• Introduction: Health Care For All
• Affordable Quality Health Care For all
• Necessary Components of Comprehensive Reform
• Health Care Commissions to Build Consensus
• A Model for Comprehensive Reform: Healthy Wisconsin
• Strategies To Extend Coverage
• Cover All Kids
• Expand Adult Coverage through Medicaid and SCHIP
• Maintain Employer Responsibility
• Improve Access to Private Coverage
• Funding Health Care Expansions
• Improve Quality And Cut Health Care Costs
• Create Incentives for Better Quality Care
• Improve Public Health
• Eliminate Health Disparities
• Expand Access to Coverage
• Improve Cultural Competency
• Support the Health Care Infrastructure and Improve Long-Term Planning
• Stop Industry Profiteering Value For Your Health Care Dollar
• Reducing Prescription Drug Costs
• Rein in Abusive Marketing Practices to Cut Costs
• Ensure Drug Quality and Safety “Academic Detailing”
• Favor Drugs that are Less Expensive But Equality, or More, Effective
• Strengthen Negotiating Power with Drug Makers
• Increase Access to Prescription Drugs for Low-Income and Vulnerable Populations
  Health Insurance Regulations to Ensure Fairness and Access to Coverage
• Non-Profit Hospital “Community Benefits” Standards

The need for health care reform is well-known and, to most Americans, indisputable. Numerous statistics and an endless trove of real-life stories document the need for bold health care reform.

The cost of health care is the primary reason at least 47 million Americans lack coverage and at least 25 million more are under-insured, meaning their insurance does not shield them from high health care costs. From 2002 to 2007, family insurance premiums rose 78% while inflation rose 17% and wages a mere 19%. Both employers and employees are feeling the squeeze.

Failure to create a coordinated and user-friendly health care system that provides necessary coverage for all Americans has left us with the endemic health care costs and wasteful spending that define our disjointed health care system. For instance, a staggering 78% of all health care costs are for people with chronic conditions like diabetes, heart disease, and depression — costs which could be reduced with effective management and disease prevention.

Americans Want Reform: Polls show that Americans want a better, more coordinated health care system that is affordable and easily navigable. Voters consistently rank health care as one of the top three problems facing the country, along with the economy and the War in Iraq, according to the Kaiser Family Foundation. But, an April 2008 Kaiser poll shows that voter concerns about health care run even deeper. Health care consistently ranks as a top economic concern as well, increasing the prominence of health care as a key electoral issue in 2008. Voters are even willing to pay more in taxes for a system that covers all Americans. A 2007 New York Times/CBS poll found that 60% of US residents would pay higher taxes to ensure everyone has access to health insurance.

Building the Political Will to Act: In many respects, we already know how to make health care in America work for everyone. We have the justification and ideas for reform—the roadblocks are short-sighted political agendas and industry special interests.

As states increasingly consider comprehensive reforms to achieve quality and affordable health care for all, progressive legislators and advocates must strengthen the public’s will and voice calling for bold reform. Knowing the facts and figures about health care in America is important, but statistics aren’t enough to convince skeptical voters. Extensive public opinion research funded by Families USA, the Herndon Alliance, and AARP has yielded messages that progressives can use to expand the base of support for bold reform and counter the industry’s tired but effective attacks against reform.

Progressives need to appeal to voters’ values and their anger at how our system functions. Voters want control, choice of doctors, and peace of mind from high health care costs; and they are angry at insurance and prescription drug companies for putting profits before people. Tapping into these values will help ensure strong voter support for progressive legislators and progressive health care reform.

A Program for Health Care for All: This document provides four sets of policies to help state legislators and advocates build proposals and political strategies to put the health care industry on the defensive and successfully move health care reform:

• Affordable, Quality Health Care for All: Comprehensive health care reform proposals will vary across states – each with their own rules, regulations, and health care needs – but there are key elements which all comprehensive initiatives should include. Reform must address the three pillars of health care – cost, quality, and access. For instance, reducing the growth of health care costs is the only sustainable way to expand coverage to all residents.

• Strategies to Extend Coverage: The over-75 million Americans who lack insurance or are under-insured can’t afford to wait for comprehensive reform. There are numerous steps states can take to expand access to coverage, from expanding Medicaid and drawing down additional federal dollars, to covering all children through the federal State Children’s Health Insurance Program (SCHIP), to public/private programs helping residents afford quality coverage. Many believe these incremental steps can help build the base of support for broader reform, particularly as you build programs into the middle class.

• Stopping Industry Profiteering – Value for Your Health Care Dollar:The health care industry, notably insurers, drug companies, and hospitals, spend millions of dollars opposing sensible reforms and consumer protections that threaten their profits. Yet, the public, who believe the industry puts profits ahead of people, is largely supportive of measures to bring fairness and accountability to the industry. States have numerous options to make sure more of our premiums and tax dollars are going to medical care rather than profits and inefficiency. Putting the industry on the political defensive highlights their self-interest in opposing change and will help bolster the public’s support for reform.

• Improving Quality and Cutting Unnecessary Costs: Improving quality will help reduce costs. The Institute of Medicine estimates medical errors cost $17 billion to $29 billion each year, resulting in an estimated 195,000 patient deaths each year. Absent comprehensive reform, states can take numerous steps to improve the quality of health care, such as “pay for performance” and supporting support chronic care management programs. Importantly, lawmakers need to place extra emphasis on reducing health disparities, as people of color and low income communities are especially impacted by the problems of our health care system.

The State Role in Health Care Reform: We need health care reform by the federal government, but the importance of state reform to lasting change cannot be overstated. State legislators can both address key needs of their states and contribute to national momentum by articulating the models, practices, and standards that any national reform should have. For example, the federal SCHIP, enacted in 1997, came out of earlier state efforts to expand publicly-sponsored health care programs for children. Another example is health insurance regulation. States can ensure that any national health care reform includes strong protections for consumers and small businesses by enacting protections at the state level. Congress is more likely to follow the lead of the states than to pre-empt established standards.

Furthermore, a key strategy to prevent the rightwing from blocking reform at the federal level is to send a clear message that state progressives will make sure reform happens, either as a patchwork of state reforms or, ideally, a more integrated national reform built in collaboration with the states. But, states States pursuing reform sends a clear message that corporate interests cannot block good public policy by only playing spoilers at the federal level.

Since 2003, at least three states – Maine, Vermont, and Massachusetts – and the city of San Francisco have enacted legislation with the express goal of ensuring all residents have access to health care coverage. While each has been met with varying degrees of success, and with San Francisco likely to be the first jurisdiction with true “health care for all,” they have all served to spur comprehensive reform efforts across the country. States like Colorado, New Mexico, and Washington created health care commissions to design programs for “health care for all” and in 2007 Oregon lawmakers created a roadmap (SB 329) for developing a system that ensures health care for all state residents.

All of these initiatives, particularly those in Maine and Vermont, pursue a comprehensive approach to reform – addressing cost, quality, and access. Lawmakers and advocates in Massachusetts, who have achieved significant success by cutting the state’s uninsured rate by half since 2006, are now eyeing containment of public and private health care costs as the next major push for reform.

Following Massachusetts’ passage of comprehensive reform in 2006, other large states became fertile ground for the health care debate, and major proposals to guarantee comprehensive reform were proposed in Pennsylvania, Illinois, and California in 2007. These bills closely followed reforms enacted in the forerunner states, including some level of individual and employer mandates, as in Massachusetts. While Governor Rendell continues to pursue his “Prescription for Pennsylvania” proposal in multiple pieces of legislation, SB 5 – Illinois Covered – fell in part to internal state house politics. Similarly, California’s compromise proposal (AB1 X1) between Governor Schwarzenegger and legislative leaders was abruptly halted in the Senate after passing the State Assembly, reportedly due to the state’s burgeoning budget deficit. Additionally, while the California legislature has twice passed a single-payer health care measure, although without including a funding mechanism, Governor Schwarzenegger has twice vetoed it.

All of this activity bodes well for health care reform nationally and in the states, in large part because states look to each other for guidance and ideas. For instance, lawmakers in Iowa this year enacted legislation with the goal of covering all children, joining at least Illinois, Pennsylvania, Massachusetts, Washington, and New York. The legislation includes language, derived in part from the California compromise measure, which calls for the state to limit the cost of children’s health care coverage to an affordable percentage of family income.

Fortunately, there are new models for reform, such as Healthy Wisconsin, which offer a new standard for states and go further than the Massachusetts model towards guaranteeing quality health care for all residents and ensuring new systems are resistant to economic ups and downs.

State Comprehensive Health Care Laws:

• San Francisco (Ordinance overview and text)

• Vermont Bill (Overview and resources)

• Massachusetts (Bill summary and text)

• Maine’s Dirigo Health Reform (Chapter 87)

Necessary Components of Comprehensive Reform

To address voters’ concerns and reach the goal of health care for all, reform must guarantee comprehensive coverage for all residents as well as tackle the escalating cost of health care and ensure the highest quality of care possible. These areas - cost, quality, and access - are inextricably linked.

The following outlines the key values that any policymaker should incorporate into a comprehensive reform package tailored to their own state’s needs, with the goal of achieving affordable, quality health care for all residents. The details will be covered in later sections, but these basic principles apply to any plan:

• Costs: One key is to limit costs, including deductibles and co-payments, to an affordable percentage of income, since patients who are sensitive to costs and face significant cost-sharing will forgo both necessary and unnecessary care, leading to delayed care and worse health outcomes. Maintaining employer participation and funding is also crucial to controlling costs, since employers still cover more than 158 million Americans, more than twice the number of Americans who receive Medicaid or Medicare. Creating a larger, merged pool of coverage lives achieves economies of scale, strong purchasing power, and negotiating leverage. And policymakers will have to challenge profiteering by health care industry players to keep costs down for consumers, including small businesses.

• Quality: Measures to improve the quality of care frequently reduce health care costs, and vice versa, including “pay for performance” and other systems that pay to keep people healthy, instead of simply paying for each service rendered. The staggering costs of chronic disease means that helping people stay healthy and reduce symptoms is critical to lowering health care costs and improving patients’ quality of life. And given the inequity in US health care across racial, ethnic, economic, gender, and geographic lines, a particular focus on eliminating the sub-par care and worse health care outcomes for people of color and low-income and underserved populations is critical for improving overall quality.

• Access: Coverage should be comprehensive and include all necessary preventive, specialist, mental health, prescription drugs and hospital care, since studies repeatedly show that limited benefit or high deductible health plans cause people to act like they are uninsured. Coverage should be guaranteed and portable, meaning it follows you through life’s events – personal relationships, new jobs, and retirement. A system that automatically provides residents with coverage is more likely to achieve universal coverage than a voluntary system or an individual mandate. Similarly, Americans value strong patient/doctor relationships, so maintaining the ability to choose the doctor you want to see and are most comfortable with is critical to achieving the political support for reform.

• Public Plan Option: Absent a universal coverage system such as a single-payer plan, comprehensive reform should include a public health plan, ideally integrating the existing state Medicaid and other public plans, which is open to individuals and employers. A large public plan can use its leverage to negotiate lower costs and infuse the insurance market with quality competition, increasing options in the market for individuals and small groups.

Health Care Commissions to Build Consensus

A key strategy for lawmakers to develop and move comprehensive reform is to create Creating a health care reform commission is one key strategy that will assist lawmakers in developing and moving comprehensive reform. If used strategically, commissions can raise the public’s awareness and build political support for reform while they study various options and discuss the benefits and trade-offs to different approaches. Commissions are typically well-covered by the media; they educate the public, fellow lawmakers, and media about health care and the need for bold progressive reforms, and they highlight the drawbacks to approaches typically pursued by the Right. If managed effectively, commissions can provide lawmakers with the political cover and credibility they need to push real reform.

A model commission is Washington’s newly created Citizens’ Work Group on Health Care Reform (SB 6333). The legislation authorizes a detailed analysis of leading comprehensive health care reform models and requires the Work Group to hold regional public forums to engage the public in developing recommendations for comprehensive reform. The Work Group is similar to reform commissions in Colorado and New Mexico, which conducted detailed actuarial studies of various health care reform models, from limited benefit plans to single-payer systems, and have since reported their findings. The Washington Work Group, like Colorado’s commission, is required to report specific recommendations for legislative action by November 1, 2009, in time for the 2010 session.

See Also

Comprehensive Reform:

• Community Catalyst and Families USA - A Consumer Guide to State Health Reform
• Progressive States Network - Health-Care-for-All on the Installment Plan
• Kaiser Daily Health Policy Report – Number of Uninsured Massachusetts Residents Declined by Nearly Half Last Year, According to Urban Institute Report
• National Alliance for Mental Illness, National Council for Community Behavioral HealthCare – Coverage for All: Inclusion of Mental Illness and Substance Use Disorders in State Healthcare Reform Initiatives

A Model for Comprehensive Reform:

Healthy Wisconsin

In June 2007, the Wisconsin State Senate became the first (and only) legislative chamber in the country to pass a fully-funded comprehensive health care reform package that would guarantee health care for all residents and enhance their choice of provider. Healthy Wisconsin stands out for its guarantee of affordable health care, cost containment provisions, and consumer choice. While not the sole model worth emulating, states should consider the elements of the plan that deliver on key values of cost, quality, and access.

Healthy Wisconsin would guarantee all residents who are not otherwise in a Federally-based health plan, like Medicare or Medicaid, with portable comprehensive benefits modeled after the current state legislators’ health plan. Health care would be financed with payroll deductions -- 9-12% of social security wages for employers and 2-4% of social security wages for employees -- instead of premiums. Residents would be able to choose from various networks of providers, who would compete on metrics of quality, price, and access.

Costs would be cut system-wide through administrative efficiency, the negotiating power achieved by pooling all eligible residents, and improved systems for preventive care and chronic care management. A report by Citizen Action of Wisconsin, “Good Deal: How Healthy Wisconsin Improves the Bottom Line for Wisconsin Families”, estimates that the average household would save 40% to 62% under the new program compared to the current disjointed health care system -- an annual savings of $1,320 to $4,180 each year. A Lewin Group study shows that employers currently providing coverage at some level would save $700 million dollars in the first year of the program and the state would save $1.3 billion each year for the next ten years.

A New Standard for Reform: Although the conservative-led State Assembly refused to go along, progressive lawmakers and advocates who comprise the Healthy Wisconsin Coalition are pushing ahead, using the proposal and the Assembly’s failure to support health care reform as major campaign issues in state legislative races this year.

Nationally, Healthy Wisconsin creates a new standard and model for state health care reform, as evidenced by similar legislation proposed in Washington earlier this year. Healthy Wisconsin represents a shift away from the 2006 Massachusetts model for reform -- as well as those in Maine and Vermont -- by guaranteeing coverage to all residents and establishing a uniform, affordable funding mechanism that is proportional to employers’ and families’ ability to pay. Where the Massachusetts law seeks to shore up the current disjointed system of multiple payers and private insurance companies, Healthy Wisconsin creates an integrated health care system that can tackle cost containment more effectively while enhancing health care choice.

See Also

Healthy Wisconsin:

• Citizen Action of Wisconsin - Healthy Wisconsin Resource Center
• Citizen Action of Wisconsin - Good Deal: How Healthy Wisconsin Improves the Bottom Line for Wisconsin Families
• Families USA - Healthy Wisconsin: Good Medicine for Wisconsin’s Economy
• Progressive States Network - Healthy Wisconsin: Model Policy, Model Advocacy

Other Resources

Messaging:

• Herndon Alliance - Resources for messaging and communicating progressive health care reform - www.herndonalliance.org
• Families USA, the Herndon Alliance, AARP (Westen Strategies and Lake Research Partners) – How to Talk About Health Care Reform

Health Care Facts:

• Kaiser Family Foundation and the Health Research and Educational Trust, 2007 Survey of Employer Health Benefits
• Kaiser Family Foundation - Trends in Health Care Costs and Spending, September 2007
• Kaiser Family Foundation - State Health Facts
• Kaiser Family Foundation - Changes in Employer-Sponsored Health Insurance Sponsorship, Eligibility, and Participation: 2001 to 2005
• Robert Wood Johnson Foundation - Paying for Quality: Understanding and Assessing Physician Pay-for-Performance Initiatives

Absent a comprehensive initiative to achieve quality and affordable health care for all, there are a number of steps progressive leaders can take to extend coverage to the uninsured and make coverage for the currently insured more affordable.

Extending coverage to all Americans is an economic as well as a moral issue, as the costs associated with being uninsured are not borne by the uninsured alone. In 2005, Families USA showed that unpaid care for the uninsured resulted in an average cost-shift of $922 to family insurance premiums. Families USA, at the time, projected these costs to increase to $1,502 by 2010.

States have drawn from a number of strategies to expand access to coverage and stem the rising percentage of uninsured Americans. While Congress has largely failed to act in recent decades – a primary exception being passage of the State Children’s Health Insurance Program (SCHIP) in 1997 – states invested in Medicaid and more than doubled the number of residents receiving Medicaid since the early 1990’s, from just over 20 million to at least 55 million. This number doesn’t include the 4.5 million children covered by SCHIP which, like Medicaid, is a state/federal partnership with eligibility levels largely set by the states.

In addition to Medicaid and SCHIP, states have developed creative programs that help low-income and middle-income families afford quality coverage while requiring employers to provide coverage or help finance expansions. Maine, Vermont, and Massachusetts have been leaders since 2003, making good coverage more affordable largely through income-based sliding scale subsidies and negotiating better deals from insurance companies.

Cover All Kids

Many health care advocates believe that as you build public programs into the middle class, more and more Americans -- voting Americans in particular -- will become invested in those programs and more welcoming of a universal system. As a first step to universal access to coverage, states like Illinois, Massachusetts, Pennsylvania, and Wisconsin have built health care programs to cover all kids, a strategy feared by the Right. A 2007 New York Times/CBS News poll found that 84% of voters support expanding SCHIP to cover all uninsured kids.

The Wall Street Journal referred to all-kids coverage as universal health care on the “installment plan.” It has urged conservatives in Congress and the Bush Administration to oppose broad expansion of SCHIP, believing it is a first step towards health-care-for-all -- a good thing in the minds of progressives and a backhanded compliment to such strategies. As Oregon Gov. Ted Kulongoski, who continues to make coverage for all children in his state a priority, said, “If you drive the plan into the middle class, it’s not just viewed as a public assistance program. You build a base of support for the program to provide health care for all of us.”

Many other states have extended kids’ coverage up to 300% of the poverty line. New York in 2007 went further by increasing SCHIP eligibility for children in families with incomes up to 400% of the poverty line ($80,000 for a family of four). Despite the Bush Administration’s refusal to authorize a robust expansion of SCHIP, New York lawmakers are committing state funds to follow through with the promised expansion. The state will also allow families above 400% without other options to purchase the SCHIP coverage at full-cost, which is still cheaper and likely more comprehensive than private options.

See Also

• Progressive States Network - In Health Care, 2007 May Be the Year of the Child
• Georgetown University - Children’s Health Coverage: States Moving Forward
• Illinois All Kids - Program Overview and text

Expand Adult Coverage through Medicaid and SCHIP

Bringing Medicaid and SCHIP to more people is one of the best and most cost-effective ways to broaden access to health care coverage. Medicaid and SCHIP bring in valuable federal dollars and frequently do not require new administrative structures. In fact, maintaining or broadening investments in
social services can help prop up an ailing economy. Additionally, states can use their bargaining power achieved from a robust Medicaid program to negotiate better deals on health care services, like prescription drugs and durable medical equipment, and to create incentives for better quality care.

As presented by a web-based guide to health care reform created by Community Catalyst and Families USA, states have a number of options for expanding access to Medicaid and/or SCHIP, including:

• Raising eligibility levels above the federal poverty line or “disregarding” some amount of income so that more people become eligible under existing income eligibility guidelines.
• Providing Medicaid coverage for disabled adults and seniors with incomes up to 100% of the poverty line and higher.
• Offering premium assistance to Medicaid-eligible employees, whereby Medicaid pays the employee’s share of job-based coverage. This helps employers provide group coverage because most states require a certain percentage of employees to participate in the employer-provided plan in order for the business to qualify for group coverage.
• Using Medicaid “Ticket to Work” programs to provide coverage on a sliding scale to people who are working but have severe disabilities.
• Implementing “medically needy” programs which that help people who are impoverished by health care costs and events to pay for their costs.
• Securing a federal “waiver” to existing federal Medicaid and SCHIP laws. These allow states to develop programs or expand access to coverage to populations not immediately covered by existing rules, such as adults without children.

Refuting claims by the Right that such expansions drive people away from private insurance and into public programs, Community Catalyst, Families USA, and the Center on Budget and Policy Priorities point out that expanding Medicaid and SCHIP is far more cost-effective than proposals like tax credits and deductions, which primarily benefit people who already have coverage. Additionally, while Medicaid is a government-created program, almost two-thirds of Medicaid members receive their benefits through a privately-run managed care program. And, while state investments in Medicaid and SCHIP have made progress, they have not been able to completely stem the rising percentage of uninsured Americans as employer-based health care has declined.

See Also

• Families USA and Community Catalyst – A Consumer Guide to State Health Reform: How will this proposal make health coverage affordable for people with low- and moderate-incomes?
• Center on Budget and Policy Priorities – The False “Public Versus Private” Choice for Children’s Health Coverage

Maintain Employer Responsibility

The great majority of employers want to provide health care benefits to employees and their families. Despite a steady decline in the percentage of Americans with employer-based coverage, from 66% of Americans under age 65 in 2000 to 61% in 2004, employers still cover more than 158 million Americans, more than twice the number of Americans who receive Medicaid or Medicare. Because of the financial contributions employers make to health care, ensuring strong employer participation in health care reform is a key priority.

Employer Mandates: As part of comprehensive reforms, Massachusetts, Vermont, and San Francisco require all employers to provide some degree of health coverage for their employees or pay a fee to help finance health care programs. The main goal is to ensure that “low road” employers are not dumping their health care costs onto the public and gaining an unfair competitive advantage against employers who do provide coverage. Despite a precipitous national decline in employer-based coverage and warnings from critics that state-funded programs would “crowd-out” private insurance, Massachusetts has seen a 3% increase in employer-based coverage.

San Francisco’s law has the strongest employer mandate, requiring employers with 20 or more employees to provide health care or pay the city $1.17 to $1.76 per hour depending on firm size. Employers have tried to challenge the law in court, but recent court decisions have allowed the city to continue with the mandate during the appeal process. This bodes well for the program and employer mandates elsewhere. Healthy Wisconsin’s proposed employer and employee payroll-fee, which replaces monthly premiums, is a form of employer mandate. In many ways, its payroll-fee creates the most equitable approach to employer responsibility, since its sliding scale payment structure is directly proportional to an employer’s ability to pay.

Public/Private Partnerships: Many states have developed programs that contract with private carriers and offer coverage to individuals and small businesses. These typically offer insurance-like coverage administered by public and private entities coupled with sliding scale subsidies or premiums available to people with income up to 300% of the poverty line.

• Contracting with Insurers: Vermont’s Catamount Health Plan and Maine’s DirigoChoice insurance program contract with private carriers to offer a comprehensive benefits package with sliding scale premiums or subsidies to people with incomes up to 300% of poverty. In case private carriers do not participate, each state is authorized to offer the coverage through a public entity. Both programs are available to individuals and small business employees. Maine’s program is available to small businesses as long as employers cover 60% of an employee’s premium. It is also available to employees eligible for Medicaid and provides a wrap-around benefit to ensure those employees receive the full range of Medicaid services. New Mexico’s State Coverage Insurance program offers coverage to individuals and small business employees with incomes up to 200% of the poverty line. Importantly, the program limits total out of pocket costs to 5% of a family’s income.

• New Regulatory Agencies: Massachusetts’ Commonwealth Connector negotiates and contracts with private insurers to bring more affordable insurance options to market for individuals and small businesses. The state created Commonwealth Care, a program offering subsidized coverage to adults with incomes up to 300% of the poverty line and who are not eligible for Medicaid, and Commonwealth Choice, a similar program that offers non-subsidized health plans to individuals, documented immigrants, families, and small businesses. Both Commonwealth programs are administered by the Connector. As Community Catalyst describes, connectors create a common marketplace for consumers to compare options, and they work best with other insurance reforms like guaranteed issue, community rating, and standardized benefit plans.

See Also

• Families USA and Community Catalyst – A Consumer Guide to State Health Reform: Employer Buy-In Programs
• Families USA and Community Catalyst – A Consumer Guide to State Health Reform: Expanding Public Coverage to Non-Medicaid Populations
• December 2006 Urban Institute paper – Changes in Employer-Sponsored Health Insurance Sponsorship, Eligibility, and Participation: 2001 to 2005
• Commonwealth Fund - Stretching State Health Care Dollars: Building on Employer-Based Coverage
• Massachusetts – Commonwealth Connector

Improve Access to Private Coverage

• States can take a number of other actions to improve access for families and small businesses to more affordable options for health care, including:

• Coverage for Young Adults: Requiring insurance companies to allow children to stay on their parent’s health insurance well into their 20’s can help cover one of the fastest growing segments of the population without health insurance. Of the 45 million uninsured in the US, 31% are between 19 and 29 years of age. Eleven states have authorized coverage up to age 25, but New Jersey has extended dependent coverage to age 30.

• Pre-Tax Employee Premium Payments: Requiring employers to set up “section 125 plans,” which allow employees to pay their share of employer-based health insurance premiums pre-tax, can help working families better afford private insurance.

• Pooling Public and Private Coverage: In 2008, legislators in Connecticut passed – but the Governor vetoed – an expansive pooling initiative allowing small businesses and municipalities to pool with the 200,000 members of the strong state employee health plan. Proponents of HB 5536 projected millions of dollars in savings to municipalities. While over 20 states allow for the pooling of municipal and state employees, Connecticut would have been the first to extend that option to small businesses.

• Standardized Benefit Plans: Requiring insurers in a particular market to include a certain level of benefits in all their insurance options helps ensure people have coverage for the care they need and get value for their insurance premiums. This prevents insurers from selling inadequate insurance and allows consumers to better compare the value of different health plans. And, as Community Catalyst points out, states can also establish maximum premiums and out-of-pocket costs to protect consumers from medical debt and bankruptcy.

• Merging Insurance Markets: Combining the individual and small group markets can make more affordable options available to small businesses and to individuals, in particular. Massachusetts has merged these markets and early projections estimate the move will reduce individual insurance premiums by 15% and cause only a slight up-tick in small group premiums. Community Catalyst found this works best if the two markets have similar consumer protections.

There are worrisome trends in states, as well. Indiana, in 2007, and Florida, in 2008, both enacted new programs that provide reduced benefit and high deductible plans to low income and uninsured residents. Such programs do not provide access to affordable and comprehensive coverage, leaving people
under-insured and without coverage for the care they need.

See Also

• Commonwealth Fund – Rite of Passage? Why Young Adults Become Uninsured and How New Policies Can Help, 2008 Update
• Families USA and Community Catalyst – A Consumer Guide to State Health Reform: Additional Strategies for Increasing Access to Private Insurance
• Connecticut – HB 5536, Connecticut Healthcare Partnership
• Georgetown University - State Consumer Guides for Getting and Keeping Health Insurance

Funding Health Care Expansions

As states face another economic downturn and growing budget deficits, expanding access to coverage may seem like an impossible goal. However, there are steps states can take to generate revenue and “stretch” health care dollars to ensure access to health care.

Following the budget stress states felt earlier this decade, the Commonwealth Fund issued a series of reports titled, “Stretching State Health Care Dollars during Difficult Economic Times”. The four reports focus on shoring up employer-based coverage, improving prescription drug purchasing through pooling and evidence-based systems, improving chronic care management, and innovative uses of uncompensated care funds.

Sources of funding include:

• Employer Pay-or-Play Mandates: Employer mandates help ensure employers provide coverage, but for those that don’t, the penalties for non-compliance can help fund health care expansions. As previously noted, San Francisco’s law requires employers with 20 or more employees to provide health care or pay the city $1.17 to $1.76 per hour depending on firm size.

• Maximizing Federal Matching Dollars: As Families USA and Community Catalyst point out, it is in a state’s best interest to maximize federal matching dollars, particularly during economic downturns. For every dollar a state spends on Medicaid, the federal government matches it with at least $1, and in many cases more. States can generate additional state funds to draw down more federal match dollars through provider taxes. A proposed 4% tax on providers as part of California’s failed compromise reform measure would have generated an estimated $2.3 billion, in large part through additional federal match. The California hospital industry supported the measure because it would have enabled the state to increase Medicaid provider rates.

• Tobacco Settlement Dollars: The 1998 multi-state tobacco settlement is projected to total $246 billion over the first 25 years of the settlement. Unfortunately, only three states have used their settlement dollars to fund tobacco cessation and prevention programs at or above minimum levels prescribed by the Centers for Disease Control and Prevention -- Maine, Delaware and Colorado. These funds should be allocated only towards health care purposes.

• Cigarette and Sin Taxes: Despite being regressive, raising cigarette, alcohol and other so-called sin taxes can provide valuable revenue to fund health care expansion programs. Additionally, raising tobacco taxes has shown to help reduce rates of smoking, which is a key public health goal.

• Ending Corporate Loopholes: Instead of cutting social services or foregoing expansions during difficult economic times, states can raise revenue by requiring corporations to pay their fair share. Options include requiring combined reporting of profits from all subsidiaries, refusing to automatically grant special interest tax breaks handed out by the Feds by “decoupling” state and federal tax codes, enacting oil windfall taxes, and requiring tax disclosure to expose corporations that are abusing the tax code.

• Capturing Savings: A bold feature of Maine’s comprehensive 2003 Dirigo Health Reform is a unique funding measure called the Savings Offset Payment – a fee paid by insurance companies that is proportional to health care savings achieved by the Dirigo Health’s cost containment provisions. Although lawmakers recently replaced the controversial fee with a premium surcharge and increased “sin” taxes, the strength of this model is that it builds health care expansions on top of cost containment, which is necessary for sustainable reform.

Funding Expansions Resources:

• Commonwealth Fund – Stretching State Health Care Dollars during Difficult Economic Times
• Families USA and Community Catalyst – A Consumer Guide to State Health Reform: How to Maximize Federal Matching dollars
• Progressive States Network – Cut Corporate Loopholes, Not Social Services
• Kaiser Family Foundation – Medicaid Financing
• Maine – Dirigo Health: Savings Offset Payment

Other Strategies to Extend Coverage Resources:

• Progressive States Network - Health-Care-for-All on the Installment Plan
• Commonwealth Fund - How Many Are Underinsured? Trends Among US Adults, 2003 to 2007
• Kaiser Family Foundation - State Health Facts

The state of the US health care system is a little bit like the vehicles churned out by the US automotive industry over the past 25 years; bigger isn’t necessarily better, but it sure is more expensive to run. In fact, even though we spend substantially more per person than any other country, the World Health Organization ranked our health care system 37th in the world in 2000. In 2007, the US ranked 42nd in life expectancy. Clearly, we spend more, but we get less.

Improving the quality of health care in the US and reducing the growth of health care costs are inextricably linked. A few sobering facts bear this out:

• The Institute of Medicine estimates medical errors cost $17 billion to $29 billion each year.

• A 2004 HealthGrades study estimated that 195,000 patients die each year across the US from preventable hospital errors.

• The federal agency that directs Medicare and Medicaid has projected US health care spending to double in ten years to more than $4 trillion, accounting for one of every $5 the nation spends.

• A staggering 78% of all health care costs are for people with chronic conditions, like diabetes, heart disease, lung disease, and depression.

Improving the quality of care, reducing public health hazards, and eliminating disparities in health care access will not only improve health and our standard of living, it will reduce health care costs and wasteful spending.

Create Incentives for Better Quality Care

Creating new incentives for quality care and improving the management of diseases is a key policy goal towards reducing the growth of health care costs and making sure Americans get the right care at the right time.

• Managing Chronic Disease: Most states have some sort of Medicaid managed care program, either administered by a private firm or contracted directly with primary care physicians. Vermont’s statewide chronic care management program, Blueprint for Health, is working to move the health care system to one that helps people stay healthy, rather than merely treating isolated medical events. A Pennsylvania commission has proposed a model focusing on engaging patients in making better health decisions, creating a quality-oriented provider culture, improving information systems, and establishing payment incentives for providers.

• Pay for Performance: Paying providers in a way that rewards quality care and care that keeps people healthy, instead of simply paying for each service rendered or office visit, can reduce costs and keep people healthier. More than half of US states have pay for performance systems in their Medicaid programs, and a Medicare pilot project is achieving cost reductions and quality improvements in participating hospitals. As Families USA and Community Catalyst point out, pay for performance is also a mechanism to eliminate health disparities and hospital errors.

• Certificate of Need: Certificate of Need (CON) is a state regulatory process designed to contain health care costs by preventing spending on unnecessary health care infrastructure and services. Under CON, hospitals and other medical facilities are required to get state approval before building a new facility or offering a new medical service. Approval, in large part, hinges on a clear demonstration of need for the new facility or service. Maine’s Dirigo Health Reform strengthened the state’s Certificate of Need by expanding it to include hospitals and large outpatient doctor collaboratives. Additionally, the state established a budget, called the Capital Investment Fund (CIF), to limit the amount of expenditures approved by CON.

• Ending Reimbursement for Avoidable Hospital Errors: The State of Massachusetts and Blue Cross and Blue Shield of MA will prohibit hospitals and other providers from billing for 28 preventable kinds of medical and surgical errors. Similarly, the Pennsylvania Medicaid program recently launched a program to identify and stop reimbursements for care related to avoidable hospital errors. These efforts are similar to a Medicare rule prohibiting payment for preventable conditions acquired at hospitals.

• Reducing Hospital-Based Infections: Public reporting of medical errors can lead to laws targeting infections acquired at medical facilities. The Governor of Pennsylvania reports that in 2006 there were 19,154 infections, resulting in 2,500 deaths and more than $3.5 billion in hospital charges. In response, lawmakers enacted SB 968, which will require hospitals to test their highest-risk patients and patients admitted from nursing homes for infections that are resistant to antibiotics. The law will also increase reimbursements to hospitals that meet benchmarks in preventing infections and require reporting to the CDC.

• Electronic Medical Records: A statewide electronic medical records system in Maine could save the state $50 million each year by eliminating duplicate and unnecessary tests, procedures, prescriptions, and hospital admissions. The program was created by private and public stakeholders and will start with a pilot project before expanding statewide. Similarly, Vermont’s chronic care management program, Blueprint for Health, is creating a new web-based and free Chronic Care Information System. Delaware has already built a statewide system providing immediate access to patient records, and New York City has launched a system offering training and maintenance assistance to doctors with a large number of Medicaid patients.

• Promote Best Practices: The Maine Quality Forum, a strategic initiative of Maine’s 2003 Dirigo Health Reform, provides consumers with information about where to obtain the best quality care as well as disseminating best practices and other clinical information to providers across the state.

See Also

• Kaiser Family Foundation – Health Care Costs: A Primer
• Vermont – Blueprint for Health
• Maine – Maine Quality Forum
• Families USA and Community Catalyst - A Consumer Guide to State Health Reform: Certificate of Need Programs
• Robert Wood Johnson Foundation – Paying for Quality: Understanding and Assessing Physician Pay-for-Performance Initiatives
• Commonwealth Fund – Fundamental Reform of Payment for Adult Primary Care: Comprehensive Payment for Comprehensive Care
• Pennsylvania – 2007 SB 968, addressing hospital-based infections
• Progressive States Network – Reducing Costs and Improving Quality of Care

Improve Public Health

Health care costs can be dramatically lowered if the public is protected from deadly and costly public health dangers:

• Ban smoking in public places: Public smoking bans improve the health of smokers and non-smokers, particularly workers in restaurants and bars. Despite dire predictions from the food service and tobacco industries, public smoking bans do not have a negative impact on local economies. In fact, several communities experienced increased economic activity and job growth following implementation of public smoking bans.

• Ban Toxic Chemicals from Consumer Products: Reducing environmental hazards and the diseases they generate is key to lowering health care costs. Most recently, states have taken the initiative to eliminate lead, phthalates (a toxic softening agent used to make plastic flexible), and other toxic chemicals used in toys and other consumer products. California banned most phthalates with AB 1108 and Washington State passed the nation’s toughest regulation – reducing the allowable lead level to 40 parts per million (ppm) and limiting phthalates and cadmium in children’s toys and products.

• List Calories on Restaurant Menus: Just as we have come to rely on the nutritional information listed on the packaging of store-bought foods, listing calories on menus can help patrons size up the nutritional content of restaurant foods and make healthier choices. New York, San Francisco and Washington’s King County, which includes Seattle, have passed menu-listing laws.

• Ban Trans-Fats from Food Production: Several cities, including New York City, have banned partially hydrogenated oils, or trans fats, from food preparation because of their role in significantly increasing consumers’ risk of heart disease. A 2008 Zogby poll found that more than 7 of 10 New York voters want a statewide ban on partially hydrogenated oils, which are the only source of trans-fats. Trans fats are used in numerous prepared and packaged foods like French fries, margarines, crackers, and doughnuts.

See Also

• Progressive States Network – Economic Impact of Smoke-Free Laws on Local Economies
• Washington – 2008 HB 2647, The Children’s Safe Products Act
• Center for Science in the Public Interest – Menu Labeling: Resources and Background
• Center for Science in the Public Interest – Q&A: Trans fat

Eliminate Health Disparities

While high costs and varying quality affect all of us, they disproportionately impact people of color, non-English speaking residents, and low-income communities – creating racial and ethnic health disparities. For instance, the life expectancy for African-Americans is 73.3 years, five years shorter than it is for whites.

Diabetes deaths by race underscore the extent of disparities in US health care. Forty-eight African-Americans per 100,000 people die from complications caused by diabetes, compared to just over 22 deaths among whites. While whites do have the lowest number of uninsured at 13% -- with the highest uninsured rate in the Hispanic community at 36% -- these disparities are the results of factors much greater than being insured or uninsured. Insured and uninsured people of color are more likely than whites to receive sub-par care, experience worse health outcomes, and are less likely to receive routine or necessary care.

The causes of health disparities are complex, systemic, and reflect the racial, class, and ethnic tensions that have for so long shaped American society and culture. Factors include inadequate access to quality health care services, lack of racial and ethnic diversity in the health care workforce, a lack of cultural competency among providers, higher uninsured rates, toxics and poor environmental conditions such as lead-based paint, inadequate access to parks and recreation for physical activity, smog in inner cities, limited access to healthy foods, inadequate public support for providers serving low-income communities such as community health centers and safety net hospitals, low health literacy, and limited English proficiency.

As recent reports by the National Women’s Law Center (NWLC) have detailed, women similarly face unique challenges obtaining insurance and face greater challenges than men in affording care even with insurance. Women earn lower wages, experience greater health insecurity and instability, and need more health care than men. Yet, women face higher out-of-pocket costs as a share of their income, leading more women than men to avoid care because of cost.

States are taking a leading role in working to eliminate health disparities, as the Opportunity Agenda and Families USA detail in Identifying and Evaluating Equity Provisions in State Health Care Reform. While more needs to be done, the growing awareness of health disparities will help result in greater adoption of many key policy options described below.

While increased access to coverage will help all state residents, this is not enough to address the cultural, geographic, and institutional barriers to quality health care faced by people of color and low-income communities. Reform must improve the cultural competency of providers, support the health care infrastructure and safety net, improve coordination among state and local health agencies, and create long-term planning so that quality and affordable health care is provided to all US residents regardless of personal characteristics and circumstances.

See Also

• The Opportunity Agenda and Families USA, supported by the Commonwealth Fund - Identifying and Evaluating Equity Provisions in State Health Care Reform
• National Women’s Law Center (NWLC) - Women and Health Coverage: The Affordability Gap, A Framework for Moving Forward, and Making the Grade on Women’s Health
• Institute of Medicine - Unequal Treatment: Confronting Racial and Ethnic Disparities in Health Care
• Dartmouth Institute for Health Policy and Clinical Practice, funded by the Robert Wood Johnson Foundation - Disparities in Health and Health Care among Medicare Beneficiaries

Expand Access to Coverage

To eliminate disparities in access to coverage, expansion programs cannot include costly co-pays or other financial barriers to accessing
care. These are especially hurtful to low-income communities. Better options include: raising income eligibility limits for Medicaid, expanding access to the State Children’s Health Insurance Program, and creating public/private expansions that provide sliding-scale premium subsidies with no or limited
cost-sharing.

A “medical home,” or primary care setting where one’s health care needs are looked after and care is coordinated, is an important part of health care access and a strategy for eliminating disparities. Patients with a medical home are more likely to get reminders to receive preventive care, such as screenings for cholesterol, breast cancer, and prostate cancer. To promote medical homes, states need to reform primary care reimbursement by measuring and rewarding medical homes, testing care delivery models, and maximizing the potential of health information technology.

See Also

• Commonwealth Fund – Closing the Divide: How Medical Homes Promote Equity in Health Care
• Partnership for Prevention – A National Profile on Use, Disparities, and Health Benefits
• Commonwealth Fund – Fundamental Reform of Payment for Adult Primary Care: Comprehensive Payment for Comprehensive Care
• Commonwealth Fund - Disparities in Health Care Are Driven by Where Minority Patients Seek Care

Improve Cultural Competency

Many health care problems derive from failures of medical professionals to communicate effectively or to fully understand the cultural barriers their patients face.

Cultural Competency Training for Providers: Cultural competency education helps ensure providers are sensitive towards diverse socio-cultural backgrounds and helps keep providers from stereotyping patients. In 2005, New Jersey enacted SB 144 requiring medical professionals to receive cultural competency training in order to graduate or get a license to practice in the state. Each medical school in New Jersey is required to provide this training. In 2005, California passed AB 1195 requiring mandatory continuing medical education courses to include cultural and linguistic training.

Reducing Language Barriers: Patients with Limited English Proficiency are 19% more likely to suffer from adverse medical events than English-speaking patients (49% to 30%). Hospitals can remove barriers by using multi-lingual signage, providing interpretive services, and making records of a patient’s native language and communication needs. During the 2003-2004 session, California enacted SB 853 requiring commercial health plans to ensure members’ access to linguistic services and to report to state regulators steps being taken to improve the cultural competency of their services. The state’s Medicaid program requires all health plans to ensure patients’ linguistic needs are met, including 24-hour access to interpretive services and documents in native languages.

Increasing Workforce Diversity: Settings where patients can seesee providers of their own race leads to greater participation in care and greater adherence to treatment. Yet, the health care workforce under-represents people of color – who are more likely than whites to practice in federally-designated underserved areas, to see patients of color, and to accept Medicaid patients. To promote a more diverse workforce and reduce disparate treatment, states can create incentive or loan repayment programs for medical students who work in medically underserved areas. In 2007, Minnesota enacted a new law (Chapter 137.42) to proactively recruit medical students in underserved areas.

See Also

• National Health Law Program – A Guide to Incorporating Cultural Competency into health Professionals’ Education and Training
• National Health Law Program – “Language Barrier” an article in Pediatrics
• Commonwealth Fund - Improving Quality and Achieving Equity: The Role of Cultural Competence in Reducing Racial and Ethnic Disparities in Health Care
• The Commonwealth Fund – Language Proficiency and Adverse Events in US Hospitals: A Pilot Study
• American Medical Student Association – Enriching Medicine Through Diversity
• The Commonwealth Fund – A State Policy Agenda to Eliminate Racial and Ethnic Health Disparities

Support the Health Care Infrastructure and Improve Long-Term Planning

States need to improve the health infrastructure’s response to the prevalence of health disparities:

• Supporting the Safety Net and Community Health Centers: People of color and low-income communities lack adequate access to services. Working to fill the gap are Community Health Centers, which have grown substantially over the past several years and serve a disproportionate percentage of non-white communities. Health Centers with dedicated chronic care management programs showed dramatically better quality of care than those without strong intervention programs -- programs aimed at warding off disease and helping patients stay healthy.

• Data Collection: To develop effective programs for eliminating disparities, such as chronic care management systems, accurate and timely data is essential. This data allows states to identify disparities and develop targeted initiatives. Some state data collection systems categorize all racial and ethnic groups as only black or white, which is far too limited. The Commonwealth Fund recommends states adopt the Revised OMB Directive 15 racial and ethnic categories as the minimum for collecting and reporting health data.

• State Offices of Health Equity and Long Term Planning: At least 35 states have an office coordinating state policy to address disparities, but many lack resources and institutional structure to be effective. New efforts, however, are improving state response to disparities. In 2007, Colorado enacted SB 242 requiring the Office of Health Disparities to educate the public about disparities and cultural competency, support local public health systems, promote diversity in the health care workforce, and reduce language barriers. A recent study shows that eliminating disparities related to diabetes alone would save taxpayers in Colorado more than $80 million each year. In 2006 Washington State created the Governor’s Interagency Coordinating Council on Health Disparities (SB 6197), which will evaluate state policies and legislation to determine whether they will help eliminate or worsen health disparities. Michigan’s Health Disparities Reduction Program is developing a strategic framework for reducing racial and ethnic disparities in the state. Additionally, the program funds community-based organizations to target health conditions in specific groups and requires Medicaid managed care organizations to develop and implement programs to reduce health disparities.

See Also

• New England Journal of Medicine – Improving the Management of Chronic Disease at Community Health Centers
• Washington State – 2006 SB 6197, Creating the Governor’s Interagency Coordinating Council on Health disparities
• Commonwealth Fund – Michigan Tackles Health Care Disparities
• Colorado – 2007 SB 242, expanding the responsibilities of the Office of Health Disparities

Putting the health care industry on the defensive by moving reforms that increase transparency, oversight, and accountability highlights health care costs and the industry’s self-interested opposition to change. The US health care system underwrites some of the most profitable industries in the world; either through complicit arrangements between the industry and government, as in the new Medicare drug benefit and Florida’s recently enacted limited-benefit health plan, or through government inaction, as in poor public oversight of health insurance rates. Too large a sum of our taxes and health care spending ends up in industry profits and inefficient administration, rather than actual medical care.

In response, states can (1) reduce prescription drug costs through bulk-purchasing and countering the industry’s abusive marketing influence; (2) bring accountability and oversight to health insurance rates; and (3) ensure non-profit hospitals, which provide 68% of all hospitals beds in the US, provide a real “community benefit” for their tax-exempt status.

A widely held belief is that the health care industry, specifically pharmaceutical companies, puts profits ahead of people. This anger can be channeled to bring transparency and accountability to the health care industry.

Reducing Prescription Drug Costs

The U.S. spent $287 billion on pharmaceutical drugs in 2007, representing 14% of all health care expenditures. Driving this expense is the pharmaceutical industry, which spends $30 billion each year on marketing, often regardless of a drug’s efficacy. In fact, the drug industry spends more money marketing drugs than it spends developing new ones.

Through direct arrangements or lack of oversight, the government is complicit in these profits. A report from Congressman Henry Waxman shows that the drug industry increased its profits by more than $8 billion in the six months after the new Medicare drug benefit went into effect, which does not allow Medicare to use its vast bargaining power to negotiate lower drug prices and a better deal for taxpayers and seniors.

In contrast, states have been working since the 1990’s to rein in the drug industry. In 2008, at least 540 bills and resolutions have been introduced for consideration in states across the country. This attention is partly driven by polls showing that 70% of Americans believe the drug industry puts profits ahead of people.

The Prescription Project and National Legislative Association on Prescription Drug Prices (NLARx) and Prescription Policy Choices have outlined a range of policies, from reining in abusive marketing practices to ensuring the safety of medications.

Rein in Abusive Marketing Practices to Cut Costs

Of the $30 billion spent each year on marketing, the drug industry directs $7 billion at towards physicians -- an average of $8,800 at towards each of the 817,000 physicians in the US. 94% of
doctors have received gifts from drug companies, including catered lunches and “educational” conferences at swankyupscale resorts.
Studies show that even small gifts create an unconscious “demand for reciprocity.” The 90,000 drug company sales reps exert tremendous influence over which drugs physicians prescribe, encouraging doctors to prescribe more expensive drugs instead of less costly — but often equally or more effective — medications. To counter the undue influence of drug industry marketing, states can:

• Ban Gifts & Require Disclosure of Financial Relationships: Minnesota, in 1993, became the first state to limit gifts from the drug industry to physicians. It bans gifts of more than $50 and requires companies to disclose payments to physicians in excess of $100. Several other states have enacted disclosure laws, exposing millions of dollars spent on payments to physicians and conflicts of interest. In 2008, Massachusetts lawmakers are considering an outright ban on gifts as part of a broad cost and quality health care reform bill (S.2526).
• Ban “Data-Mining” -- Protecting Prescription Privacy: In 2006, New Hampshire became the first state to enact a ban on “data-mining” (HB 1346) – the process by which the drug industry uses, or mines, the prescribing habits of providers to inform direct-to-provider sales. Maine and Vermont soon passed similar laws. As expected, PhRMA, the drug industry’s massive lobby, is holding these laws up in court, but states like Washington and the District of Columbia continue to press forward.

See Also

• Center for Public Integrity – Drug Lobby Second to None: How the pharmaceutical industry gets its way in Washington
• The Prescription Project – Regulating Industry Payments to Physicians: Identifying and Minimizing Conflicts of Interest
• National Legislative Association on Prescription Drug Prices (NLARx) – Model Legislation
• The Prescription Project – Control Pharmaceutical Marketing to Improve Health Care Quality and Cost
• NLARx – Minnesota Gift Ban and Disclosure Laws
• New Hampshire – 2006 HB 1346, Ban on Data Mining
• The Prescription Project and NLARx – Model Drug and Medical Device Marketing Restrictions and Disclosure Act.
• The Prescription Project – Data Mining: Myths and Rebuttals
• The Prescription Project – The Constitutional Battle Over State Regulation of Data Mining

Ensure Drug Quality and Safety – Prescriber Education Programs

Doctors targeted by marketing schemes tend to prescribe more, newer, and pricier drugs regardless of the drug’s efficacy compared
to less expensive medications – sometimes with deadly consequences. As The Prescription Project reports, Merck spent $209 million marketing the painkiller Vioxx, driving up utilization before the medical community had a full understanding of the drug’s side effects. The premature and rapid adoption of Vioxx resulted in up to 139,000 heart attacks, 40% of which were fatal.

States can establish “Academic Detailing” programs to save lives and reduce costs. Academic detailing programs send highly-educated medical professionals to doctors’ offices with scientific and unbiased information about which drugs are right for a given situation, countering the industry’s direct-to-physician marketing and sales. Studies have found that for every dollar spent on “academic detailing,” two dollars are saved.

States can establish Prescriber Education Programs, also known as “Academic Detailing”, to save lives and reduce costs. These programs send highly-educated medical professionals to doctors’ offices with scientific and unbiased information about which drugs are right for a given situation, countering the industry’s direct-to-physician marketing and sales. Studies have found that for every dollar spent on “academic detailing,” two dollars are saved.

See Also

• The Prescription Project – Academic Detailing: Evidence-Based Prescribing Information
• The Prescription Pproject – Cost-Effectiveness of Prescriber Education (Academic Detailing) Programs

Favor Drugs that are Less Expensive But Equally, or More, Effective

As NLARx reports, generic drugs cost $45 less on average than brand name drugs. Over the next 4 years, numerous brand name drugs which account for $38 billion worth of sales are going to lose their patents, meaning generics will flood the market — and making this a good time to enact policies to promote their use, such as:

Preferred Drug Lists (PDL): States can reduce drug costs by prioritizing drugs proven to be safe, highly effective, and typically less expensive inexpensive over more expensive yet no more effective brand name drugs. As Prescription Policy Choices (PPC) reports, at least 40 states have some sort of PDL policy regulating physicians’ prescribing practices. Maine’s PDL has kept Medicaid drug cost increases to below 3% annually. During the same period, the federal government saw increases of 13%. Texas’ PDL saved the state’s Medicaid and SCHIP programs $116 million in 2007.

• Promoting Generics: Massachusetts saved more than $150 million annually by emphasizing generics over brand name drugs, and Texas saved $223 million by making it easier for doctors to prescribe generics. Medicaid and other public programs should require that, when available, equally or more effective generics must be prescribed over more expensive celebrity drugs, except where a treating physician overrules this requirement.

• Evidence-Based Prescribing: The Drug Effectiveness Review Project is a public and private collaboration that compares and reports on the effectiveness and safety of drugs designed to treat similar conditions. This program is used by at least 13 states’ preferred drug lists.

See Also

• Prescription Policy Choices – Model Policy: Preferred Drug Lists, Prior Authorization, and Promoting Generics
• Oregon Health and Science University – Drug Effectiveness Review Project

Strengthen Negotiating Power with Drug Makers

As NLARx documents, pooling the bargaining power of drug purchasers, like state Medicaid and state employee health plans, increases their individual leverage to negotiate cheaper prices from the industry.

• Multi-State Purchasing Pools: At least five multi-state bulk purchasing pools are currently negotiating lower prices from drug companies. As NLARx reports, Iowa, Maine, and Vermont created the Sovereign States Drug Consortium, and Oregon and Washington created the Northwest Prescription Drug Consortium. In 2006, it was estimated that Maine would save $5 million in state and federal Medicaid costs by participating in the purchasing pool. As Prescription Policy Choices reports, Oregon could save $17 million annually by combining the drug purchasing of all its state programs.

• Pharmacy Benefit Managers (PBMs): PBMs negotiate rebates and manage drug benefit programs on behalf of public and private health plans and many self-insured businesses. However, the PBM industry is highly corruptible. To get their drug on a health plan’s benefit list or formulary, drug companies make payments to PBMs that are proportionate to how often the drug is prescribed. PBMs boost their profits by pocketing some or all of these payments instead of passing them along to their customers. Three PBM companies administer 80% of all private prescription coverage and pocket annual revenues exceeding $15 billion. Model legislation compiled by PPC and NLARx requires greater transparency of negotiations, disclosure of conflicts of interest, and new ethical standards. PBM laws in Maine and DC have been upheld by the federal courts.

• Pricing Reforms: Worries about price gouging and artificial price inflation on celebrity drugs are driving states to shed light on the pricing practices of pharmaceutical companies. Wisconsin and Colorado laws prevent unfair and discriminatory pricing of prescription drugs, particularly during emergency situations. Maine law requires disclosure of manufacturer prices and “best price,” and West Virginia created the Pharmaceutical Cost Management Council in 2004 (HB 4084) to continually examine the cost of prescriptions and develop ways to reduce prices in the state. Model legislation compiled by NLARx includes the Excessive Drug Pricing Act and the Drug Retail Price Disclosure Bill.

See Also

• NLARx - Model legislation: the Excessive Drug Pricing Act, the Drug Retail Price Disclosure Bill
• Prescription Policy Choices – Model Legislation: PBMs Transparency and Fiduciary Standards

Increase Access to Prescription Drugs for Low-Income and Vulnerable Populations

States are increasingly thinking more creatively about how to enable populations that are ineligible for Medicaid to purchase drugs at the same reduced prices negotiated by Medicaid.

• Discount Programs: Maine Rx negotiates with drug companies to provide more affordable drugs to residents living below 350% of the poverty line. The program, as NLARx reports, uses the leverage of the state’s Medicaid program to achieve average savings of 25-50% on generic and brand name drugs for residents not eligible for Medicaid.

• 340B Pricing: Under federal law, certain “safety-net” programs and providers can purchase prescriptions at significant discounts, often below what Medicaid pays for drugs. States can ensure that populations and programs eligible for 340B pricing are receiving the reduced prices. Legislation in Massachusetts (H 2243) would require eligible health care centers to participate in 340B pricing, and Vermont’s comprehensive prescription reform act of 2007 requires the state to inform residents of the availability of 340B pricing.

See Also

• NLARx – Discount Plans and Purchasing Pools
• NLARx – A Guide to Best Practices for the Federal 340B Program
• Prescription Policy Choices – Model Legislation: PBMs Transparency and Fiduciary Standards

Other Resources

• Progressive States Network - Focus on Prescription Drug Reform
• Progressive States Network - Notes: Prescription Drug Reform Nationwide Conference Call

Health Insurance Regulations to Ensure Fairness and Access to Coverage

Families USA explains that Massachusetts’ 2006 health care reform law was “built on Massachusetts’ expanded public programs and its highly regulated insurance market.” In addition to providing a base for comprehensive reform, the following examples underscore why states need to up the ante on insurance companies by increasing state oversight of insurance rates and industry tactics that hurt consumers:

• California regulators have been investigating and imposing fines on many of the state’s for-profit and non-profit insurance companies. News reports have documented rampant abuse and anti-consumer tactics, including insurer HealthNet giving bonuses to employees who cancel health plans after members incur costly claims and Blue Cross of California recruiting physicians in canceling coverage.

• In Washington State, news that a state-based non-profit insurer transferred $49 million in premium revenue over the past three years to a faltering for-profit subsidiary in Arizona fueled the legislature’s passage of stronger oversight and rate regulation in early 2008.

• The Pittsburgh Post-Gazette reported that health insurer Highmark enjoyed total revenue of $12.4 billion in 2007, growing its surplus to $3.5 billion. The article went on to report that several insurers are planning premium hikes over the summer of 2008 because “per-share earnings” have not met projections, down from a forecasted $6.41 per share to between $5.76 and $6.01 in the case of the huge multi-state insurer Wellpoint. However, the Post-Gazette reports that Highmark’s $3.5 billion surplus represents 734% of its risk-based capital -- a measure of the money an insurer might need on hand in case of unforeseen claims. The National Association of Insurance Commissioners note that surpluses exceeding 250% of risk-based capital are troubling.

In June 2008, Families USA released an extensive 50-state survey and scorecard of the laws governing the individual insurance market in each state - “Failing Grades: State Consumer Protections in the Individual Health Insurance Market.” They found great variation across states and, overall, little that states are doing to protect consumers from the anti-consumer behavior of insurance companies. In fact, only five states prohibit all insurance companies from cherry-picking the healthiest consumers and excluding everyone else. In most, there are no limits on premiums based on health status, and insurers can exclude coverage for pre-existing conditions, spend less than 75 cents of every premium dollar on medical services, and revoke an individual’s health insurance policy without advance review by the state.

States have many options to ensure consumers in the individual and small group markets are treated fairly and that more of our premium dollars actually go to health care rather than profits and share-holder earnings.

• Rate Review and Oversight - requiring insurers to gain “prior approval” for premium increases. On the heels of 40% and 70% rate increases and in light of $2.2 billion in reserves for the three largest health insurers, Washington State enacted SB 5261 in 2008. The law requires insurers to receive “prior approval” from the commissioner before rates go into effect and allows the commissioner to reject unfair and unjustifiable increases. When the office had the power of prior approval in the 1990’s, rates increased between 1% and 4% less than what insurance companies requested. Similarly, Colorado lawmakers beat back fierce industry resistance and passed the Fair Accountable Insurance Rates Act (FAIR Act), which brings “prior approval” to the individual and small group insurance markets.

• Medical Loss Ratio - minimum medical loss ratios ensure that more of our premiums are spent on medical care and less on profits, bonuses, and inefficient administration. As Families USA reports, New Jersey has a medical loss ratio of 75% for the individual and small group markets. If less than 75-cents of every premium dollar is spent on direct medical care, an insurer must issue the difference in refunds to their members. Minnesota has a tiered loss ratio, setting different levels for the large group, small group, and individual markets. Pennsylvania would establish an 85% loss ratio for the small group market if the Senate joins the House and passes HB 2005.

• Guaranteed Issue - preventing insurers from refusing coverage to individuals because of their health status, age, gender, or other factors. This helps ensure the availability of coverage and is especially important in the individual market, where many states allow insurers to cherry-pick their customers and refuse coverage to certain residents.

• Community Rating - creating more consistency in health insurance rates across insured populations. These laws limit how much an insurer can adjust premiums based on a person’s age, gender, health status, and other factors. “Pure community rating” sets the same rate for an entire insured population, regardless of demographic factors. “Modified community rating”, the more common form, sets a rating band within which insurers can vary rates based on certain factors. In 2007, Colorado strengthened small group community rating by removing health status as a factor in setting premiums (HB 1355).

• Regulating Coverage Rescissions (or Cancellations) – regulating the rescission, or cancellation, practices of insurance companies. California legislators are targeting insurer rescission policies after abusive practices by many of the state’s largest for-profit and non-profit insurers came to light over the past year, as detailed earlier. Legislation proposed in 2008 would clamp down on these practices by: restricting rescissions, or cancellations, of a health insurance policy to the first six months (AB 2549); outlawing employee compensation based on rescissions (AB 1150); and requiring state approval for rescissions (AB 1945).

See Also

• Colorado HB 1389 - The Fair Accountable Insurance Rates Act
• WA State Sen. Karen Keiser - Letter to the Colorado State Finance Committee
• WA Insurance Commissioner - Letter to the Colorado Legislature
• WA Insurance Commissioner - Myths and Facts: Insurance Rate Regulation
• WA Insurance Commissioners - Fact Sheet: Restoring authority in the individual health market
• Families USA - Failing Grades: State Consumer Protections in Individual Health Insurance Markets
• Georgetown University Health Policy Institute - Key Consumer Protections in Individual Health Insurance Markets
• Kaiser Family Foundation - How Private Health Coverage Works: A Primer 2008 Update
• Kaiser Family Foundation - Percent of Firms Offering Coverage
• Georgetown University - State Consumer Guides for Getting and Keeping Health Insurance
• Progressive States Network – Insurance Reforms to Ensure Fairness and Access to Coverage

Non-Profit Hospital “Community Benefits” Standards

State and local governments spend at least $5.9 billion in tax exemptions for non-profit hospitals, according to a 2006 Congressional Budget Office report. Non-profit hospitals are the most common type, accounting for 68% of the 630,000 Medicare-certified hospitals beds across the US. For-profit hospitals account for a mere 16%. Clearly, the investment in non-profit hospitals is vast and we need to ensure the public is getting real value for this investment.

It’s counter-intuitive, but many US non-profit hospitals have bgger profits than their for-profit counterparts. In April 2008, the Wall Street Journal reported that the combined net income of the 50 largest non-profit hospitals across the US increased nearly eight-fold from 2001 to 2006, to a staggering $4.27 billion. 77% of the 2,033 non-profit hospitals in the US routinely make money, compared with 61% of for-profit hospitals. Congress exempts non-profits from income taxes and states free-up non-profits from paying property taxes.

In return for their non-profit status and $12.6 billion in federal, state, and local tax exemptions, these hospitals must provide a “community benefit.” Many people assume this means charity care, or free care for the uninsured and indigent, but the term is so loosely defined that some non-profits have been reporting the wages they pay to employees as a community benefit. Additionally, hospitals regularly assert that they cost-shift to paying and insured patients as a result of the free care they provide. In other words, they simply shift the cost of free care to public and private payers. A reasonable question for lawmakers to ask is whether “charity care” in this instance is providing a “community benefit” when the hospital is simply shifting the cost of free care to paying patients.

To shed light on non-profit hospitals and the community benefits provided, the IRS will require hospitals to break-down their community benefit contributions starting in 2009. The new reporting standards are welcome, but minimum standards for providing charity care and gaining non-profit status are a necessary next step.

What Can States Do? State lawmakers can pass a “community benefits” program that defines what qualifies as a “community benefit,” establishes standards for the provision of these services, and requires health care institutions to regularly report the “community benefits” they provide. The Hospital Accountability Project, a project from Community Catalyst, provides a panoply of resources to ensure communities are getting value for the tax-exempt status of non-profit hospitals. Community Catalyst has developed model legislation -- the Health Care Institution Responsibility Model Act -- with the following objectives:

• to ensure “community benefits” are equitably and fairly provided among communities
• to ensure all health care institutions participate in providing “community benefits”
• to raise the bar for all health care institutions, and
• to ensure health care institutions know what is required of them in the provision of “community benefits”

To achieve these goals, Community Catalyst identifies the following priorities for legislation designed to better define and regulate the provision of “community benefits”:

• Accountability for all institutions - Establish requirements for all health care institutions in the provision of “community benefits,” including for-profit and non-profit hospitals and Health Maintenance Organizations (HMOs).
• Standards for “community benefits” - Establish standards that meet the needs of communities through “collective bargaining” between communities and institutions. Massachusetts, for instance, has a target goal that non-profit hospitals provide community benefits up to 6% of total patient operating expenses.

A well-constructed community benefits plan can ensure health care institutions are holding up their end of the bargain to serve the public good and provide important transparency in the medical system.

See Also

Congressional Budget Office - Non-Profit Hospitals and the Provision of Community Benefits, December 2006

• Community Catalyst – Hospital Accountability Project
• Model Legislation: The Patient Financial Assistance Act
• State Laws – Free Care: A Compendium of State Laws
• State Fact Sheets – New York State Requirements Relating to Community Benefits and Free Care
• Strategy: Guide to Negotiating with Providers to Improve Access to Health Care Services