BLOG Medicine

Maine's Dirigo Health Savings One-Third of Original Estimate

Maine's Acting Insurance Superintendent, Eric Cioppa, ruled last Monday (17 September) that the Dirigo Health Program saved the health care system $32.8 million in its third year of operation; roughly only one-third of the original $92.7 million savings estimate released on 8 July 2007.

Despite Karynlee Harrington, executive director of the Dirigo Health Agency, previously stating in the Portland Press Herald that the agency had refined the methodology used to determine the savings amount based on past decisions of the superintendent, it appears the agency needs a new mathmagician in accounting.

On 27 July, the Dirigo Health Board of Director had reduced the estimated $92.7 million to $78.1 million.  The September 17 ruling of $32.8 million is the lowest savings figure, to date, in the agency's short, but beleaguered history; a possible indication that the agency has lost its steam.  Last year's savings were $34.2 million and the first year savings were ruled to be $43.7 million.

Of the $32.8 million, Cioppa found that the program provided $25 million in hospital savings, $6.3 million in uninsured and under-insured initiatives, and $1.5 million in provider fee savings.  The savings form the basis of the Savings Offset Payment (SOP), the sole funding mechanism for the program.

At a Dirigo Board meeting held after Cioppa's ruling, members discussed the possibility that the decrease in funding may result in the elimination of the subsidies currently paid to a majority of DirigoChoice program participants.

The Maine Dirigo Health program was established in 2003.  Dirigo stopped accepting new enrollees July 1, 2007.■

August a Flurry of Activity

I have to apologize for the abrupt shortage of articles in August, but the month was an absolute flurry of activity, behind the scenes.

In addition to maintaining BLOG Medicine, we operate a parent company (Maynard & Company) that provides healthcare consulting and management services.  Thanks to the steady increase in clients throughout New England, the services provided through Maynard & Company have transitioned to a new entity called Origin Health Group, recently taking on clients in the additional regions of the Mid-Atlantic and Deep South.  The stretch goal for 2008 is for Origin Health Group to have a presence coast-to-coast.

Also, after 11 months of brainstorming and hard work, we've created MedBay, the on-line auction community for healthcare equipment and services.  MedBay is wrapping up testing and is targeted for general release October 1.  Given the heightened awareness about health insurance and reform, MedBay will provide the ideal community mix for patient, provider, and purchaser.  I think MedBay will offer an exciting and attractive alternative to the current more restrictive and cost-prohibitive approach to paying for healthcare.  We'll be providing more information over the next few weeks as we approach our "go-live" date.

Finally, BLOG Medicine is evolving.  Over the next few months, BLOG Medicine will integrate into a larger blog platform that will include a mix of topics written by contributors from throughout the blogosphere.  Although my dedication hasn't changed, due to the other time commitments, my BLOG Medicine entries will now be biweekly on Mondays and Thursdays.  Bloggers interested in contributing to BLOG Medicine and/or the larger platform (including suggesting a name for it) are welcome to comment/contact me here.

Exciting times, indeed.  Expect BLOG Medicine to be back on schedule (and topic) with today's submission and watch for appropriate updates regarding MedBay over the coming weeks and [Insert New Blog Platform Name Here] over the coming months.  As always, I'd like to thank the readers of BLOG Medicine and especially those who have taken the time to comment -- we're nothing without you.■

Dirigo Health: Con Artists, Liars, and Thieves?

With no new enrollment as of July 1 and stated savings estimates and membership numbers gyrating up and down faster than a turkey trot, one has to wonder if Maine's Dirigo Health is made up of con artists, liars, and thieves or if they actually believe their mathmagical accounting.

On 8 July 2007, Dirigo Health released a 2006 estimated savings amount of $92.7 million.  By Friday, 27 July Maine's Dirigo Health Board of Directors had reduced the amount they claim the Dirigo Health program has saved the state's healthcare system in 2006 to $78 million, still more than twice the amount determined in 2005 that required a ruling by the State Supreme Court to be settled.  The recently reduced $78 million figure will now be submitted to the state superintendent of insurance, who has historically reached a lower number than the board, for final determination.

Karynlee Harrington, executive director of the Dirigo Health Agency, was quoted in the Portland Press Herald stating that the agency has refined the methodology used to determine the savings amount based on past decisions of the superintendent seemingly oblivious as to why it should be objectionable that Dirigo's accounting methodologies are changeable, year-to-year and seem to conveniently eliminate Dirigo's earlier cost concerns.  However, not only do Dirigo's accounting methodologies change based on the needs of the day, but the membership numbers experience dramatic unexplained leaps, as well.

On 1 July 2007, when Dirigo stopped accepting new enrollees stating cost concerns, they quoted membership of 14,400, many of whom already had insurance and less than half of the 31,000 Dirigo said they would cover in 2003 and nowhere near the 130,000 Dirigo forecast for coverage by 2009.  By 28 July 2007, only 27-days after halting enrollment, Dirigo mathmagically claims 26,000 Maine residents have been helped.

For their part, as expected, Maine insurance carriers plan to dispute the board's figures, adding that it's a conflict of interest for the Dirigo board to make a determination on savings that will translate into income for its program.

Dirigo's annual attempt to be more than just another failed attempt at healthcare reform with lingering delusions of grandeur is similar, in its own way, to the frivolousness, fantasy, and mathmagical fiction that might be found in a Harry Potter book -- too bad, unlike JK Rowling, Dirigo doesn't know when to end the fairy tale.■ 

Mass Governor Asks Blue Cross to Keep Higher Employer Contribution

At the request of Governor Deval L. Patrick (D-MA), the state's largest health insurer, Blue Cross and Blue Shield of Massachusetts, scrapped a new policy that would have allowed owners of small businesses to contribute just one-third of the cost of their employees' health plan premiums.  Blue Cross is the state's largest health insurer with about 3 million members.

Prior to 1 July, Blue Cross required a minimum 50 percent contribution to premiums from employers with 50 or fewer workers.  The average contribution by Massachusetts employers is about 75 percent.

On 1 July, Massachusetts's healthcare reform law took effect, under which, if a company does not offer health insurance, low income works can receive subsidized coverage under the state's Commonwealth Care plan.  They are ineligible for assistance, however, if their employer offers a company health plan, regardless of the company's contribution to premiums.

Company's not offering health insurance to their employees or contributing less than what the state deems "fair and reasonable" toward their employees' health plan premiums are required to pay an annual fee of $295 per employee.

Harvard Pilgrim Health Care, the state's second largest health insurer with about 1 million members, has said that the insurer will retain its 50 percent contribution after earlier reviewing its policies as a result of Blue Cross's lowering its minimum contribution to 33 percent.■

One Nation, Uninsured

Six times in the past century -- during World War I, during the Depression, during the Truman and Johnson administrations, in the Senate in the 70s, and during the Clinton administration -- efforts have been made to introduce some kind of universal health insurance, only to be rejected.  Each time, Americans have instead opted for a system of increasing complexity and dysfunction.

The above quote, found in Friday's BLOG Medicine, begs the question:  Why?

A good place to start when looking for an answer can be found in Jill Quadagno's, One Nation, Uninsured: Why the U.S. Has No National Health Insurance.  Quadagno is a sociology professor at Florida State University, where she holds the Mildred and Claude Pepper Eminent Scholar Chair in Social Gerontology.  One Nation, Uninsured shows how powerful stakeholders like the American Medical Association (AMA), the American Federation of Labor (AFL), and the Health Insurance Association of America (HIAA), at various times over the last 60 years, have acted to keep health care financing out of the government's hands, effectively preventing every attempt to enact national health insurance.

In light of Michael Moore's recent shockumentary Sicko, a quote from Jonathan Cohn's review in the Washington Post of Quadagno's book is especially relevant (and prescient -- the review was done in 2005):

Quadagno's ultimate message seems to be that politics are more important than policy -- that progressives won't achieve universal coverage unless they learn to operate like the special interests of the right. She's probably correct -- which is why her richly constructed history could prove so handy in the months and years to come.

Given the breadth and depth of the various coalitions that have formed to promote change, we have reason to be optimistic that we are, indeed, at a tipping point for healthcare reform.■

Maine's Dirigo Health Makes More Inflated Claims

Within days of citing cost concerns and putting a hold on new enrollees, Maine's Dirigo Health now predicts it will save the state's healthcare system $92.7 million in its third year of operation.

On 1 July, Dirigo Health stopped taking new members, stating the need to cut costs.  Small businesses and self-employed people were given an additional 60-days, cutting off enrollment on 1 September.  Dirigo recently won its court case over the much-contested savings offset payment (SOP) funding mechanism, securing $34.4 million from insurance companies, but Governor John Baldacci (D-ME) cut the requested additional $16.3 million from the state's current budget, causing Dirigo executives to claim they could only remain operational through the fiscal year beginning 1 July.

The savings calculation is the starting point from which the SOP is determined.  The payment is an assessment made on insurers based on savings created by Dirigo through its enrollment of members -- currently only 14,400 Mainers and no where near Dirigo's first-year enrollment target of 31,000 uninsured, let alone 130,000 by 2009.  Insurers argue that the majority of Dirigo members previously had insurance and that the plan is not meeting its legislated goal of reducing the number of Maine's uninsured.

A hearing before the Dirigo Health board of directors, scheduled for 23 July, is the next step in determining the SOP.

Last year, Dirigo calculated that the plan resulted in close to $100 million in savings.  The Dirigo board reduced that figure to $41.8 million and the insurance superintendent reduced it to $34.3 million.

BLOG Medicine volunteers to check Dirigo's math, because these numbers continue not to add up.  When Dirigo claimed the $100 million savings the plan had approximately 7,000 members.  Now, with 14,400 members and crying poverty, Dirigo claims another, seemingly miraculous, $93 million in savings, that, just in the nick of time, would allow the plan to keep its doors open after next year.  If these savings numbers are even remotely accurate, Dirigo membership must only consist of high-cost catastrophic cases.

If, instead, Dirigo's paltry membership is more broadly based (i.e., the risk pool consists primarily of young, healthy members), then the SOP calculation starting point cannot feasibly be accurate.  However, if Dirigo membership does, in fact, consist primarily of the elderly and severely ill, then Maine legislators have further compounded their financial malfeasance by allowing Dirigo to self-insure, as signed into law by Baldacci in May 2007.

Regardless, on 1 July 2007, 4 years into the experiment of state-sponsored health insurance, Dirigo Health proved it was neither self-sufficient nor financially sound by closing enrollment.  The State of Maine has proved, beyond any reasonable doubt, that it does not belong in the health insurance business.  No inflated claims of unrealistic, unsubstantiated savings should cloud anyone's perception --this emperor has no clothes.■

Adversarial Role a Chosen One by Managed Care Payors

That the relationship between managed care payors and their members and providers has become toxic is unsurprising to anyone engaged in health care, whether it be its recipients, providers or administrators.  Managed care was set up to be adversarial from day one and payors have reveled in their "bad boy of health care" image ever since.

Six times in the past century -- during World War I, during the Depression, during the Truman and Johnson administrations, in the Senate in the 70s, and during the Clinton administration -- efforts have been made to introduce some kind of universal health insurance, only to be rejected.  Each time, Americans have instead opted for a system of increasing complexity and dysfunction.

On any given day, 45 million Americans are uninsured and without access to affordable, necessary health care services; another 16 million are under-insured.  According to the National Coalition on Health Care, employer health insurance premiums increased 7.7 percent -- two times the rate of inflation -- in 2006.  Since 2000, employment-based health insurance premiums have increased 87 percent, compared to cumulative inflation of 18 percent and cumulative wage growth of 20 percent during the same period.  Publicly traded managed care company CEOs are receiving multiple millions of dollars in cash incentives, bonuses, and stock options.

Conservative writer Ramesh Ponnuru points to technological developments and an aging population as exacerbating the trend of rising health care costs.  To contain costs, employers partnered with HMOs to impose limits on patients and doctors.  "There," Ponnuru states, "in a nutshell, is almost everything we dislike about modern American health care.  It can be very good, but it is more expensive than it is worth; more bureaucratic, too."

Managed care payors wouldn't have it any other way.■

Maine's Dirigo Health Puts Hold on New Enrollees

Saying they need to cut costs, the Maine state-sponsored insurance program, Dirigo Health, stopped taking new members as of today.  Small businesses and self-employed people have until 1 September.

After 4 years, the program, created in 2003, has 14,400 members, less than half of the 30,000 members they were to have covered in the first year.

The program is claiming that without an additional $16.3 million that was requested and rejected in the last budget, the $34.4 million that insurance companies pay into the program will only keep them operational through the coming fiscal year.

Perhaps rather than continuing to drag out this failed experiment or foolishly move forward into self-insurance, the Baldacci Administration will recognize that they don't belong in the insurance business and instead work to make appropriate reforms that modify the restrictions on managed care that chased the majority of payors out of Maine in the first place.■

Knowing When the Wrong Guy Is At the Table

There's a lot of work involved when a hospital enters into negotiations with a payor and knowing if you're sitting down to negotiate with the right person should be near the top of your checklist.

At the beginning of a negotiation, before a meeting is even scheduled, prep work will have already identified how the payor fits into the overall financial picture, how they are or are not complying with their obligations under their current contract, how they're perceived by the employers in the market, whether or not you want to continue doing business with them, and what your goals are under a new agreement.  A CFO and various members of his or her staff will spend a large amount of time pulling together this information, cross-checking it, and testing it, attempting to not only answer all of their own questions and assumptions but also to anticipate any and all roadblocks and arguments that the payor will raise in opposition to your goals.

Once the CFO has the necessary information, the meeting is scheduled.  You meet the payor's negotiator, who will provide you with the latest press release about why that payor is the best/nicest/most philanthropic payor in the state/region/country or some similar corporate communication meant to dissuade the CFO from their belief that managed care is a failed payment mechanism, that that payor is especially disagreeable to work with, and, because of this new good press, thousands of your patients will be flocking to join that payor as members in the very near future.  The CFO states their goals for the new agreement, financially as well as utilization and quality, and, if they're bold, presents a draft of the new agreement.  The meeting concludes with niceties about family, the weather, golf, and/or the current season's sport with a follow-up meeting tentatively scheduled.

You are now in the middle of negotiations where, depending on how significant the financial changes are, the payor's negotiator will either drag their feet -- vacation, division meetings out of town, other departments have to do the number crunching are old stand-bys -- or try to get LOAs quickly signed.  Contract language will depend on the size of the hospital and/or the experience of the CFO.  A CFO presenting a draft contract will automatically lengthen the duration of the negotiation by at least a factor of three, or, depending on the size of the payor, bring negotiations to a complete halt.  It will be the payor's policy to only negotiate from their own document -- no, the payor won't provide you with hard-copy of their policies and procedures, but you'll be welcome to look them up on the payor's web page.  A review copy of the payor's "boilerplate" agreement will already be in the mail to the CFO's attention.

The CFO will send the boilerplate agreement to their attorney for review.  The hospital's attorney will identify all of the ways the document is one-sided to the benefit of the payor, down to definitions of covered services, medically necessary, participant, and benefit plan.  There will be follow-up phone calls, faxes and e-mails between the payor and the CFO.  The first follow-up meeting to review language will easily take an hour and should take two.  The negotiator will tell the CFO that the financial goals aren't possible, or the physician's just received a 2 percent increase, or that to even consider making the requested financial changes, the hospital will have to go to some kind of fixed OP pricing.

There will be multiple meetings, language and reimbursement will finally be (and most times grudgingly) agreed to.  Both CFO and payor negotiator will still be alive and can expect to repeat this process in 2 years.  The negotiation will have taken somewhere between 3-9 months from first meeting to signature.  The whole process will have taken 12-15 months.  What will impact the length of time the greatest is who you have at the table for the actual negotiation.

Having the wrong guy at the table will stretch the process to its limit, making it important to look for and identify the wrong guy early in the negotiation process.  You know you're dealing with the wrong guy when he doesn't come prepared to answer your questions (or doesn't respond within 24-hours with answers), when he tells you language cannot be changed because it's the national template, and most tellingly when he can't agree to make a change during the meeting.  Once the wrong guy has been identified, stop the meeting.  Before you can proceed, you need to know who the right guy is, whether he's this negotiator's boss or his boss's boss.  That's who the next meeting needs to be scheduled with and don't be surprised if it takes a notice of termination to make it happen.

Knowing when the wrong guy is at the table and how to get to the right guy will significantly cut the amount of time it takes to reach agreement.■

CDC Reports 2 Million More Uninsured Americans in 2006

The Centers for Disease Control (CDC) is reporting that there were 2 million more uninsured Americans in 2006 over the previous year, putting estimates for uninsured, all ages, at 43.6 million.  The number has been averaging between 41 and 44 million over the past 5 years.

Highlight of the CDC's National Center for Health Statistics report "Early Release of Health Insurance Estimates Based on Data from the 2006 National Health Interview Survey" include:

• In 2006, there were 43.6 million Americans of all ages who did not have health insurance (at the time of the interview), or 14.8 percent of the population
• Among working-age Americans (those ages 18-64), there were 19.8 percent who did not have health insurance in 2006, a slight increase from 18.9 percent in 2005.
• Approximately 9.3 percent of children under the age of 18 did not have health insurance in 2006, a decrease from 13.9 percent in 1997
• In 2006, the percentage uninsured at the time of interview among the 20 largest states ranged from 7.7 percent in Michigan to 23.8 percent in Texas.

The study examines data from interviews collected in over 100,000 households nationwide.■