From 1990 to 1994, the proportion of Connecticut residents without health insurance increased from 8.5 percent to 12.2 percent of the non-elderly population. In 1995, the uninsured population appears to have declined somewhat -- to 10.1 percent -- perhaps a sign of an improving economy. However, this still represented 284,000 uninsured non-elderly residents, including 80,000 children according to Census Bureau estimates. Therefore, it is still too early to tell whether this decrease represents a one year aberration or the beginning of a new trend. At the same time, the cost of uncompensated care continues to increase, putting more strain on Connecticut's health care providers and on the state's system of health care finance. In addition, serious health care access issues remain for many Connecticut residents.
The Work Group's Formation
In order to address these problems, the Work Group for Health Care Access for the Uninsured was formed in May of 1996. The Work Group has a diverse membership representing a variety of professional organizations with an interest in health care policy. These include state legislators and legislative staff, the State Comptroller and Deputy Comptroller, representatives of Connecticut hospitals, physicians, health maintenance organizations, insurance companies, the business community, and advocates for the uninsured.
The Structure and Scope of this Report
The report begins with an overview of significant health care trends in Connecticut. The next section contains five guiding principles of health reform developed by the Work Group and a summary of the group's recommendations. The third section provides an outline of the problems facing Connecticut's health system. This is followed by a summary of the Work Group's process in examining these complex issues and a consensus recommendation concerning two promising reform concepts. The report concludes with a list of questions that require further exploration.
II. An Overview of Significant Health Care Trends
III. Guiding Principles and Summary Recommendation
In order to address these complex issues, the Work Group was guided by the following principles to help ensure that any proposed solutions would incorporate a reasonable balance between access, quality and affordability. The Work Group membership believes that any reform legislation brought forward should be consistent with these principles.
Guiding Principles of Health Reform
For many years, expanding access to health care has remained an elusive goal for policymakers, as the experience of both the state and the nation has shown. While nearly everyone acknowledges that serious problems exist, there is no political consensus around a solution. In light of this, the diverse membership of the Work Group believes that the best approach is to pursue meaningful incremental steps that will improve health care access for targeted segments of Connecticut's uninsured population. In their deliberations, Work Group members reached consensus that the first priority should be to help the most vulnerable group -- Connecticut's uninsured children.
In addition, the group's demographic research showed that the uninsured were most likely to work for small businesses, which are creating most of the new jobs in Connecticut. Therefore, the group agreed that efforts should be made to encourage small firms to offer health coverage to their employees and their families.
The Work Group recommends that the two reform concepts outlined below should be given priority consideration by the Connecticut General Assembly.
The first concept involves expanding Medicaid to cover as many of the state's uninsured children as possible. This approach could use a Section 1115 research and demonstration waiver or use the state's authority under Section 1902 (r) (2) of the Social Security Act to expand Medicaid coverage. The idea would be to make the Medicaid managed care program available to most of Connecticut's uninsured children and subsidize premiums using a sliding scale for low and medium income families. Higher income families who could not obtain insurance in the private market would be eligible to enroll their children; however, they would have to pay the full cost of their children's coverage.
The second reform concept focuses on small businesses, which are much less likely to provide health insurance to their employees than their larger counterparts. This approach could use a package of tax incentives to encourage small employers to provide coverage to workers and their families. The incentives could involve a credit on the corporation business tax, the personal income tax or a combination of both to help subsidize the cost of coverage.
In addition, Connecticut appears to have a significant number of uninsured children between 133 and 185 percent of the Federal Poverty Level (FPL) who are presently eligible for Medicaid, but are not yet covered by the program. Therefore, the Work Group recommends that the Department of Social Services pursue more aggressive outreach efforts to ensure that all uninsured children who are currently eligible for Medicaid are actually enrolled. Since Medicaid outreach activities are eligible for federal matching funds, the state would only have to cover half of the cost.
These outreach efforts should be coordinated with the Department's efforts to implement changes resulting from the recent federal welfare legislation. This law replaced the Aid to Families with Dependent Children program with a block grant -- Temporary Assistance for Needy Families or TANF -- and discontinued the automatic enrollment of AFDC recipients into Medicaid. This change will present new challenges for the state including the development of effective outreach strategies to inform families of their potential eligibility for Medicaid and to help guide them through the enrollment process. As such, the Work Group believes this new outreach responsibility under TANF offers DSS an additional opportunity to identify and enroll those uninsured children between 133 and 185 percent of the FPL.
IV. Problems Facing Connecticut's Health Care System
A. The Uninsured
From 1990 to 1994, the proportion of Connecticut residents without health insurance increased from 8.5 percent to 12.2 percent of the non-elderly population. This trend mirrored Connecticut's declining economic fortunes through the recession. The state lost jobs in sectors that have traditionally included health benefits -- defense, manufacturing and insurance, for instance -- while it gained service sector jobs that are less likely to provide coverage.
In 1995, the uninsured population appears to have declined somewhat -- to 10.1 percent -- perhaps due to an improving state economy. However, this still represented 284,000 uninsured non-elderly residents, including 80,000 children according to Census Bureau estimates. An additional 5,000 residents age 65 or over were estimated to be uninsured in 1995 as well. Therefore, it is still too early to tell whether this decrease represents a one year aberration or the beginning of a new trend.
It is important to note that the Census Bureau's point estimate represents a snapshot in time. In other words, on any given day in 1995, an estimated 289,000 Connecticut residents lacked health insurance. National data for previous years indicate that a larger number of individuals were uninsured at some point over the course of the year.
In 1993, for example, 51.3 million people -- one in five Americans -- were uninsured for some time during the year. Of these, 18.2 million (35 percent) were without insurance for the entire year. Another 22 million (or 43 percent) went without coverage for 4-11 months, while the remaining 11.1 million (22 percent) were uninsured for 1-3 months.see footnote 1
Who are the Uninsured?
One available source for demographic information on the uninsured comes from the March Current Population Survey (CPS), which is conducted each year by the U.S. Bureau of the Census. Nationwide, 60,000 households are interviewed on a variety of demographic and socioeconomic topics, including health insurance coverage. Due to the size of the sample, health care analysts tend to merge 3 years worth of data, so that meaningful conclusions can be drawn at the state level. A 1995 publication by the Urban Institute used this approach to provide a state-by-state demographic profile of the uninsured.see footnote 2
The merged data comes from the 1991-1993 March Current Population Surveys and covers calendar years 1990-1992 (weighted more heavily toward the most recent year). The data show that Connecticut's uninsured are a diverse group; they come from different income levels, age groups and family types.
The Uninsured by Age
Virtually all Americans without health insurance are under age 65 because Medicare provides coverage for nearly all elderly citizens. The vast majority of Connecticut's uninsured population fell between the ages of 18 and 64 -- reflecting the dominance of working individuals among the uninsured. Overall, the 18 to 34 group was the most likely to be uninsured -- representing 46 percent of Connecticut's uninsured. After that, the chances of being uninsured declined with age. Those 35 to 53 represented 27 percent of the uninsured, while those between 54 and 64 made up another 8 percent. Children -- those under age 18 -- represented 19 percent of the uninsured in Connecticut.
It appears that some of Connecticut's uninsured children may actually be eligible for Medicaid, but are not enrolled in the program. Public Act 93-289 increased Medicaid eligibility from 133 percent to 185 percent of the federal poverty level (FPL) for children under the age of 6. Special Session Public Act 94-5 expanded Medicaid eligibility to 185 percent of the FPL for children born after September 30, 1983. The age limit for this eligible class is 19 years.
However, in federal fiscal year 1994, this class of children represented only 2.1 percent of Connecticut's Medicaid recipients, compared with 8.6 percent regionally and 10.8 percent nationally.see footnote 3 If more aggressive outreach efforts are pursued, it appears that Connecticut may be able to add a significant number of uninsured children to Medicaid.
Between 1990 and 1992, poor and moderate income families were disproportionately represented among the uninsured. In general, the higher one's income, the less likely he or she was to be uninsured. The one exception to this pattern, however, involved those below the poverty level. Those slightly above poverty were more likely to be uninsured than those below. This is due to the presence of Medicaid, which acts as a safety net for the poor who qualify for that program.
However, many low income individuals are not eligible for Medicaid. A total of 19 percent of Connecticut's uninsured were poor, living under the federal poverty level (FPL).see footnote 4 Another 34 percent of the uninsured were "near poor," living between 100 and 199 percent of the FPL. Families between 200 and 399 percent of the FPL made up 34 percent of the uninsured. The remaining 13% came from families living at or above 400 percent of the FPL.
In Connecticut, where health care costs are among the highest in the nation, the cost of individual non-group policies are beyond the means of many families -- even those who are well above federal poverty standards. Family premiums for these policies vary widely, but can cost $6,000 per year or more. For a family of three that earns 300 percent of the FPL ($38,940 per year) this premium would represent over 15 percent of their gross annual income.
Type of Family
About half of Connecticut's uninsured were single with no dependents between 1990 and 1992. Married people with children made up nearly a quarter of the uninsured, while couples with no children represented an additional 14 percent. Finally, single-parent families made up the remaining 12 percent of Connecticut's uninsured residents.
In part, the dominance of singles (including single-parents) among the uninsured can be explained through economic factors. Overall, married couples tend to have higher incomes, especially if both adults are working. In addition, if both are in the work force, there is a higher probability that the family has access to employer-based coverage. If not for the existence of the Medicaid program -- which serves those on Aid to Families with Dependent Children (AFDC), among others -- single parent families would make up a much greater proportion of the uninsured.
Attachment to the Work Force
Significantly, during the period of 1990-1992, the vast majority of the uninsured were from working families. More than 7 in 10 uninsured households in Connecticut had at least one adult who worked full-time and another 15 percent had at least one adult who worked part-time. Only 12 percent of uninsured households were headed by adults who were not in the work force.
Size of Firm
From 1990 to 1992, Connecticut's uninsured were much more likely to work for small and medium size firms. About 52 percent of the uninsured were employed by firms with fewer than 25 employees. Another 13 percent worked for firms with between 25 and 99 employees. The rest (35 percent) worked for firms with 100 or more workers.
There are a number of reasons for this trend. National data show that small firms are much less likely to offer coverage to their employees than larger ones. Small firms' per capita costs for health insurance are significantly higher than their larger counterparts. In part, this is due to the higher risks and higher average administrative costs associated with small businesses. Larger firms can spread risk and administrative costs over more workers. In addition, these firms have more clout in the market place when negotiating rates with health insurers.
As a result, the employees of small firms are disproportionately represented among the uninsured. A recent ten state survey conducted by RAND showed that even though small firms (fewer than 25 workers) employed 34 percent of the workforce, their employees represented 57 percent of uninsured workers. By contrast, while medium size firms (25-99 workers) employed 13 percent of the workforce, their employees represented 12 percent of uninsured workers. Finally, larger firms (100+ workers) employed 54 percent of the workforce; however, their employees represented 31 percent of uninsured workers.
While the issues involving small employers are clearly very significant, they do not account for the whole problem. Over 40 percent of uninsured workers are employed by medium and large firms.
Reasons Cited for not Offering Coverage
When asked why they do not offer health insurance coverage, small employers' responses are fairly consistent. In 1991, the Bourget Research Group conducted a survey on Connecticut small employers' attitudes toward health insurance and found the following: The most common reason cited for not offering health insurance was that it was too expensive (63 percent). About 28 percent reported that most of their employees were covered by a spouse's plan. Approximately 19 percent cited poor business/economy as the primary reason for not offering coverage. Other frequently mentioned reasons included having too few employees, plans being too costly or complicated to administer, and having been turned down for health reasons.see footnote 5
A more recent national survey conducted by Wayne State University and KPMG Peat Marwick, confirmed these Connecticut specific results.see footnote 6 Cost-related concerns were once again cited most often as the primary factor in the decision not to purchase coverage -- nearly 90 percent of those surveyed said premiums were too high. In addition, almost 80 percent said the firm's profits were too variable and another three-quarters said that premium increases were too uncertain. The researchers note that these issues underscored a fear among small business owners that if they did offer coverage, they would have to take it away sometime in the future.
Some firms reported that health benefits were not a priority for workers. Nearly 60 percent of respondents indicated that they did not need to offer insurance to attract workers. Fifty-four percent reported that their workers preferred higher wages to health benefits. Many firms reported that their employees were already covered through another source (54 percent). Lastly, firms also cited the administrative burdens of providing coverage as a major concern.
What about Medium and Large Firms?
Many uninsured workers (over 40 percent) work for medium and large firms. How can this be explained? Are the existing gaps in the employer-based system a problem of supply -- that is, a failure of employers to offer insurance -- or a lack of demand to enroll on the part of employees? Two researchers, Long and Marquis, have done extensive work in this area and have concluded that the gaps in coverage are largely a failure of supply. Though somewhat dated, their data show near universal acceptance of insurance among employees that are offered the opportunity to participate. However, a significant group of employees are not eligible for coverage -- even if their employer does offer it to some workers. These employees are mostly part-time or temporary workers, low income, and tend to have jobs in service-related industries or agriculture.see footnote 7
Using national Census Bureau data (from the 1988 Current Population Survey), Long and Marquis found that over three-quarters of all workers (ages 18 to 64) are offered health insurance by their employers. Among those offered insurance, 87 percent (66 percent of all workers) participate in the plan. Eleven percent of those eligible decline it because they have other coverage, usually through a spouse. Only about 2 percent of employees who are eligible to participate turn down an employer offer and remain uninsured.
About one-quarter of workers do not have access to employer sponsored health insurance through their own employer. About 6 percent of workers are employed in firms that offer health insurance to employees but are not eligible themselves. Full-time employment is a common requirement and over half of ineligible employees work fewer than 35 hours per week. Some of those ineligible for their employer's health coverage have been with the firm for fewer than three months (which probably reflects waiting period requirements). Eighteen percent of workers are in firms that do not offer insurance.
In addition, many industries that employ seasonal or temporary workers do not provide insurance for workers. These include agriculture, construction, retail and other service-related businesses.
The researchers note that the majority of workers in firms that do not offer insurance are low wage earners. Two-thirds of them earn wages of less than $7.00 per hour, and 41 percent earn less than $5.00 per hour. Significantly, the wage profile of those who turn down their employer's offer of insurance -- especially those who are not covered by another source -- is quite similar. About 61 percent earn less than $7.00 an hour and 33 percent earn less than $5.00 per hour.
Many who work in firms not offering insurance and many who do not enroll in their employer plan are part-time workers. Among the former, 36 percent work fewer than 35 hours per week; among the latter, 30 percent work fewer than 35 hours per week.
Lastly, the Long and Marquis point out that about 25 percent of workers in firms of all sizes that do not offer insurance are young -- under age 25. By contrast, for firms that do offer coverage, only 15 percent of their workforce is young.
Thus, from this national data, a fairly clear profile of uninsured workers begins to emerge:
B. Health Spending
According to estimates by the Health Care Financing Administration (HCFA), national health expenditures (NHE) in the United States totaled $949.4 billion in 1994, representing about 13.7 percent of the nation's gross domestic product (GDP). U.S. per capita spending -- total spending divided by the population -- amounted to $3,510. When measured on either a per capita basis or as a percentage of GDP, U.S. health spending far out paces that of any other nation.
Is Health Spending Growth Slowing?
After five years of double-digit and near double-digit growth in health spending between 1988 and 1992, U.S. health expenditure growth decelerated to 7 percent in 1993 and 6.4 percent in 1994. The 6.4 percent growth rate was the slowest recorded in more than three decades. Even at this relatively low rate, U.S. health spending still grew faster than the GDP. When economy-wide inflation is removed from these expenditure estimates, policy analysts have found that health spending still grew at a real rate of 4 percent.see footnote 8
While this slowed growth is a welcome respite, analysts warn that a two-year observation does not necessarily constitute a long-term trend. Policymakers point to a number of factors that could explain the decelerating growth. Anecdotal evidence suggests that insurers' profits are being squeezed as they offer employers lower premiums in competition with other firms to increase their market share. Second, surveys of employer-sponsored private health insurance show that part of the slow down in premium growth in 1994 and 1995 resulted from the switch of employers' coverage from conventional to managed care plans.see footnote 9
In addition, some analysts contend that the slower growth was partly in response to the possibility of government intervention in the form of national health reform. That is, the threat of explicit cost controls provided enough uncertainty to have a self-disciplinary effect on the health sector. Analysts point to historical evidence to support this theory. The last time real health spending growth slowed this dramatically was in 1978 and 1979 while Congress was debating President Carter's proposals for hospital cost control and was awaiting his proposed health care financing plan. After the threat subsided, real growth continued to escalate dramatically throughout the 1980's.see footnote 10 At present, the longer term prospects remain unclear. Only time will tell if the recent slow-down in health spending growth will be a short-lived aberration or if it will develop into a long-term trend.
Personal Health Care Expenditures
Personal health care expenditures (PHCE) are a subcategory of national health expenditures. PHCE measures spending on therapeutic goods or services rendered to treat or prevent a specific disease or condition in a specific person. This includes hospital care, physician services, dental services, home health services, nursing home care, drugs, vision products and other personal health care goods and services. A recent article in the Health Care Financing Review provided a break down of PHCE for the nation, as well as by region and by state.see footnote 11 The data presented are from calendar year 1993.
Health Spending in Connecticut
The New England region led the nation in health spending per capita. In 1993, New England's PHCE spending averaged $3,585, 19 percent higher than the national average of $3,020. Among individual states, Connecticut ranked second highest in the nation with a per capita PHCE of $3,727; only Massachusetts spent more per capita in 1993 -- $3,892.
Connecticut's total PHCE exceeded $12.2 billion in 1993 and represented about 11.7 percent of its gross state product (GSP). GSP measures the total value of goods and services produced in a particular state. Therefore, nearly 12 cents out of every dollar spent in Connecticut paid for health related goods or services in 1993. The graph that follows shows Connecticut's total PHCE spending from 1980 to 1993. These increases represented an average annual growth of 11 percent for the period, which was somewhat higher than the national average of 10.3 percent.
The amount a state spends on health care is influenced by a number of factors, including the age distribution of its population. The elderly -- those age 65 and above -- consume four times as much health care as those under age 65. At 14.1 percent, Connecticut was eleventh in the nation for population age 65 or above in 1993. This percentage ranked above both the national average of 12.7 percent and the New England region's rate of 13.9 percent. In 1980, Connecticut had approximately 368,000 elderly residents (or 11.8 percent), compared with 461,000 in 1993.
This demographic trend is evident in one particular area of personal health care spending. On average, the United States spent about 8.5 percent of PHCE on nursing home care in 1993. By contrast, Connecticut spent 14.3 percent of PHCE on nursing care and ranked first in the nation.
Sources of Funding in the United States
From 1989 to 1994, the share of U.S. health spending funded by the public sector increased from 40.5 percent to 44.3 percent. The major public sources include Medicare (18 percent), Medicaid (14 percent), and state and local government programs (12.3 percent). The two major private sources of health care funding are private health insurance (34 percent) and out-of-pocket expenditures (18 percent).
This trend has not gone unnoticed by federal policymakers. The size of both Medicare and Medicaid and the growth rates associated with these programs have made them a tempting target for deficit reduction. In the past two years a number of balanced budget proposals have been advanced that would slow the growth rates of Medicare and Medicaid substantially.
Sources of Health Spending in Connecticut
Traditionally, compared with the nation as a whole, a greater proportion of Connecticut's health spending has been funded by private insurance. In 1992, for example, private insurance covered 37 percent of health spending in Connecticut. Public sources covered a total of 41 percent. These sources included Medicare (17 percent), Medicaid (14 percent), and other state and local government programs (10 percent). The balance of Connecticut's health spending (22 percent) was funded through out-of-pocket payments by consumers.see footnote 12
In recent years, several trends have increased the percentage of health care expenses funded by public programs. First, a greater number of Connecticut residents have turned age 65 and have enrolled in Medicare. Second, due to the economic downturn, a larger proportion of the population has lost private insurance coverage. Lastly, Medicaid eligibility has been expanded, enabling the program to cover more Connecticut residents.
C. UNCOMPENSATED AND UNDERCOMPENSATED CARE
Uncompensated care is usually defined as health care rendered to individuals who are unable to pay and are not covered by private or governmental health insurance plans. This includes both unbilled charity care and bad debts (that is, services billed but not paid). While uncompensated care can be delivered by a variety of health care facilities and providers, most is provided by acute care hospitals. In 1992, the national cost of uncompensated care for hospitals was estimated to be $11.9 billion.see footnote 13 Analysts also make the distinction between uncompensated care and "undercompensated care," which refers to underpayments for services from Medicare, Medicaid, and other government programs. Nationally, undercompensated care amounted to $22.7 billion in 1992.
Uncompensated Care and Cost-Shifting in Connecticut
Connecticut's 33 acute-care hospitals serve anyone who is admitted, regardless of insurance status or ability to pay. In doing so, they provide the vast majority of uncompensated care to Connecticut's uninsured residents. The Office of Health Care Access (OHCA) estimates that in state fiscal year (SFY) 1993, Connecticut hospitals provided over $237 million in uncompensated care (approximately $53 million in charity care and $184 million in bad debts).see footnote 14 For the federal fiscal year ending September 30, 1995, OHCA estimates that uncompensated care totaled $249 million.
In addition, the level of underpayments from government programs such as Medicare and Medicaid continues to grow. In order to analyze the effect of these underpayments, OHCA has developed a methodology for measuring cost-shift. Cost-shifting is the practice of charging higher rates to one set of patients (usually privately insured) to make up for revenue lost on another set (publicly insured or uninsured patients). OHCA estimates the total costs shifted onto private payers -- from both uncompensated and undercompensated care -- amounted to $570 million in SFY 1993. In fact, cost- shifting represented about 30 percent of the average private pay hospital bill in Connecticut. OHCA equates this "hidden" cost to a premium tax because it is an unavoidable charge to private payers.see footnote 15
Prospects for the Future?
Each of these trends makes it more difficult for hospitals to provide care to the uninsured. As both public and private payers seek to limit reimbursement, hospitals will find it more difficult to generate surplus revenue to cover uncompensated care costs. A recent article in Health Affairs, by Joyce Mann, et. al., warned that the situation is particularly acute in California, where most of the factors discussed above have already emerged. As a result, hospitals have provided less care to the medically indigent. The authors estimate that in 1989, without pressures from competition and the financial tightening of public programs, hospitals would have provided 36 percent more uncompensated care than was actually provided.
While there are significant differences between Connecticut's network of nonprofit hospitals and California's system (which has both public hospitals and private, for-profit facilities), the general comparison may be instructive as policymakers look for solutions. The authors warn that California may serve as a harbinger of trends that are likely to appear in other states -- potentially jeopardizing this "invisible safety net" for the poor.see footnote 16
V. THE WORK GROUP FOR HEALTH CARE ACCESS FOR THE UNINSURED
In order to address these growing problems, the Work Group for Health Care Access for the Uninsured was formed in May of 1996. Work Group members include state legislators and legislative staff, the State Comptroller and Deputy Comptroller, representatives of Connecticut hospitals, physicians, health maintenance organizations, insurance companies, the business community, and advocates for the uninsured.
The Work Group's Process
Between May and October 1996, the Work Group met a total of seven times for half-day sessions. After an initial meeting to set the schedule and ground rules, the group attempted to define the problem in terms of a question to be addressed. The Work Group reached consensus on the following problem definition:
How can we ensure access to quality health care for the uninsured and underinsured without adverse consequences to the system, and how do we develop the basis to pay for this access?
At the second Work Group meeting, members also asked for information in a number of areas to help them analyze the problem and hopefully recommend one or more consensus solutions. The information requested included Connecticut specific data on: the uninsured and underinsured; how health care is financed, including a break down of health expenditures by category; how the uninsured obtain medical care under the current system; and how uncompensated care is financed. In addition, the Work Group asked for a review of earlier efforts to expand health care access in Connecticut and a comparison of how other states have dealt with this problem. (A complete list of Work Group publications addressing these various issues is presented in Appendix A).
Work Group staff presented data at the third and fourth meetings, which took place in the first part of September. At the fourth meeting, Work Group members also began to develop a set of criteria with which they would test any alternatives or options developed to address the problem. The test criteria were reviewed and refined by group members during the fifth Work Group meeting.
The Work Group spent the sixth meeting brainstorming about possible reform options. The members generated a wide variety of ideas to examine. Some of the ideas that resonated most with group members included: targeting children as a priority population; expanding Medicaid eligibility; using the Medicaid managed care network as a vehicle for service provision; using sliding scale premiums to make coverage more affordable; and providing a variety of incentives -- including tax credits -- to encourage small businesses to offer health insurance to their workers.
Two Reform Concepts
Using these ideas as building blocks, the seventh meeting focused on outlining two workable reform options to address the problems of the uninsured.
The first concept involved expanding Medicaid to cover as many of the state's uninsured children as possible. This approach could use a Section 1115 research and demonstration waiver or use the state's authority under Section 1902 (r) (2) of the Social Security Act to expand Medicaid coverage. The idea would be to make the Medicaid managed care program available to most of Connecticut's uninsured children and subsidize premiums using a sliding scale for low and medium income families. Higher income families who could not obtain insurance in the private market would be eligible to enroll their children; however, they would have to pay the full cost of their children's coverage.
Section 1115 of the Social Security Act provides the Secretary of Health and Human Services broad discretion to waive certain laws pertaining to Medicaid, in order to conduct experimental, pilot or demonstration projects. This allows states to pursue Medicaid projects that test new and innovative ideas relating to benefits and services, eligibility requirements and processes, program payment, and service delivery. These demonstrations are frequently aimed at serving more low-income and uninsured people while saving money through program efficiencies. In fact, demonstrations must be "budget neutral" -- that is, they cannot cost more over their duration than the Medicaid program would have spent in the absence of the demonstration.
States also have extensive flexibility to liberalize Medicaid financial eligibility criteria for certain high-priority populations under the authority of section 1902 (r) (2) of the Social Security Act. Under this provision, states are able to apply more liberal financial eligibility standards by disregarding certain income and/or assets. Several states have used the authority under section 1902 (r) (2) as a means of expanding eligibility for children beyond 185 percent of the federal poverty level.
The second reform concept focused on small businesses, which are much less likely to provide health insurance to their employees than their larger counterparts. This approach could use a package of tax incentives to encourage small employers to provide coverage to workers and their families. The incentives could involve a credit on the corporation business tax, the personal income tax or a combination of both to help subsidize the cost of coverage.
For many years, expanding health care access has remained an elusive goal for policymakers, as the experience of both the state and the nation has shown. While nearly everyone acknowledges that serious problems exist, there is no political consensus around a solution. In light of this, the diverse membership of the Work Group -- a group that includes representatives of state government, private sector businesses, labor, hospitals and physicians, insurance companies, HMOs and advocates for the uninsured -- believes that the best approach is to pursue meaningful incremental steps that will improve health care access for targeted segments of Connecticut's uninsured population, namely children and employees of small firms.
To this end, the Work Group recommends that the two reform concepts outlined above should be given priority consideration by the Connecticut General Assembly. Moreover, as noted earlier in the report, Connecticut appears to have a significant number of uninsured children between 133 and 185 percent of the FPL who are currently eligible for Medicaid, but are not yet covered by the program. Therefore, the Work Group recommends that the Department of Social Services pursue more aggressive outreach efforts to ensure that all uninsured children who are currently eligible for Medicaid are actually enrolled. Since Medicaid outreach activities are eligible for federal matching funds, the state would only have to cover half of the cost.
To maximize the effectiveness of this outreach effort, it should be coordinated with the Department's efforts to implement changes resulting from the recent federal welfare legislation. This law replaced the Aid to Families with Dependent Children program with a block grant -- Temporary Assistance for Needy Families or TANF -- and discontinued the automatic enrollment of AFDC recipients into Medicaid. This change will present new challenges for the state including the development of effective outreach activities to inform families of their potential eligibility for Medicaid and to help guide them through the enrollment process. As such, the Work Group believes this new outreach responsibility under TANF offers DSS an additional opportunity to identify and enroll those uninsured children between 133 and 185 percent of the FPL.
Issues and Questions to Explore Further
The consensus recommendation by the membership of the Work Group indicates the potential for broad-based support for one or both of these reform concepts. However, a number of outstanding issues need to be addressed before they can be developed into a formal legislative proposal: 1) the details of the two reform concepts must still be worked out more explicitly, including a balanced financing mechanism; and 2) both concepts would require more sophisticated technical and actuarial analysis to estimate the total costs involved and the distributional effects upon various stakeholders.
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