pursuing expansions With the number of uninsured continuing employer-based insurance. aimed at children, including Hawaii, to rise, employer-sponsored coverage Missouri, and Texas. New York created continuing to weaken, and no federal The climate appeared right for reform the nation’s highest ceiling for the State action in sight, state health care reform will elsewhere, as significant new coverage Children’s Health Insurance Program continue to play a critical role in decreasing proposals emerged from California, (SCHIP) by raising the eligibility the number of uninsured individuals in the Pennsylvania, and New Mexico. requirement from 250 percent of the United States. States have played a critical Governor Schwarzenegger captured federal poverty level (FPL) to 400 role in increasing the urgency surrounding national headlines at the start of 2007 percent. Connecticut will also be raising conversations about improving health care with his vision of a sweeping reform its SCHIP eligibility to 400 percent FPL. coverage for the country’s uninsured and proposal that would achieve coverage underinsured. Yet, given the future fiscal for all Californians, while ensuring A number of states—Connecticut,