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Fostering Rapid Advances in Health Care: Learning from System Demonstrations (2003)

Chapter: 5. State Health Insurance: Making Affordable Coverage Available to All Americans

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Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
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Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
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Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
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Page 71
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
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Page 72
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
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Page 73
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
×
Page 74
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
×
Page 75
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
×
Page 76
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
×
Page 77
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
×
Page 78
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
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Page 79
Suggested Citation:"5. State Health Insurance: Making Affordable Coverage Available to All Americans." Institute of Medicine. 2003. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Washington, DC: The National Academies Press. doi: 10.17226/10565.
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Page 80

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-I. 5 State Health Insurance Making Affordable Coverage Available to All Americans SUMMARY DESCRIPTION Demonstration projects in this category are intended to result in insurance coverage for nearly all residents of a state. The Depa~l~ent of Health and Human Services (DHHS) would issue a Request for proposals (RFP) to state governments (end U.S. territories) for undertaking two major activities: (~) achieving increased availability of affordable insurance coverage through public and/or private insurance programs, and (2) establishing a statewide electronic insurance enrollment clearinghouse. A limited number of demonstration sites—perhaps three to five would likely be selected from the applicants. The demonstration projects should be 10 years in duration, but with the expectation that there will be measurable accomplishments within ~ ~ months. The committee believes that a lO-year commitment by DHHS to these demonstration projects would be necessary to encourage states to undertake the very significant efforts envisioned in the areas of building public-private partnerships, developing information and communications technol- ogy (ICT) infrastructure, and redesigning public insurance programs. Furthermore, in light of currently severe state budget limitations, the federal government may need to contribute all or nearly all of the increased funds required to conduct these demonstrations. BACKGROUND The number of people in the United States who were without health insurance during the entire year of 2001 was 41.2 million, or approximately 14.5 percent of the population ~J.S. Census Bureau, 2002~. Although there was a slight drop in the number of uninsured people in the late i990s, , ,~

f State Health Insurance probably as the result of a particularly strong economy, the number has been increasing overall for more than a decade (Institute of Medicine, 2001~. When one considers the number of U.S. residents who experience breaks in insurance coverage of at least ~ month during a year, the magnitude of the uninsured problem becomes even greater. In 1996, 27.1 percent of noneld- erly residents, or 62 million individuals, lacked coverage at some point during the year (Monheit et al., 2001~. Since Medicare provides nearly universal coverage for the elderly, almost all of the unin- sured are individuals under age 65 (U.S. Census Bureau, 2001~. The majority (67.3 percent) of residents under age 65 who have some form of health insurance obtain that insurance through their employer (Fronstin, 2001~. Another 14.1 percent are enrolled in public insurance programs, such as Medicaid and the State Chil- dren's Health Insurance Program (SCHIP) (Fronstin, 2001~. Eligibility requirements for Medicaid and S CHIP vary from state to state, but most have maximum income thresholds of 200 percent of the federal poverty level (FPL) or less. (Centers for Medicare and Medicaid Services, 20004. There is also a small proportion (6.6 percent) of people who purchase individual insurance policies (Fronstin, 2001~. People may lose their coverage for all or part of a year for a number of reasons: Toss of a job where insurance was offered; loss of Medi- caid or SCHIP eligibility once children grow up or if the family income increases; Toss of one's spouse because of separation, divorce, or death; Toss of eligibility under a parents' plan upon turning IS or graduating from college; situations in which one's insurer or employer goes out of business or an employer denies coverage; or an inability to pay increasing premium costs (Institute of Medicine, 2001~. State efforts to date to cover the uninsured have achieved some success in reducing the total number of people without coverage. With a large majority of states now offering public coverage to children up to 200 percent of the FPL, S CHIP has accomplished a significant expansion of coverage of low-income children (Centers for Medicare and Medicaid Services, 2002~. In addition, at least 18 states now offer public coverage to parents up to the FPL, and a few, using federal waivers, extend coverage to low-income parents above the FPL (BroadJus et al., 2001~. The experience of states such as Wisconsin, Massachusetts, New Jersey, and Rhode Island demonstrates that extending coverage to parents allows public programs to reach many more children as well (Dubay and Kenney, 2002; Institute of Medicine, 2002; Ku and BroadJus, 2000~. Only a handful of states have significantly expanded coverage for low- income childless adults (Mann, 2002~. Eligibility for public programs is not enough to ensure coverage, especially for chil- dren. In 1999, three-quarters (6.S millions of the estimated 9 million uninsured children who were eligible for Medicaid or SCHIP were not enrolled by their parents (Dubay et al., 2002~. Some low-income parents (or guardians) may also lack information on public programs for which their children are eligible, or may find the enrollment procedures too cumbersome. As part of their expanded coverage for adults, a small but growing number of states offer premium assistance to help low-income families afford the employee contributions needed for coverage by private employers. Rhode Island adopted a premium assistance program after finding that its public program expansion had reduced the state's uninsured rate, but also resulted in unaffordable shifts from private employer to public coverage (Rhode Island Depa~l~ent of Human Services, 2002~. Oregon will use premium assistance as the central focus for its pending expansions (Crawford, 2002; Office for Oregon Health Policy and Research, 2001~. There are also nu- merous proposals under consideration by federal policy makers to use tax credits to help uninsured residents buy individual health insur- ance; analyses indicate that this strategy would likely help some uninsured, but alone would not achieve coverage for all residents (Gabel et al., 2002a; Hadley and Reschovsky, 2002~.

State Health Insurance In spite of the many efforts made, states generally have not been able to develop approaches that facilitate stables continuous coverage for the* residents. Changes in a family's situation (new job, change to part-time status) can cause changes in program eligibility, coverage source, and consequently provider relationships. Federal program structures and eligibility rules sometimes require various family members to enroll in different programs offering different provider networks. Families may be willing to participate in one program but not another because of perceived differences in programs. And the complexity and fragmenta- tion of private and public coverage sources and subsidies mean that many who need coverage do not enroll at all. Frequent changes in cover- age can create significant costs for families and for the health care system as a whole as a result of discontinuities in care management and treat- ment, as well as administrative waste. State expansion initiatives are probably fiscally frag- ile because individual state economies are vulnerable to economic downturns that lead to a loss of private coverage (due to higher unem- ployment), while at the same time increasing demand;for public programs and reducing tax . revenues. The committee believes that offering afford- able insurance coverage to all residents should rank among the highest of health care priorities, even though it will not be easy to find solutions to achieve this goal. Numerous options exist, however, and should be explored (Meyer and Wicks, 2001~. Strategies that maintain or even increase private contributions to insurance premiums will be needed, as will increased public expenditures. Efforts must also be made to stabilize or slow the rate of increase in the cost of insurance. GOALS Demonstration projects in this category are intended to achieve the following goals: 1. Coverage for all citizens and legal residents in a state Affordable insurance coverage avail- able to all citizens and legal residents in a demonstration state Stable insurance coverage no breaks in coverage and minimal switching from one insurance program to another Consumers having some degree of choice of insurance carriers and plans and geographically accessible providers within a plan Availability of comparative perform- ance data for insurance carriers, plans, and providers to inform consumer deci- . . . s1on ma. ong Coverage that is fam~ly-centered, with parents and children having the oppor- tunity to be covered under the same health plan 2. The right care at the right time Shared responsibility for health (e.g., encouragement and support for healthy behaviors and lifestyles) Improved use of primary preventive services (e.g., measurable improve- ments in screening, early-stage diagno- sis) Better management of chronic condi- tions (e.g., ongoing, coordinated care, with emphasis on secondary and tertiary prevention) Improved patient satisfaction (e.g., fewer disruptions in clinician and patient relationships, ease of access to appropriate care providers) 3. Reduced clinical waste reductions in redundant services (e.g.9 visits and ancillary tests) that result from the lack of a consis- tent source of care 4. Reduced administrative transactions Fewer transactions resulting from . . c ranges in Insurance coverage 1~

~ State Health Insurance Reduced redundancy in clinical record keeping, resulting from fewer disrup- tions in cTinician-patient relationships 5. Improved efficiency, resulting from an elec- tronic clearinghouse for enrollment, eligibil- ity verification, and billing and payment processes Reductions in paperwork - Improved timeliness 6. Establishment of a strong public-private partnership that provides a foundation and mechanism for states to address other com- munity health and health care issues DEMONSTRATION ATTRIBUTES Each demonstration would involve two components: expansions of affordable insurance coverage options through public anchor private programs, and establishment of a statewide electronic enrollment clearinghouse. Coverage Expansions Demonstration states would choose to expand insurance coverage through either tax credits to be applied to private insurance plans, Medicaid/SCHIP expansions to cover families and adults, or a combination of the two. Although there is much interest in coverage expansions (107th Congress, 2002), there has been limited experience with these approaches to date. Tax Credit Approach. Under this approach, the federal government would provide support to a demonstration state to be used for premium assistance. The state would establish a program providing state tax credits to uninsured individuals based on a sliding scale tied to income. A demonstration state would determine individual eligibility based on state income tax filings, payroll taxes, or other infor- mation. There are many different options for design ing a state tax credit program (Fuchs et al. 2002~. In general, there are two types of tax credits- nonrefundable and refundable. A non- refundable credit reduces the actual amount of tax paid by the individual. It provides a "dollar of subsidy for each dollar spent," but only up to the amount of the individual's total income tax liability (Fuchs et al., 2002~. A refundable credit is not limited by tax liability, but rather, amounts in excess of tax liability are payable to the individual. The size of the population reached by a tax credit approach will depend on several factors, including the type of tax credit selected, the sliding income scale used to determine eligibil- ity, and the design and amount of the tax credit. A refundable tax credit is recommended in that it has the ability to reach more uninsured indi- viduals and to provide more assistance to those in greatest need. Credits can even be provided to individuals who do not have positive tax liability. The number of people affected will also be influenced by the design of the tax credit and income range over which it is available. There are three basic designs: a fixed dollar amount (e.g., $3000 per family as proposed by President Bush), a percent of premium (e.g., 65 percent of premium as contained in the COBRA Trade Ad- justment Assistance Act just enacted), or a percent of income (e.g., premium in excess of 5 percent of income). The tax credit would typi- cally be limited to those with incomes below a given level (e.g., up to 200 percent of poverty or, alternatively, those in the 15 percent tax bracket $27,000 for an individual and $46,700 for a family). A tax credit that ensures no family pays more than 5 percent of income for a stan- dard plan would likely achieve a modest partici- pation rate, perhaps in the range of about 15 to 20 percent of those eligible (Ku and Coughlin, 1999~. In the case of a fixed dollar amount, younger adults and families are more likely to participate than older people because premiums in the individual market would be much higher for older adults (Gabel et al., 2002b). About 65-75 percent of premium assistance (comparable to what employers contribute on average to employees plans) would also induce

State Health Insurance fairly high participation rates (e.g., 60 percent of the unemployed uninsured) (Edwards et al., 2002~. To obtain a tax credit, individuals would be required to enroll in an insurance plan approved by the state. States should provide individuals with at least some choice of insurance plans. For example, a state might provide a choice of two or three of the following options: employee coverage, private or state purchasing pool, state employee health plan, and individual insurance plan. As a component of these demonstrations, states should be able to ask DHHS to give unin- sured individuals aged 62 and older the opportu- nity to enroll in Medicare. The state tax credit accompanied by a Medicare buy-in option would minimize disruptions in coverage and provider relationships, and would afford DHHS an opportunity to assess the potential effects of broader-based policy proposals (Shells and Chen, 2001~. Individuals who did not exercise their choice of options (and who did not indicate a desire to opt out) would be enrolled in a default plan offering reasonable geographic access to providers. Those individuals who received a tax - subsidy covering some but not all of their premium would be expected to pay the remain- ing portion or be disenrolled. Demonstration states may need to establish a mechanism for discouraging individuals from moving to the state to obtain coverage (e.g., a requirement for a 6- or 12-month employment history in the state without coverage). The tax credit approach has some appealing characteristics, but there are also limitations. Tax credits are a fairly flexible method of providing varying levels of assistance to indi- viduals depending upon need. If designed prop- erly, tax credits can also work in a complemen- tary fashion with employer-based contributions to health insurance. However, one of the key challenges is to set the credits at levels that provide enough additional assistance to indi- viduals to encourage them to enroll in a health insurance program, while not having the unin- tended consequences of reducing employer contributions to premiums or increasing the proportion of employers who choose not to offer insurance coverage. The tax credit approach can also be struc- tured to encourage continuity of patient relation- ships with health plans and providers. By allow- ing the tax credit to be used towards any one of several insurance options (e.g., Medicare buy- in, employment-based coverage, individual insurance plan, COBRA, Medicaid/SCHIP or other state plan), changes in an individuals income or employment status are less likely to result in disruptions in insurance coverage or provider relationships. Lastly, the tax credit approach may provide states with greater control and predictability over health care expenditures than is the case with expansions in public insurance programs. Tax credit programs do not require states to assume insurance risk or responsibility for the provision of certain benefits to beneficiaries. States can still afford some protections for bene- ficiaries by restricting the use of tax credits to the purchase of insurance from a selected set of approved plans that meet certain minimum requirements in terms of benefits, copayments, and quality requirements. Medicaid/SC H1P Expansions to Cover Families. Under this approach, the federal government would provide federal matching support (at rates currently applied to SCHIP beneficiaries) for a significantly expanded eligi- bility program under a state Medicaid or SCHIP program. Initially, a state would expand eligibil- ity for its Medicaid or SCHIP program to cover low-income parents of children enrolled in these public programs (an approach sometimes referred to as a family health insurance program). Coverage of other uninsured family members (older siblings) or family units (childless couples or adults) might follow. Indi- viduals in these public programs should be enrolled for a minimum period of 12 months to encourage greater stability of coverage (i.e., fewer gaps in enrollment and less switching from one health plan to another). Many factors would influence the approach selected by states. For example, states that do 73 i

f State Health :Insurance not have income taxes (i.e., Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) are less likely to pursue a premium assistance approach. Some pioneering states already have experience with demonstration projects that involve coverage of modest-income parents and children under Medicaid and SCHIP (Mann, 2002), and these states might choose to continue pursuing this strategy to cover larger numbers of the uninsured, including childless adults. Regardless of the approach selected, there should be a reasonable expectation for any given demonstration project that nearly all resi- dents in the state will have obtained health insurance coverage within 3 years. Although the intent is to give states a good deal of flexibility in developing innovative ap- proaches to expanding coverage, all demonstra- tion projects should be designed to encourage the following: . One plan per family—There is evidence that both access and quality improve for children and adults when the family is enrolled in a single health plan (Institute of Medicine, 2002~. Having a single health plan helps simplify administrative matters for both consumers and insurance programs, and increases the likelihood of multiple family members being able to obtain care at common delivery sites or provider groups. Demonstrations should be structured to encourage one plan per family through such options as enrollment of Tow-income parents in the same Medicaid and SCHIP program as their children, or use of premium assistance options toward employ- ment-based family coverage. Evidence-based insurance package States should be required to establish coverage policies that are science-based, specifying the types of services to be covered and under what circumstances. The Agency for Healthcare Research and Quality should be provided the resources necessary to work in a supportive capacity with the demonstra- rem lion states, providing syntheses of the evi- dence on the effectiveness of various approaches. Each demonstration state will need to establish a mechanism to allow for public dialogue and input into decisions regarding coverage policies. Careful consid- eration should be given to the identification and inclusion of effective preventive, mental health, and developmental screening and treatment services. . A personal clinician Having a personal clinician (primary care physician, specialist, physician assistant, advanced practice nurse) increases the likelihood of patients obtaining the right care at the right time in the right setting (Bindman et al., 1995; Star- field, ~ 986, ~ 995~. Insurance programs and health plans participating in the statewide demonstration project should be encouraged to ensure that each individual has access to a designated personal clinician capable of providing culturally appropriate services (e.g., simultaneous language translation ser- vices) (Youdelman and Perkins, 2002~. Correspondingly, individuals should be in- formed of their responsibility to seek care in appropriate settings and to remain from use of emergency departments for routine or urgent care that is best provided in other settings. Both patients and their personal clinicians should be made aware of their joint responsibility to ensure appropriate access to and wise use of resources. Fair payment Each insurance program should provide adequate payments to providers, and states should take immediate steps to ensure that plans and providers participating in state-sponsored programs (i.e., Medicaid and SCHIP) receive ade- quate payment. If payments to providers are set too low, many may choose not to partici- pate in public programs, thus impeding access, and others may participate but not provide all of the services from which patients would likely have benefited. Over time, the public and private insurers in the various demonstration sites should also be encouraged to identify innovative ways of

State Health :Insurance providing payments to clinicians that encourage and reward the provision of high- quality care. Electronic Enrollment Clearinghouse During the first 18 months of each project, the participating state would establish an elec- tronic clearinghouse for eligibility verification and insurance program enrollment. One of the immediate benefits of the clearinghouse would be the ability to check whether individuals have insurance, and if not, to enroll them immedi- ately in one of the insurance options made avail- able through coverage expansions. The clearing- house would not be the only method of enroll- ing uninsured individuals. States enrollment processes should also provide for applications to be submitted by telephone, fax, or other means. The clearinghouse would likely yield bene- fits to consumers, clinicians, and insurers. Consumers would benefit immediately from faster and, in some cases, easier enrollment processes. Current enrollment processes rely to a great extent on the patient (or their provider office) completing paperwork, which is then mailed-or faxed to state offices. The paperwork must be processed and a response sent to the individual. The electronic process would be faster and presumably less burdensome to consumers and providers. The streamlined eli~i- bility process would result in more timely payment of providers, and over time, the clear- inghouse might also be used for electronic bill- ing and payment of claims. Lastly, insurers would likely derive some benefits Tom the clearinghouse, including ease of identification of dual eligibles, and possibly reduced adminis- trative costs associated with the eligibility deter- mination and other business functions that might be earned out using the electronic clear- inghouse (e.g., provider payment, receiving and responding to benefits coverage and utilization review requests). State governments should work in partner- ship with private insurers, DHHS, and others in designing and establishing the electronic clear- inghouse. The clearinghouse is intended to be used by both public (i.e., Medicare, Medicaid, and SCHIP) and private insurance programs for eligibility verification, enrollment, claims proc- essing, and payment. The return on investment in this infrastructure would increase if all insur- ance programs participate, and the likelihood of this happening would be higher if leading private and public insurers are involved in the design up front. During the first 6 months of the demonstration projects, public and private insur- ers would need to work closely on system design issues. Processes for safeguarding confi- dentiaTity and security would need to be estab- lished, and these processes should meet all legal and regulatory requirements for privacy imposed by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other statutes. It is not necessary for all insurers to adopt uniform eligibility, claims processing, payment, and other processes, but some degree of standardization or mapping of key data elements to a reference standard would be nec- essary. DHHS should play a very active role in this process to promote the development and use of national standards where appropriate (see Chapter 4 for a discussion of data standards). The enrollment network should be capable of verifying eligibility for coverage under vari- ous insurance programs by accessing relevant sources of information, such as state income tax records and payroll records, as well as enroll- ment information submitted by individuals seeldng coverage (with retrospective verifica- tion of income and other information). Health care delivery sites should have connectivity to the clearinghouse for purposes of eligibility verification and immediate enrollment of unin- sured patients in insurance programs (although consumers, often with the assistance of their providers, would still have the option of seeking enrollment by telephone, fax, or mail). Although the intent is to use the clearing- house to enroll individuals in an insurance program automatically, each demonstration state should carefully consider options for providing consumers with some degree of choice of insurance carriers and plans. There should also be a mechanism for consumers to

~ State Health Insurance opt out of insurance coverage for religious or other personal reasons; however, states should design policy approaches so that those without coverage will constitute a very small percentage of the currently insured population. It is anticipated that over time, the elec- tronic cieannghouse would evolve into a more general ICT platform and be used for many purposes. As noted above, electronic billing and payment functions might be added within a few years of demonstration start-up. The platform might also serve as a vehicle for providing clini- cians and consumers with information on bene- fits, clinical evidence, and public health concerns. Ultimately, the platform might serve as a vehicle for accessing patient-level clinical information (e.g., laboratory and imagine results, prescription medications, emergency department visits, specialist encounters) and for ordering ancillary services, prescribing medica- tions, referring patients to specialists, and admitting patients to hospitals (with appropriate confidentiality protections). Although the focus of these demonstrations is intended to be on expanding insurance coverage, participating states should give some consideration to these potential future applications of the clearing- house~during the planning phase (see Chapter 4 for a discussion of the many applications of a comprehensive ICT infrastructure). In establishing their clearinghouse, demon- stration sites should be encouraged to learn from other programs already under way. One innovative project is the New England Health- care EDI [electronic data interchange] Network (REHEM), a consortium led bv Computer Science Corporation that has been operational since 1998 (New England Healthcare EDI Network, 2002~. Membership is open to provid- ers, health plans, and payers in Massachusetts and Rhode Island. There are currently 14 members, including most of the region's largest insurers and health plans. NEHEN provides members with access to a secure high-speed network for sending and receiving transactions. Members can either inte- grate NEHEN functions directly into their own management systems or access the NEHEN 1~ network using NEHENLite, a Web-based appli- cation. Members pay a flat monthly fee (which is not transaction-based) to cover the cost of managing and coordinating the consortium's activities and the development of common work products. All intellectual property created for NEHEN is shared among the members. NEHEN's primary focus is on administra- tive simplification. The initial pilot project, which started in June 1998, involved checking insurance eligibility in real time for every patient encounter to reduce both claim denial rates and claim rework effort. A pilot is now under way to integrate Medicaid into the system. Another pilot project involves authori- zation for specialist referrals. Developmental efforts are also under way to address claims processing, including submission, inquiry, and remittance. IMPLEMENTATION ISSUES For the demonstration projects in this cate- gory to be successful, key implementation issues should be addressed. Specifically, the demonstrations should have adequate and stable long-range financial support and cooperation from both the public and private sectors. Financial Support Regardless of the approach selected by a demonstration site, increased federal and state financial support would be necessary. There should also be an ongoing federal commitment to the Tong-term goal of making affordable coverage available to all residents. The executive branch has a considerable ability to restructure Medicaid and S CHIP pro- grams through Section Ills waivers (Kaiser Commission on Medicaid and the Uninsured, 2001). Over 20 percent of federal Medicaid spending is in support of Section l l 15 demon- strations. Those demonstrations have been used to extend coverage to groups not eligible under current law (e.g., low-income nonelderly, non- disahled adults without children); provide

State Health Insurance targeted benefits to specific groups (e.g., access of Medicare beneficiaries to Medicaid prescrip- tion drug discounts, family planning services for low-income women not otherwise eligible for Medicaid, and coverage for people with HIV who would not otherwise qualify for Medicaid because their disease has not progressed to the point where they are considered disabled); and implement changes in managed care and other delivery systems (e.g., mandatory managed care enrollment, substate programs that modify pay- ment and care delivery, special management programs for those dually eligible under Medi- care and Medicaid) (Kaiser Commission on Medicaid and the Uninsured, 2001~. It is quite likely that congressional enabling authority and financial support would be needed to conduct some or all of the proposed demon- strations. The proposed demonstration projects differ from earlier efforts in three ways: · Magnitude of change- The objective of the proposed demonstration projects is to achieve coverage for all or nearly all resi- dents in a state. Other demonstrations to date have been important in extending coverage to certain groups of the uninsured, but';modest in scope overall. Fundamental change in enrollment proc- esses—The proposed demonstration projects include the development of an electronic clearinghouse that will remove adm~nistra- tive bamers to enrollment and improve the timeliness and efficiency of processes for eligibility verification and enrollment. ~ . . Not budget neutral To date, nearly all Section ~ ~ 15 waivers have been granted for budget-neutral demonstrations (Kaiser Commission on Medicaid and the Unin- sured, 2001~. Given the proposed scope of the demonstration projects, it is unrealistic to expect that they would be budget neutral. . Ongoing flexibility to achieve goals- Approval for demonstration projects has traditionally been provided for detailed program policy structures that are inflexible once approved. Given the scale of the proposed demonstrations, it is unrealistic to expect a state to identify a priori the best combination of policies and approaches for achieving the demonstration goals within budget constraints. Participating states should have the latitude to adjust program policy structures to achieve overall cover- age goals. To ensure accountability and facilitate evaluation, changes should be reported prospectively to DHHS. Although it was beyond the scope of this project to provide detailed estimates of the impact of the proposed demonstration projects on expenditures, it is a virtual certainly that overall costs would increase at both the federal and state levels, and that these would be ongo- ing expenditures. Federal support for the elec- tronic clearinghouse would represent one-time start-up funding (once operational, the clearing- house could be supported by very modest user fees). Of far greater significance, the federal government would need to provide ongoing support for expanded enrollment in Medicaid and S CHIP (at the enhanced SCHIP matching rate) and/or to offset the cost of state tax credits to the uninsured for premium assistance. The federal government could provide this addi- tional support in the form of a block grant to a state tied to a state commitment to expand coverage to a prespecified number of individu- als, or through existing Medicaid funding chan- nels accompanied by flexibility to use the federal matching dollars to assist with paying premiums for private-sector plans. State Medicaid and SCHIP expenditures would increase as enrollment expands, and states would presumably bear some of the costs ~ A bill (HR 5233) to promote Internet enrollment systems in S CHIP and Medicaid was introduced in the U.S. House of Representatives on July 25, 2002. If passed, the bill would make available $50 million to the Secretary of Health and Human Services for providing grants to states to establish Web-based enrollment systems.

~ State Health Insurance of providing premium assistance to the unin- sured enrolled in private insurance plans. To secure state participation, it might also be neces- sary for the federal government to identify a mechanism for providing additional support to states during economic downturns (i.e., counter- cyclic funding). Extension of coverage to the uninsured would likely yield many benefits to the community, including improved health status (which in some cases may reduce health care costs) and increased worker productivity. In all likelihood, there would also be some offsets to the insurance expansion program, such as less need for disproportionate share hospital payments and reduced tax wnte-offs for uncompensated care on the part of for-prof~t providers (Garson, 2000~. Steps should also be taken to ensure that the necessary information is gathered to enable evaluation of the effects of these demonstra- tions. Additional investments in expanding coverage would be sizable. The committee believes that the benefits to individuals and communities would also be sizable, but this belief should be substantiated through rigorous evaluation of the impact of expanded and stable coverage on (1) health status improvements; (2) the "health, social, and financial stability of families; (3) timely and appropriate use of preventive, acute, and chronic care; and (4) enhanced productivity of workers and school participation of children. Public- and Private-Sector Cooperation Given the magnitude of change involved in these demonstrations, it would be important to build a broad base of private- and public-sector support. Prior to the start of the demonstration projects, efforts should be made to secure the support of the business community at the national, state, and local levels. DHHS and the Department of Labor, working with the National Governors Association, the National Business Coalition on Health, the Business Roundtable, and the Leapfrog Group, should convene leaders from the business community and state governments to discuss the importance of the demonstration projects. Other groups that might play an important role in building a broad base of support for and providing ongoing infor- mation about the demonstrations include the National Academy for State Health Policy, the National Association of insurance Commission- ers, and the National Conference of State Legislatures. In each demonstration site, the support of the business community and private insurers would be critical to success. Regardless of the approach selected by a state, the insurance expansions should be accomplished in a way that preserves the current levels of contributions from private employers and employees. Reaping the full benefits of the electronic clearinghouse would require the full (or nearly full) participa- tion of all insurers. Although the tax credit approach is not an employer mandate, the success of this approach would depend on the willingness of employers, both self-insured and non-self-insured, to work voluntanly with the state to encourage the enrollment of individual employees and their families in employer- sponsored plans. REFERENCES 107th Congress, 2nd Session. 2002. H.R. 3009: Trade Act of 2002. Public Law No: 107-210. Bindman, A. B., K. Grumbach, D. Osmond, M. Komaromy, K. Vranizan, N. Lurie, J. Billings, and A. Stewart. 1995. Preventable Hospitaliza- tions and Access to Health Care. JAMS 274 (4~:305-1 1. Broaddus, M., S. Blaney, A. Dude, J. Guyer, L. Ku, and J. Peterson (Center on Budget and Policy Priorities). 2001. "Expanding Family Coverage: States' Medicaid Eligibility Policies for Working Families in the Year 2000 (Revised February 13, 20021.~' Online. Available at http://www.cbpp. Org/1-2-02health.pdf [accessed Sept. 3, 20023. Centers for Medicare and Medicaid Services. 2000. "State Children's Health Insurance Program (SCHIP) Aggregate Enrollment Statistics for the 50 States and the District of Columbia for Fed- eral Fiscal Year (FFY) 2000." Online. Available

State Health Insurance at http ://www.hcfa. gov/init/fy2000.pdf [accessed Oct. 16, 2001~. Centers for Medicare and Medicaid Services. 2002. "The State Children's Health Insurance Program Quarterly Enrollment Report, Second Quarter Fiscal Year 2002: January 1, 2002 - March 31, 2002." Online. Available at htip://www.cms.hhs. gov/schip/fyO2sqer.pdf [accessed Aug. 13, 20023. Crawford, H., Oregon Department of Human Ser- vices. 2002. "Changing the Oregon Health Plan." Online. Available at http://www. statecoverage.net/statereports/or24.pdf [accessed Sept. 4, 2002~. Dubay, L., J. M. Haley, and G. M. Kenney. 2002. Children's Eligibility for Medicaid and SCHIP: A View From 2000. New Federalism: National Survey of America's Families, Vol. Number B- 41. Washington, D.C.: Urban Institute. Dubay, L. and G. M. Kenney. 2002. Expanding Pub- lic Health Insurance to Parents: Effects on Chil- drenis Coverage Under Medicaid. Washington, D.C.: Urban Institute. Edwards, J. N., M. M. Doty, and C. Schoen. 2002. The Erosion of Employer-Based Health Cover- age and the Threat to Workers' Health Care: Findi;ngs From the Commonwealth Fund 2002 Workplace Health Insurance Survey. New York NY: The Commonwealth Fund. Fronstin, P. 2001. Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2001 Current Population Survey. Issue Brief 240. Washington, D.C.: Employee Benefit Research Institute. Fuchs, B., M. Merlis, and J. James. 2002. Expanding Health Coverage for the Uninsured: Fundamen- tals of the Tax Credit Option. NHPF Back- ground Paper. Washington, D.C.: National Health Policy Forum. Gabel, J. R., K. Dhont, and J. Pickreign. 2002a. Are Tax Credits Alone the Solution to Affordable Health Insurance? Comparing Individual and Group Insurance Costs in 17 U.S. Markets. New Yorlc, NY: The Commonwealth Fund. Gabel, J. R., K. Dhont, H. Whitmore, and J. Pick- reign. 2002b. Individual Insurance: How Much Financial Protection Does It Provide? Health A~6Millwood) Web exclusive. Garson, A., Jr. 2000. The US Healthcare System 2010: Problems, Principles, and Potential Solu- tions. Circulation 101 (16~:2015-6. Hadley, J. and J. D. Reschovsky (Center for Study- ing Health System Change). 2002. "Tax Credits and the Affordability of Individual Health Insur- ance (Issue Brief Number 53 - July 2002~." Online. Available at http://www.hschange.conn/ CONTENT/458/ Accessed Sept. 4, 2002~. Institute of Medicine. 2001. Coverage Matters: Insurance and Health Care. Washington, D.C.; National Academy Press. . . 2002. Health Insurance Is a Family Matter. Washington, D.C.: National Academy Press. Kaiser Commission on Medicaid and the Uninsured. 2001. "Medicaid "Mandatory" and "Optional" Eligibility and Benefits." Online. Available at http://www.kff.org/content/2001/2256/2256.pdf [accessed Sept. 4, 20024. Ku, L. and M. Broaddus (Center on Budget and Pol- icy Priorities). 2000. "The Importance of Fam- ily-Based Insurance Expansions: New Research Findings About State Health Reforms." Online. Available at http://www.cbpp.org/9-5-OOhealth- rep.pdf "accessed Sept. 5, 2002~. Ku, L., and T. A. Coughlin. 1999. Sliding-Scale Pre- mium Health Insurance Programs: Four States' Experiences. Inquiry 36 (4~:471-80. Mann, C. (The Kaiser Commission on Medicaid and the Uninsured). 2002. "The New Medicaid and CHIP Waiver Initiatives." Online. Available at http://www.kff.org/content/2002/4028/4028.pdf Accessed Sept. 4, 20023. Meyer, J. A. and E. K. Wicks. 2001. Covering Amer- ica: Real Remedies for the Uninsured. Washing- ton DC: Economic and Social Research Insti- tute. Monheit, A. C., J. P. Vistnes, and S. H. Zuvekas. 2001. Stability and Change in Health Insurance: New Estimates From the 1996 MEPS. MEPS Research Findings No. 18. AHRQ Pub. No. 02- 0006. Rockville, MD: Agency for Heal~care Research and Quality. New England Healthcare EDI Network. 2002. "NEHEN lIomepage." Online. Available at http://www.nehen.net Accessed July 30, 20023. Of lice for Oregon Health Policy and Research. 2001. "SCHIP Funding for Employer-Sponsored In- 1~

State Health Insurance surance: Federal Issues and Barriers Encoun- tered. A Briefing Paper." Online. Available at http :llwww. ohpr. org/hrsa/Briefs/ SCHIPforFHIAP.pdf [accessed Sept. 4, 20021. Rhode Island Department of Human Services. 2002. "RIte Care and RIShare." Online. Available at http: llwww. dhs. state . ri.us/dhs/famchild/shcare. him [accessed Sept. 4, 20024. Shells, J. and Y. J. Chen. 2001. Medicare Buy-In Op- tions: Estimating Coverage and Costs. New Yorlc, NY: The Commonwealth Fund. Starfield, B. 1986. Primary Care in the United States. Int J. Health Serv 16 (2~:179-98. . 1995. Access Perceived or Real, and to What? SIGMA 274 (4):346-7. U.S. Census Bureau. 2001 . "Health Insurance Cov- erage: 2000." Online. Available at http://www. census.gov/hhes/www/hlthin00.html [accessed July 26, 20021. - . 2002. "Health Insurance Coverage: 2001." Online. Available at ht~://www.census.gov/ prod/2002pubs/p60-220.pdf "accessed Sept. 30, 2002]. Youdelman, M. and J. Perkins. 2002. Providing Lan- guage Interpretation Services in Health Care Settings: Examples From the Field. New York, NY: The Commonwealth Fund. 80

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In response to a request from the Secretary of the Department of Health and Human Services, the Institute of Medicine convened a committee to identify possible demonstration projects that might be implemented in 2003, with the hope of yielding models for broader health system reform within a few years. The committee is recommending a substantial portfolio of demonstration projects, including chronic care and primary care demonstrations, information and communications technology infrastructure demonstrations, health insurance coverage demonstrations, and liability demonstrations. As a set, the demonstrations address key aspects of the health care delivery system and the financing and legal environment in which health care is provided. The launching of a carefully crafted set of demonstrations is viewed as a way to initiate a "building block" approach to health system change.

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