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2004-01-09 -- State and Local Programs Seek to Aid the Uninsured (sic)

Lack of a Federal Solution Prompts Steps to Fill Gap;

Looming Campaign Issue

Wall Street Journal, Friday, January 09, 2004

By LAURIE MCGINLEY
Staff Reporter of THE WALL STREET JOURNAL

MUSKEGON, Mich. -- States and local communities, frustrated by the
federal government's failure to stem the growing ranks of the
uninsured, have begun experimenting with their own initiatives to
expand health coverage, especially for low-income employees of small
businesses.

Many of the initiatives are small and still nascent, started with seed
money provided by state and federal governments or nonprofit
foundations. They could be snuffed out if the states' beleaguered
financial picture doesn't substantially improve. Medicaid, the big
state-federal program for the poor, already has been cut in many
states.

But in states as diverse as Maine and California, and in communities
as different as Galveston, Texas, and this one, state and local
governments are taking tentative steps in a challenging health-care
environment to provide coverage for some low-income workers. The
question of how to aid the 43.6 million Americans estimated to lack
health insurance is a growing subject of debate in a presidential
election year.

Maine, for instance, is developing a health plan called Dirigo --
Latin for "I lead" -- for thousands of residents whose employers don't
offer health coverage and who are ineligible for Medicaid. Patients
are expected to begin signing up next summer. Other communities and
states, including Rhode Island, have started providing subsidies to
workers who can't afford their share of the premiums for
employer-sponsored policies.

In New York, Gov. George Pataki is promoting Healthy NY, a program
designed to help small businesses and their employers afford insurance
by requiring private carriers to offer low-cost bare-bones health
plans. California has taken a different tack, passing a new law
requiring hundreds of employers to provide coverage or pay a fee so
the state can do it. That law exempts small businesses.

Health-care coverage and affordability are emerging as big issues in
the 2004 presidential campaign. Just Thursday, the federal government
reported that health-care spending rose to $1.6 trillion in 2002, a
jump of 9.3%. Federal, state and local governments accounted for
almost half of that spending -- $713 billion. (See a related article.)

Democratic contenders, meanwhile, have seized on the swelling numbers
of uninsured as a stress point amid the broader prosperity. Every
major Democratic presidential candidate has put forth a plan costing
hundreds of billions of dollars to cover the uninsured.

President Bush, meanwhile, is likely in his budget proposal next month
to dust off -- and perhaps sweeten -- a much smaller package of tax
incentives to expand insurance coverage. Republicans generally agree
they need to address the problem, but feel they can portray the
Democrats as being too focused on big-government solutions, much as
they did in blocking President Clinton's health-coverage plan early in
his first term.

Given such political tensions, as well as a ballooning federal deficit
and the lack of political clout among the uninsured, many doubt major
progress on the problem will occur anytime soon. Consequently, "states
and communities are starting to take things into their own hands,"
says Paul Fronstin, a senior research associate at the Employee
Benefit Research Institute, a nonprofit Washington-based group.

The state and local experiments also are driven by political and
economic pressures. As states have cut Medicaid recently, in some
cases drastically, the problem of the uninsured has become a big issue
in some local communities, with patients, doctors and businesses alike
pressing legislators to go beyond funding cuts to find creative ways
of boosting the number of insured. Programs that prod employers and
employees into getting private health insurance, moreover, could
conceivably ease strained budgets by keeping more people from becoming
wholly dependent on state-funded Medicaid programs or state- and
locally-run health facilities.

Officials are beginning to realize that "the long-term cost of people
being uninsured is high, and we're all paying for it," says Sharon
Silow-Carroll, senior vice president at Economic and Social Research
Institute, a Washington-based, non-profit research organization.
Hospitals and doctors often bear the initial costs, but consumers end
up paying more through higher insurance rates.

Advocates for the uninsured welcome state and local efforts, but say
it's unrealistic to expect a big drop in the ranks of the uninsured
without a major financial commitment from the federal government. "The
states are good crucibles, good learning laboratories, but I don't
think they can do this on their own," says Jack Meyer, president of
ESRI. "One program might have 10,000 people and another 20,000, and
they get a lot of ballyhoo -- but there are 43 million uninsured and
the states don't have the resources to bring this to scale."

Complicating the challenge of covering the uninsured is the fluid
nature of that population, which encompasses everyone from the young
and healthy who don't want to spend money on health insurance to those
who desperately want it but can't afford their share of the premiums
and those who work at small companies that simply don't offer
insurance.

A number of communities are experimenting with programs aimed at these
latter groups called "three-share," because the cost of the premium is
shared by the employee, the employer and the local community.

One such program is Access Health, a community-owned health plan
located here in Muskegon, an economically strapped community in
southwest Michigan. Under the program, workers and employers each pay
$46 a month per worker, while the county, using Medicaid funds,
contributes another $56.

Access Health uses the money to contract directly with local doctors
and hospitals to provide basic and specialty care. Thus, the plan is a
cooperative rather than an insurance product, and needn't bear the
costs of complying with state insurance regulations. The plan is an
initiative of the Muskegon Community Health Project, a local
nonprofit, which used a grant from the W.K. Kellogg Foundation to get
the program going.

Only businesses paying workers a median wage of $11.50 or less can
take part in the program. That includes many restaurants, day-care
centers, hair salons and similar service providers that are unable to
afford insurance. To make sure that the program doesn't "crowd out"
private coverage, only workers who have been uninsured at least a year
can take part.

The financing of the program has raised some eyebrows. The money for
the "community" share of the premium -- the $56 per month per
employee -- doesn't come from the county itself, but from a
complicated financing transaction that involves drawing down Medicaid
funding for hospitals that treat large numbers of the poor and
uninsured.

Gordon Mudler, president and chief executive of Muskegon's Hackley
Hospital, questions whether the program should be using the Medicaid
funds that way. But Vondie Woodbury, who runs the health project, says
she hasn't gotten any objections from Medicaid officials. Medicaid
officials weren't immediately available to comment.

Wee Care Child Development, a nonprofit day care center here, was one
of the first employers in Muskegon County to offer Access Health to
its workers. Stephanie Qualkenbush, a 34-year-old employee, jumped at
the offer. For most of her adult life, she had been uninsured and had
to scramble to pay for medical care. Previously, she used her
income-tax refunds for medical tests and says she once developed
walking pneumonia because she didn't seek medical attention quickly
enough.

Now that she's on Access Health, Ms. Qualkenbush says, things are
different. Last August, she had a tubal pregnancy that could have left
her deeply in debt. The emergency-room bill alone was $800, she says.
But her new health plan covered everything but $200 in costs.

Access Health is hardly a panacea. It covers just 1,000 people out of
a total of 17,000 uninsured in the county, and employer interest waned
when the economy slowed. Only services that are available in Muskegon
County are covered, even if recipients require care out of the area.
Expensive treatments like organ transplants and sophisticated burn
treatments also aren't covered. Access Health patients who need such
expensive care are steered to Medicaid, and might be eligible after
paying some of their medical costs.

"It's a Band-Aid for a small portion of the problem," says Stu Jones,
who is a member of the Access Health board and a spokesman for Hackley
Hospital, one of the two big hospitals in town. Nonetheless, other
communities, including Rockford, Ill., are now experimenting with
their own "three-share" programs.

--Jacob M. Schlesinger contributed to this article.

Write to Laurie McGinley at laurie.mcginley@wsj.com

Updated January 9, 2004