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Transcript of Web-assisted Teleconference

Stretching Scarce Resources: State Strategies to Design Effective, Affordable Benefit Packages

Addressing the Needs of the Uninsured in a Challenging Economic Environment


On March 14, 2002, the third session of this teleconference was held by the Agency for Healthcare Research and Quality (AHRQ) and the Council of State Governments.

The transcript follows for the third session, "Stretching Scarce Resources: State Strategies to Design Effective, Affordable Benefit Packages." Select for the Streaming Audio for the session (Length, 1 hour, 19 minutes; 9.7 MB).


Transcript

Cindy DiBiasi: Good afternoon. Welcome to "Addressing the Needs of the Uninsured in a Challenging Economic Environment." This is a series of three Web-assisted audio conferences for State and local health policymakers sponsored by the User Liaison Program within AHRQ, the Federal Agency for Healthcare Research and Quality and by the Council of State Governments. My name is Cindy DiBiasi and I will be your moderator for today's session entitled "Stretching Scarce Resources: State Strategies to Design Effective, Affordable Benefit Packages."

This is the third event of this Web-assisted audio conference series on addressing the needs of the uninsured in these difficult times. As you are well aware, in times of rising health care costs, growing unemployment, and shrinking State budgets any gains made over the past few years in addressing the problem of the uninsured are at risk of being reversed. Rising unemployment could mean the loss of employer-based health insurance for thousands of Americans. While shrinking State revenues and budget deficits may limit the ability of public programs to provide coverage for individuals and families who would otherwise be uninsured. Given these factors, many State and local governments are struggling to maintain or at least minimize any decrease in the level of resources available to help the uninsured and they are searching for ways to maximize the effectiveness of the scarce resources they do have.

Let me tell you about each of the calls in this audio conference series. On March 12 during the first Web-assisted audio conference in this series entitled "Trends of the Uninsured: Impact and Implications of the Current Economic Environment," we looked broadly at the size and characteristics of today's uninsured population and also discussed the important health-related and economic consequences of being uninsured.

We also examined efforts by individual States to better understand specific circumstances in their own jurisdictions in order to design more effective approaches to address the needs of the uninsured.

Yesterday during the second Web-assisted audio conference in this series, "State and Local Efforts to Close the Gaps Between Public and Private Insurance Coverage," we discussed opportunities available for States to use existing public programs to address the needs of the uninsured. Panelists also provided examples of strategies other States and local governments are using to maintain coverage levels including designing public—private partnerships.

Today's event will address "Stretching Scarce Resources: State Strategies to Design Effective, Affordable Benefit Packages." This Web-assisted audio conference will examine efforts by States to stretch scarce resources by designing more effective and affordable benefit packages and service delivery approaches.

We will hear first-hand from a State struggling with this issue and hear from State service researchers on the potential of cost sharing and innovative benefit management models to control costs and encourage appropriate utilization of services.

In the studio with me I have two individuals who will be participating in our discussion. Ann Markus is a senior research scientist at the Center for Health Services, Research and Policy within the George Washington University School of Public Health and Health Services. Autumn Dawn Galbreath is the director of the University of Texas Disease Management Program. Also joining us remotely from Portland, OR, is John Santa, the administrator of the Office for Oregon Health Policy and Research. Welcome everyone.

Before we begin our discussion I have a few housekeeping tips to take care of. If at any point during this event you have Web-related technical difficulties, please use the "tell" function to contact tech support. If you are on the phone, just dial "*0" to be connected to technical assistance. Also, if at any point in time you experience difficulty with the audio stream or if you experience an uncomfortable lag time between the streamed audio and slide presentation, feel free to access the audio via your phone at 1-888-868-9080. Just give the password "uninsured audio conference".

Later in the call, our experts will also be taking your questions. There are three ways you can communicate those questions to us. If you are on the phone, please dial "14" to indicate you have a question. You may E-mail us your question at info@ahrq.gov or you may directly type your question in the messaging field and hit "enter".

If you prefer not to use your name when you communicate with us, that is fine. But we would like to know what State you are from and the name of your department or organization. So please indicate that regardless of the way in which you transmit your question.

We will have audio tapes of this Web-assisted audio conference series available for purchase several weeks from now and I will give further details about this at the end of today's show.

Resource and followup information regarding this program will be available in a few weeks on the CSG Website at www.csg.org. Click on the "health policy" link on the left side of the home page and follow instructions from there. You can also request copies of the slides presented in this series by sending an E-mail message to info@ahrq.gov. Please indicate whether you would like the slides for the entire series or specific presentations.

Finally, an archive of these events will also be available on the AHRQ/ULP Website. The URL is www.ahrq.gov/news/ulpix.htm.

Now I think we are ready to discuss today's topic, "Stretching Scarce Resources to Design Benefit Packages." We are going to go first to John Santa. John, I understand that because of the poor economy Oregon, like many other States, is being forced to take a hard look at its Medicaid program and is looking for ways to stretch scarce resources in this tough economic climate.

John Santa: Well, Cindy you are right. Scarce resources for insurance coverage have been an issue for us for the last decade. In late 2000 and early 2001, conditions started to change in Oregon to make them even more so. Clearly, rates of uninsurance started to rise then and Oregon started to move into recession. Events of September 11 only made this more dramatic. Like many States we now have a very large deficit. In Oregon's case, we are looking at the highest unemployment in the United States.

What this has done is caused us to look at doing the Oregon health plan in a new and a bit different way, though retaining some of our original strategies and principles. Specifically, we are interested in returning to more flexibility around benefits and eligibility issues. We have really tried to focus on leveraging resources to the greatest degree possible and all the resources that we can find to leverage. Our hope is to use those resources to actually expand eligibility and we feel that economic times like we are having now justify that more than ever. At the same time, there are clearly realities from a budget point of view and a part of our approach would be to have the ability to cap enrollment for expansion populations.

Cindy DiBiasi: How are you going to go about looking at those options that you face and making those tough decisions?

John Santa: Well, we have been down the tough choices road here in the past. There is clearly a well-established environment here to look at rationing services rather than people. We are very familiar and comfortable with, difficult as it is, with an explicit public decision process. It is a lot of work but we think it makes the whole process make more sense to everyone. We do have data and we have spent the last decade trying to improve the information we have that gives us some reference and relevance and I will give you a couple of examples. Also, we are better at finding evidence from research other researchers in other States and we try to use that when it is available and relevant.

Cindy DiBiasi: I know that about a decade ago Oregon was very involved in the process of trying to systematically prioritize which benefits would be included and which would not be included under its Medicaid program. What lessons did you learn from that experience?

John Santa: Well, we have learned a lot. We have certainly made our priorities explicit. I think most folks watching our process know that prevention has come out very high on our list. Futile and inefficient care has come out the lowest. That makes sense to everyone. In fact, the overall rankings, when folks understand them in our list make sense. It has resulted in a relatively modest financial contribution. Probably somewhere around 3 percent compared to a traditional insurance plan.

It is a challenge to administer because we are talking about the treatments that correspond to conditions. Communicating that and understanding that is a different process than in traditional insurance. We feel like we have made progress, but it is still very complex and we have not removed the emotion from it. It is a difficult process.

Cindy DiBiasi: What have you learned from going back out and seeking input from the public?

John Santa: Well, we have had two rounds of public sessions. One in the spring of 2000 and one in the summer of 2001 on these specific changes. We have learned how to get a lot of people involved and we have learned that it is important to really target a specific population. If you have your meetings at a hospital site, you are going to get primarily hospital administrators and doctors and you are not going to get low-income people.

This has led to an ability we think for us to explain these tradeoffs to Oregonians and they understand really the elements of these difficult choices. For example, in our most recent round, we did get the sense, albeit a qualitative sense, that even low-income folks would like the option of cost sharing prior to the elimination of major benefit families. We did ask about optional Medicaid benefits. I don't think anyone would be surprised to find that we heard loud and clear that prescription drug benefits are very important to the Medicaid population. We were a bit more surprise to hear how important dental was. In fact, our sense again qualitatively was dental benefits seem to rank right up there with mental health benefits.

Cindy DiBiasi: Let's talk about that. How have your efforts to go back and analyze this program, how did that help you?

John Santa: Well, perhaps I could best do that by giving you an example. In our case, we are looking at a significant reduction in benefits for a large portion of our adult population that is eligible by income only. That is the population we are focusing on to reduce benefits and it is the population that we would like to expand to.

Well, dental benefits ended up, if you will pardon the expression, on the cusp. We could clearly make our reductions by just eliminating dental. That was the easiest solution. Well, the dental community, in part because we provide our dental benefit through capitated dental plans, really got organized. They dug into the data. We were surprised, for example, to show that despite our best intentions our adult population was not using preventive dental benefits. In fact, a very high portion of our benefits for dental were going to a small number of high cost patients. The dental community then looked at that data. They met several times. There were several public discussions, and they emerged with a dental benefit plan that does focus on maintaining function. Focuses on having the ability to eat and the ability to do so painlessly and having a smile that will work out in the job market. The benefit resulted in some co-pays on especially restorative services, but most importantly a dollar limit over a 6-month period. With that we are hopeful we can still provide at least some dental benefit.

Cindy DiBiasi: To what extent have you identified health services research that has helped in your decisionmaking?

John Santa: Well, it has been very helpful in some respects and then in others we are asking questions that still remain unanswered. For example, there is pretty good research on what we would call the low-income population. People between 100-200 percent of the Federal poverty level and we have done some of that ourselves. We know that lesser benefit packages help that population. It is clearly preferable to no coverage at all.

We know a lot about churning because of a study done of all the enrollment eligibility issues and the churning that results here in Oregon. We have a lot of information and there are other folks who have done research on employer-sponsored insurance or ESI, which has helped us, figure out the different options available for subsidy programs.

What we have struggled with is our current proposed benefit does have significant cost sharing for both low-income and poor people, people below 100 percent of the Federal poverty level. While there is some research on the effects of that, particularly for prescription drugs, we think that could be a much richer research field than it currently is.

I would mention one I think unique strategy that we are pursuing is when it comes to prescription drugs, especially when it comes to those families in which there are multiple prescription drugs in a family, that may have similar effectiveness but very different cost, we are vigorously pursuing sorting those issues out by having the evidence-based practice center at Oregon Health and Sciences do evidence-based assessments of those families. We are eager to get those results later this spring.

Cindy DiBiasi: John, what would you consider to be the most important lessons you have learned so far?

John Santa: Well, this is really tough work. You don't make folks happy and it is hard to feel like a good guy because you are taking things away. Hard to get people to participate in that. We have been surprised to find that uninsured folks have relatively little leverage. We tend to hear a lot from the stakeholders who have something and the folks who don't have anything aren't really well organized. We have hung in there. We keep presenting options. We try and keep the participants talking. We try and play the role of catalyst. We try and get them to particularly focus on what are the most important services like the dental community did. What are the less-valued, less effective services and get folks to step up how can they contribute in terms of identifying those less-valued, less effective services.

In general, we try to keep pursuing every option until we get pushed back, but it is a tough process.

Cindy DiBiasi: What questions are you still asking? What do you still need answers to?

John Santa: Those cost sharing questions. Especially in poor adults and people below 100 percent of the Federal poverty level. We are very interested. We are looking at the basic health plan in the State of Washington, for example, that has had cost sharing for poor adults for some time. We are very interested in premium issues. We do have some premiums. We have had premiums for a while in our adult income-eligible population and we think there is some different ways to do that so we are interested in premiums.

Most importantly, what we are interested in and what we think is the question is what are the ways in which we could improve the health of our population from a population point of view by trading off benefits for expansion? That we think is a really key research question.

Cindy DiBiasi: It is a big question. We will be getting back to you in a few minutes, but we want to go to our other presenters before we open it up to questions.

Next Ann Markus from George Washington University Medical Center, a research scientist. Ann, before we go too far, let's make sure we have our terms straight. What do we mean by "cost sharing"?

Ann Markus: Well, I like to separate premiums from cost sharing because while they both result in out-of-pocket costs, I do think they have a different aim from the consumer's perspective. Premiums are directly associated with a decision to enroll in health insurance and it is very relevant of course to the success of public insurance programs.

Cost sharing, on the other hand, is directly associated with the use of services. Now when it comes to a definition, premiums are defined as a set amount of dollars for a defined payment period, usually monthly, [unclear] health insurance coverage. States have also used enrollment fees, which are slightly different, but are basically the same concept. They are set amounts of dollars per defined payment period. Those are usually quarterly or annually, paid to participate in a public program and receive services.

Cost sharing, on the other hand, is defined as patient exposure to out-of-pocket costs associated with the delivery of health care services and usually includes deductibles, co-insurance and co-payments. Deductibles are flat dollar amounts for medical services that have to be paid by the patient before the insurer picks up all or part of the remainder of the cost. Co-insurance, on the other hand, is a defined percentage of the total charges for service. Co-payments are fixed-dollar fees per visit paid at the point of service.

Cindy DiBiasi: What are the purposes of cost sharing?

Ann Markus: Generally there are a number of reasons why insurers want to impose premiums and cost sharing, including enticing families to be more cost conscious in seeking care, fostering in some sense ownership and personal responsibility. Another reason is to direct consumers toward more cost-effective care, deter unnecessary utilization and raise revenues to reduce costs or cost of health care coverage.

There are also some additional reasons for States to consider cost sharing. States have also used cost sharing to make public insurance programs aimed at the poor to look more like private insurance and thus avoid the welfare stigma associated with this program and to limit substitution and [unclear] of private insurance.

Cindy DiBiasi: Where do you see the trends in this area?

Ann Markus: Well, I think it is important to examine what is happening in the area of cost sharing in the private sector as well as the public sector because in a way the experiences that private sector drives or influences the approach is that public programs might end up considering and adopting. In the private sector during the late 1990's, we experienced strong economic growth and tight labor markets. Employers were more willing to pay large shares of premiums and less likely to cut back on benefits because they were concerned about recruitment and retention. Employers now are seeing a return of the double-digit premium increases of the late 1980's and early 1990's and recent research by a number of researchers has shown that they are not changing their contribution strategies so much even though we are talking a lot about defined contribution approaches. So they are not changing the contribution approaches so much as they are changing their benefit structure by among other things, increasing co-payments for office visits, for emergency room visits, for specialty care visits, in-patient stays and also by using three-tiered pharmacy benefits.

In a sense, there are similar kinds of trends in the public sector towards increased cost sharing. I think it dates back to a certain extent to the State Children's Health Insurance Program (SCHIP)in 1997 and the two more recent initiatives by the Centers for Medicare & Medicaid Services (CMS). The first initiative being the Health Insurance Flexibility and Accountability Act (HIFA) for "chip in" Medicaid and the Pharmacy Plus Initiatives for low-income seniors who have Medicare coverage. Those two initiatives give States a lot of leeway in designing new rules for their cost sharing, for cost sharing.

Cindy DiBiasi: Let's talk a little bit about the flexibility States now have with respect to establishing the cost sharing provisions and their various health care coverage programs.

Ann Markus: Well, States have varying levels of flexibility depending on the program. Under Medicaid, premiums are generally prohibited. There are some exceptions. While cost sharing is usually allowed with some exceptions and there is no annual cap on the amount of cost sharing. Under SCHIP on the other hand, both premiums and cost sharing are allowed and there is an overall annual cap of 5 percent of family income.

Finally, State employee benefit plans are probably the ones that are enjoying the greatest flexibility in setting premiums and cost sharing levels, but most of that happens actually between insurers and the State employment program through negotiations. Under both programs there are waivers which means that States can ask to waive some of the Federal requirements concerning cost sharing and being more flexible in setting cost sharing rules that are different from the Federal ones.

In the Medicaid statute, there are actually two cost sharing waivers. One for the inappropriate use of the emergency room in which case States can ask to increase the amounts of cost sharing. There is also the possibility to ask for, to do a 2-year demonstration program just on cost sharing. Under Section 11 waivers, States can waive some of the Medicaid or SCHIP requirements as part of the 5-year demonstration program and now there is the more streamlined waiver process increased flexibility under HIFA.

Cindy DiBiasi: Has any research been done, and if so what does it tell us about the impact of cost sharing on things like access and utilization costs and outcomes?

Ann Markus: Well, again I like to separate out premiums from cost sharing when we talk about some of the evidence on these two aspects. In terms of premiums, the three or four studies that exist on effective premiums on patient rates pretty much consistently indicate that the pricing of benefits is an important influence on low-income people's decision to enroll in their public insurance program. Although they also point out that the actual design and implementation of these programs will likely determine actual participation rates.

More specifically, some of the studies consistently show that as premiums increase participation rates decrease. John mentioned that Washington Basic Health Plan and there is one study that actually looked at Medicaid expansion and [unclear] the best program in Washington, Hawaii, Minnesota and Tennessee. It showed that in the aggregate when the program, when a premium was increased by 1 percent of income, over half of eligible persons enrolled and as you increased the percentage, enrollment dropped. Also these studies found that pretty much the magnitude of the effect was pretty consistent across. They estimated that roughly a $10 increase in premiums would result in roughly a 10-15 percent decrease in enrollment.

In terms of cost sharing, there are a number of studies on cost sharing. There are a lot more studies on cost sharing than on premiums, but there is still a lot we don't know as John pointed out.

What we do know is pretty consistent across and the strongest evidence comes from the RAND Health Insurance Experiment, which was conducted in the 70's. This study looked at co-insurance deductibles and income-related maximums. Other studies are not so robust, but methodologically, but they looked at six co-payments only, but many of these studies basically aimed at detecting the effect of cost sharing on the use of services in health outcomes and also to a certain extent, costs.

Cindy DiBiasi: To what degree are the results different across population groups, especially populations at different income levels?

Ann Markus: Well, research shows that cost sharing has a deterrent effect across the board. Pretty much the same effect for everybody whether it is children or adults, people who are healthy or people who have chronic conditions, rich or poor. But the existing body of knowledge also suggests that cost sharing may have a more pronounced negative effect on low-income people and it comes from a number of studies. The studies on premiums that I just alluded to, a number of studies that focused on non-Medicaid populations and five or six Medicaid studies that are out there that by definition focus on a low-income population. Generally they did find a disproportionate effect of cost sharing on those populations.

Cindy DiBiasi: What do we know about what States have been doing with respect to cost sharing provisions within their SCHIP programs?

Ann Markus: Well, all States with separate SCHIP programs have some form of cost sharing. There are 35 States with separate SCHIP programs, 26 of those impose premiums and those are mainly targeted to families with incomes above 150 percent of the poverty. Twenty-five States also impose co-payments and also those are mainly targeted at families with incomes above 150 percent of poverty. Research thus far has focused on the effect of premiums on initial participation but also on continued participation in the program. For example, one study, which looked at North Carolina, found that the failure to pay their enrollment fee of $50 per child was the leading cause for denied participation in the program. Another study showed that while families liked the concept of paying monthly premiums, they also faced difficulties in making those premiums on a regular basis.

Finally, a couple of studies focused on continuous enrollment and disenrollment and they did find a significant portion of the children lost coverage as a result of the failure to pay premiums. There is also some anecdotal evidence that suggests that collecting and processing premiums and other cost-sharing contributions may be administratively burdensome and may not be worth the cost. As a result of this, some States have actually contracted out that function or dropped the requirement of cost sharing altogether.

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