Curing Maine's Medicaid crisis with a prescription for success

Sunday, June 12, 2005

By BILL BECKER,

So often over the past few years state leaders have argued for and passed into law expansion of Maine's Medicaid and health assistance programs, such as the much-heralded yet underwhelming Dirigo Health plan.

These actions have left Maine with one of the highest percentages of its population on Medicaid and an exploding state health-care budget, with Medicaid and Dirigo now costing hundreds of millions of tax dollars.

Simultaneously, Mainers also pay some of the nation's highest health-insurance premiums. This is a direct result of the many health-care and health-insurance mandates our Legislature has passed.

Additionally, Maine lacks a "high risk pool" that would take the sickest and neediest out of the general health-insurance pool, allowing the rest of the individual rates to drop a great deal, while still providing health-insurance security to those who need it most.

High premiums have forced more people to give up their traditional health insurance and choose to do without insurance or to enroll in the Medicaid or Dirigo programs.

If more Mainers could afford traditional health insurance with private companies, fewer would need to be enrolled in Medicaid or Dirigo. The resulting re- duction could save Maine taxpayers more than $1 billion over the next five years.

What led to this crisis?

Medicaid was created in the 1960s to address the health and well-being of those needing the most assistance: children, the indigent, those with physical or mental disabilities - those who truly needed government assistance to maintain their health.

In Maine, however, we have continued to expand Medicaid eligibility far past the minimum federal requirements and greatly surpassing the national average. In fact, Maine Medicaid enrollment has skyrocketed over the past few years, now enrolling 20 percent of Maine's population in this taxpayer-funded program.

As of May 1, more than 266,000 Mainers were enrolled in the state's Medicaid program, and that number is climbing. To put this into perspective, there are only 205,000 students enrolled in Maine's K-12 public school system, and that number is shrinking. A state that has 60,000 more Medicaid enrollees than K-12 students faces darker days ahead unless something is done.

The only state with a higher percentage of its population on Medicaid is Tennessee - but that will change on July 1. Tennessee's governor, Phil Bredesen, a Democrat who is chairing a national Medicaid reform panel, recently pushed through a major reduction in Medicaid eligibility because his state simply could not afford the cost.

Maine is heading in the other direction.

Just last month - in the face of crushing budget problems and devastating news on our bond ratings and military bases - Maine expanded Medicaid eligibility for working and non-working parents to 200 percent of the federal poverty level. The Legislature's fiscal office projects that this could increase Medicaid enrollment by up to 50,000 people!

This means a family of four earning $39,000 or a family of five earning $45,000 are now eligible for Medicaid. Given that the average family income in Maine is about $37,000, this expansion is clearly unsustainable.

Let's remember how this relates to Maine's tax burden: Mainers pay a top marginal income-tax rate of 8.5 percent (one of the highest in the nation) on any income over $17,350. Yet, a family earning over $40,000 can now qualify for Medicaid! Any state that reserves its highest marginal tax rate for those who also qualify for Medicaid surely has confused its priorities.

MAINE COMPARES BADLY

Meanwhile, Maine's cost of health insurance is often twice or three times as expensive as premiums in other states.

A recent study by the Maine Heritage Policy Center compared the monthly premium cost of a traditional $1,500 deductible health-insurance plan for a 25-year-old man living in Portland or in Portsmouth, N.H. The results were startling.

The monthly premium in Maine was $475 per month. A very similar plan in New Hampshire cost just $125 per month. This $350 monthly cost differential adds up to $4,200 per year. Additional examples comparing Maine to other states abound.

Maine is struggling to keep young people in the state. Yet in addition to a crushing tax burden and dismal business climate, we are asking young Maine workers to pay an outrageously inflated health-insurance premiums. Such a high cost of living provides an incentive for young people to move out of state, a devastating result for Maine's future.

Yet, what are we getting for all this. Not much. Twenty-two states have a lower uninsured rate than Maine, reinforcing the idea that government-imposed high insurance premiums do not buy a very low uninsured rate.

Maine's growing and increasingly costly Medicaid program and expensive health-insurance premiums must change. This crisis will only get worse unless we begin to change direction and implement effective and efficient changes.

STEPS TO SAVINGS

Five simple policy changes will create a healthier Medicaid program that Maine people can afford and provide Mainers with less costly health-insurance options, with no new government program:

Repeal the Dirigo Health Choice initiative. The program is costing tens of millions of dollars in just its first year - yet enrollment is 61 percent below original projections. There comes a point in every public policy initiative where a mid-flight correction is needed. It is time to pull the plug on this expensive failure. This will lower state health-care costs, as Dirigo is set to implement a 3 percent tax on health-insurance premiums (about $120 per privately insured person per year), driving up health-insurance costs by another $100 million over the next two years.

Repeal the costly insurance mandates, such as guaranteed issue, certificate of need and regional geographic access standards. These mandates increased the cost of health insurance while driving most health-insurance providers out of the state, leaving just a couple with a virtual monopoly. These repeals will cost the state nothing and provide tremendous benefit to Mainers purchasing private health insurance.

Create a high-risk pool. This will allow those Mainers who receive the most health care to enter into a health-insurance pool, funded collaboratively by the state, health-insurance companies and enrollees. This allows the broader health-insurance pool to see significant reduction in premium costs, as has happened in other states. This will be a more targeted and effective use of taxpayer funds.

Freeze Medicaid eligibility at July 1, 2004, levels. Maine's Medicaid is far out of line with national averages and federal minimums. Mainers want to ensure that the elderly, disabled and disadvantaged are able to enroll in Medicaid - but we cannot expand the program into the middle class. This will lower state health-care costs while prioritizing taxpayer-subsidized health care for those who need it most.

Encourage health-insurance companies to return to Maine's individual and small-group market. Basic economics teach us that increased competition will lower the cost of services - and other states with many insurance companies provide ample evidence of this effect. Mainers will benefit from such reduced premiums.

By implementing these changes, the Medicaid program will be stronger and financially viable, enabling it to provide care and assistance to the neediest among us. Maine's Medicaid population will be reduced to a more reasonable level, while the number of those affording private health insurance will increase.

This right-sized Medicaid program would be one that Maine taxpayers could afford, with a significant reduction in annual cost to the state budget.

Maine's safety net has been stretched so wide that the most vulnerable are the ones having their benefits cut and are falling though the cracks.

Let's get back to the basics: provide assistance for those who need it most, while implementing public policies that will allow private health insurance to be as affordable in Maine as it is in most other states.

Bill Becker is the executive director of the Maine Heritage Policy Center. He can be reached at info@mainepolicy.org.

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