The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
About the Series
This state update is a product of Assessing the New Federalism, a multiyear project
to monitor and assess the devolution of social programs from the federal to the
state and local levels. Alan Weil is the project director. The project analyzes
changes in income support, social services, and health programs. In
collaboration with Child Trends, the project studies child and family
well-being.
Recent Changes in Health Policy for Low-Income People received special funding from the Robert Wood Johnson Foundation as part of the Urban Institute's Assessing the New
Federalism project. The project received additional financial support from
The Annie E. Casey Foundation, the W. K. Kellogg Foundation, The
Henry J. Kaiser Family Foundation, The Ford Foundation, The David and Lucile
Packard Foundation, The John D. and Catherine T. MacArthur Foundation, the
Charles Stewart Mott Foundation, the McKnight Foundation, The Commonwealth
Fund, the Stuart Foundation, the Weingart Foundation, the Fund for New Jersey,
The Lynde and Harry Bradley Foundation, the Joyce Foundation, and The
Rockefeller Foundation.
This state update was prepared for the Assessing the New Federalism project. The
views expressed are those of the authors and do not necessarily reflect those
of the Urban Institute, its board, its sponsors, or other authors in the series.
Overview
Washington is a state with a strong history of progressive social policy. It has been a leader in health reform, with legislation in 1993 that included an employer mandate,
an expansion of Medicaid coverage for low-income children and home and community-based
coverage for the elderly and disabled, and a major effort to reform its
individual and small group insurance markets. The state also expanded
enrollment in its Basic Health Plan (BHP), an insurance program for low-income
working families. In subsequent years, the state repealed several of these
measures. It also enacted a ballot initiative I-601 that constrains state
spending growth to inflation plus population increases, less than the rate of
growth in per capita income. Today the state is struggling to maintain several
of the advances in health coverage it made in the early 1990s.
Medicaid is a major item in the state budget, accounting for 17 percent of
state spending (including spending from federal revenues). Medicaid spending is
projected to increase by 11.6 percent per year between 2000 and 2003. This is
attributable to projected enrollment growth of about 3.6 percent for Temporary
Assistance for Needy Families (TANF) families, low-income children, and the
aged, blind, and disabled. Managed care spending is expected to increase by
about 11.5 percent per year. The state has aggressively controlled payment
rates in the past year but realizes that rates will have to increase because of
rising costs faced by managed care plans. Prescription drugs are a major issue
in the state, with expenditures expected to increase by about 17 percent per
year between 2000 and 2003. Expenditures for hospital and physician care are
expected to increase by about 10 percent per year due to a combination of increased
enrollment, utilization, and payment rates.
Long-term care
spending is not expected to place significant pressure on the budget and is
seen as more controllable. Nursing home utilization has been falling as the
state has moved more residents into community-based alternatives. Services
provided through its Medicaid home and community-based waiver continue to
increase. Because of its substantial expansion of long-term care services, the
state does not anticipate that the Olmstead decision, which requires
states to move individuals to community-based settings to the extent possible,
will have a major impact.
In 2001 the
state faced difficulty passing a budget for the 2002–2003 biennium, in part but not
wholly because of health care spending increases. State spending, as noted
above, is limited by an expenditure cap. In addition, because of tax cuts in
recent years and the slowing of the economy, revenue growth has also been slow.
In addition to expectations of rapid increases in health spending, in the November
2000 election voters passed two ballot initiatives to increase spending on
teacher pay and to reduce class sizes. In response, the governor made a
proposal for cuts in health care as well as in other spending. The senate and
house passed budgets with alternative strategies that also affected health
care. The health care cuts in the various proposals included reductions in
dental and vision services in Medicaid, reductions in the BHP enrollment,
increases in BHP premiums and copayments, and lower payments to hospitals for
indigent care. These proposals were highly controversial and legislators were not able to pass a
budget by the close of either the regular or the first emergency legislative
session.
In the midst of
the deadlock, state officials discovered a way to increase their upper payment
limit, or ProShare program, that, as described below, brought in additional
federal Medicaid revenues with little increase in state spending. As a result,
a budget was passed and the cuts in health care spending were quite limited
compared with the proposals that had been considered. There was a small cut in
BHP enrollment and small increases in BHP copayments for prescription drugs. In
the end, the cuts in BHP coverage will be more than offset by the growth in Medicaid
rolls, including new coverage for the working disabled and
women with breast and cervical cancer, though the composition of enrollees in
the two programs is quite different. In addition, a ballot initiative was
passed in November that allowed the state to increase its tobacco tax and use
the proceeds to fund additional slots in the Basic Health Plan.
Washington
clearly does not envision any significant further expansions of coverage, for
example, through extending coverage to parents using Section 1931. The state is
seeking a Section 1115 State Children's Health Insurance Program (SCHIP)
demonstration waiver to restructure its Medicaid program and use its unspent
SCHIP allotment to cover BHP parents through SCHIP. This would increase federal
revenues more than expand coverage. Moreover, the maintaining of existing
health coverage in the near future will be at the mercy of the budget process.
Cuts in health care spending were avoided through tobacco
settlement revenues in the 1999–2001 and 2001–2003 bienniums and by the
newfound upper payment limit revenues in the 2001–2003 biennium. Thus, the
state is essentially solving its budget problems and avoiding health care cuts
with one-time "outside" revenues.
At the same
time, the health care market in general is under stress. Health care providers in
the state have been affected by several years of managed care growth in the
private sector, controls on provider payment rates through Medicaid and the
state employees' health benefits program, and more recently by Medicare
cutbacks. While the greatest problems emanate from Medicare and private
insurers, physicians and hospitals are adamant that state spending on health
services needs to be increased. But this is inconsistent with the spending
constraints imposed by I-601. As a result, the health system for low-income
individuals seems to be in a fairly fragile state.
There are also
concerns that the recession will lead to a drop-off in employer-sponsored the
insurance, and that while Medicaid may pick up some of those losing coverage,
there seems to be little willingness on the part of state legislators to
further expand the fully state-funded BHP or to take advantage of the coverage
options newly available from the federal government. Thus, an economic slowdown
could pose significant problems in Washington for insurance coverage, an area
where the state has been a national leader.
In the second
year of the 2001-2003 biennium, Washington developed a $1.3 billion deficit out
of an approximately $23 billion budget. The governor considered a range of
options for reducing Medicaid spending. In the end, he proposed substantial
cuts in reimbursement rates for both generic and brand name drugs and in
nursing home reimbursement rates and elimination of interpreter services.
Motivation
The past five
years have given states new opportunities in health policy for low-income
people, yet also have put new pressures on policy formulation. Many
developments increased state flexibility, including welfare reform and
delinking of Medicaid from cash assistance, new funding for children's health
insurance coverage under SCHIP, repeal of federal minimum standards for nursing
home and hospital reimbursement that had constrained states' control over
Medicaid payments, and federal willingness to grant waivers under Medicaid (and
now under SCHIP). Fiscal capacity also rose—from booming revenues during the
long economic expansion of the 1990s and from new tobacco settlement funds.
However, new
pressures on revenues and state policy arose from recent federal economizing
under Medicaid and Medicare, notably including cuts in safety net support,
which was believed to have been abused by some states; political pressures for
state tax cuts; and, starting in 2001, an economic slowdown and fears of
recession. New pressures also arose from the Supreme Court's Olmstead decision
that detailed a right to home and community-based services under the Americans
with Disabilities Act, rapid growth in pharmaceutical spending, and the
difficulties faced by Medicaid managed care. Political demands for public
action arose from developments such as the rise in uninsurance, growth in
private and public managed care, rising pharmaceutical costs, hospital fiscal
woes, and from events specific to each state.
To examine how
states have responded to both federal constraints and state flexibility during
the last half decade, this study of Washington and 12 other states examines
state priority setting and program operations in health policy affecting the
low-income population.1 Five major sets of issues are addressed
in this set of reports. First, how have the political and fiscal circumstances
of the state changed over the last several years? Second, has the state
expanded public or private health insurance coverage, through Medicaid, SCHIP,
Medicaid research and demonstration waivers, or state-funded programs? Third, how have
Medicaid managed care and other acute care issues changed? For example, has access been
affected by managed care plan withdrawals from Medicaid or backlash against
plans by providers or beneficiaries? Fourth, how are states responding to their
new freedom to set reimbursement rates, pressures to expand home and
community-based services for disabled persons, and the labor shortage? Fifth,
what other issues are prominent?
This report on
Washington assesses changes and continuities in the last five years, building
on an earlier baseline study.2 Information
came from in-person interviews on-site in early June 2001, supplemented by
several telephone inquiries. Interviewees included state officials, provider
associations, and other knowledgeable observers. Secondary sources included
publicly available documents, newspapers, and Web sites. State officials were
given the opportunity to comment on a draft, and changes were tracked through
passage of the 2001–2003 biennium budget in July 2001.
Background
Demographics/Insurance Coverage
Washington is
the 18th largest state in the nation with a population of 5.8 million and an
area of 66,582 square miles. Geographically important is the state's east-west
division by the Cascade Mountain Range. There are striking east-west political
divisions as well. With several rivers descending from its mountains,
Washington has had an inexpensive source of hydroelectric power that drew many
manufacturers, such as Boeing, to the state.3 The population
west of the mountains is relatively liberal, with a strong union history. A
large portion of the population is concentrated in urban Seattle, also home to
highly successful businesses such as Microsoft and Starbucks. Much of the land to the east is rural, producing wheat and apples, and the population is politically conservative. The state has
39 counties, of which many are rural. Compared with the national average, there
are few racial minorities in Washington, although the state does have a
significant Hispanic immigrant population working on the farms of eastern
Washington and is home to 26 federally recognized Native American tribes. Both
populations present state policymakers with unique health care challenges.
Per capita
income in 2000 in Washington was slightly above the national average, $31,528
versus $29,676 (see table 1). However, mean income in Washington grew 5.6
percent faster than the national average between 1995 and 1999. While child
poverty decreased at the same rate as in the rest of the nation, adult poverty
fell 12.9 percent more than the national average between 1996 and 1998. Also,
from 1996 to 2000 Washington consistently aided more poor children through cash
assistance programs than the typical state.
|
| TABLE 1. Selected Washington Characteristics, 2001 |
|
| |
Washington |
United States |
|
| Population Characteristics |
| Population (2000) (in
thousands)a |
5,894 |
281,422 |
| Percent under age 18 (1999)a |
25.7% |
25.7% |
| Percent Hispanic (1999)b |
6.5% |
12.5% |
| Percent Black (1999)b |
3.5% |
12.8% |
| Percent Asian (1999)b |
5.8% |
4.1% |
| Percent Non-metropolitan (1999)b |
16.7% |
20.3% |
| |
| State Economic Characteristics |
| Per Capita Income (2000)c |
$31,528 |
$29,676 |
| Percent Change Per
Capita Income (1995-1999)d |
16.4% |
10.8% |
| Unemployment Rate (2001)e |
5.8% |
4.5% |
| |
| Family Profile |
| Percent Children in Poverty (1998)f |
12.7% |
17.5% |
| Percent Change Children in Poverty (1996-1998)f |
-17.5% |
-15.0% |
| Percent Adults in Poverty (1998)f |
8.9% |
11.2% |
| Percent Change Adults in Poverty (1996-1998)f |
-23.3% |
-10.4% |
| |
| Political |
| Governor's Affiliation (2001)g |
Democrat |
NA |
| Party Composition of Senate (2001)h |
25D-24R |
NA |
| Party Composition of House (2001)h |
49D-49R |
NA |
| |
| Percent of Poor Children Covered by Welfare |
| 1996 (AFDC)i |
78.5% |
59.3% |
| 1998 (TANF)i |
72.8% |
49.9% |
| |
Income Cutoff for Children's Eligibility for
Medicaid/State
Children's Health Insurance
Program (Percent of Federal Poverty Level) |
| 1996j,k |
200% |
124% |
| 1998j,l |
200% |
178% |
| 2000j,m |
250% |
205% |
|
| Table 1 notes. |
Washington's
uninsurance rate is lower than the national average; 6.5 versus 12.5 percent of
children and 12.9 versus 16.3 percent of adults are uninsured (see table 2).
Rates of employer-sponsored insurance are close to the national average for
both those above and below 200 percent of the federal poverty level (FPL). For
those above and below 200 percent of the FPL, the extent of public coverage is
higher than average and has contributed significantly to lower uninsurance
rates. The uninsurance rate for low-income children is 11.2 percent,
versus 22.4 percent for the nation, with the state enrolling a higher
percentage of low-income children in public coverage (42.2 percent) than the
United States (35.2 percent). Among low-income adults, Medicaid or BHP covers
23.3 percent, versus the national average of 14.7 percent, leading to an
uninsurance rate of 29.3 percent in Washington versus 34.9 percent for the
nation.
|
| TABLE 2. Health Insurance Coverage, by Family Income, Washington and the United States, 1991 |
|
| |
Children (Ages 0-18)a
(%) |
Adults (Ages 19-64)b
(%) |
|
| |
Washington |
United States |
Washington |
United States |
|
| Below 200% FPL |
| Employer-sponsored |
40.1 |
38.7 |
38.7 |
41.7 |
| Medicaid/SCHIP/State |
42.2 |
35.2 |
23.3 |
14.7 |
| Other coverage |
6.5 |
3.8 |
8.7 |
8.8 |
| Uninsured |
11.2 |
22.4 |
29.3 |
34.9 |
| |
| Above 200% FPL |
| Employer-sponsored |
83.5 |
85.3 |
82.0 |
83.7 |
| Medicaid/SCHIP/State |
6.0 |
3.8 |
2.1 |
1.1 |
| Other coverage |
6.2 |
4.9 |
7.5 |
5.8 |
| Uninsured |
4.3 |
6.0 |
8.4 |
9.4 |
| |
| All Incomes |
| Employer-sponsored |
69.9 |
66.7 |
72.6 |
72.3 |
| Medicaid/SCHIP/State |
17.3 |
16.4 |
6.7 |
4.8 |
| Other coverage |
6.3 |
4.5 |
7.8 |
6.6 |
| Uninsured |
6.5 |
12.5 |
12.9 |
16.3 |
|
a. Kenney, Genevieve, Lisa Dubay, and Jennifer Haley. 2000. "Health Insurance, Access, and Health Status of Children." In Snapshots of America's Families II: A View of the Nation and 13 States from the National Survey of America's Families. Washington, D.C.: The Urban Institute.
b. Zuckerman, Stephen, Jennifer Haley, and John Holahan. 2000. "Health Insurance, Access, and Health Status of Adults." In Snapshots of America's Families II: A View of the Nation and 13 States from the National Survey of America's Families. Washington, D.C.: The Urban Institute.
Note: Figures in bold represent values that are statistically significantly different from the national average at the 0.10 confidence level or better.
FPL = federal poverty level
SCHIP = State Children's Health Insurance Program |
|
Political Developments
Over the past
eight years, Washington has become a more fiscally conservative state, with one
of the nation's more stringent state expenditure caps. However, there is also a
long history of social liberalism, which is surprising for a state with no
income tax. The BHP, a state-only funded health insurance program for the
working poor, is extremely popular, and even prior to the enactment of SCHIP,
with a higher federal matching rate, the state provided Medicaid to children
living at up to 200 percent of the FPL.4
Prior to the
1990s, there was a long history of Democratic legislative and gubernatorial
control. Similar to most of the country, the 1994 election saw political power
shift toward the Republicans. The Republicans gained control of the house in
1994 and the senate in 1995. The remainder of the 1990s saw changes in
political control after several elections.5
Today, control
over the senate is narrowly in the Democrats' hands, 25D-24R, and the house is
split 49D-49R with shared control of the rules and chairmanships. In mid-July
of this year, the legislature ended a historically long session, with three
back-to-back special sessions,6 caused, at
least in part, by political gridlock.
The Democratic
governor, Gary Locke, who won reelection to his second term last year, replaced
the retiring liberal Mike Lowry in 1996. Locke, the first Chinese-American
governor in the United States, ran as a fiscal conservative centrist stressing
education.7 Governor Locke has not emphasized health, making
little mention of it in his 2000 and 2001 state of the state addresses and
instead focusing on education, crime, transportation, water, and energy.8
State budgetary
decisionmaking is heavily driven by ballot initiatives. Initiative 601,
discussed in detail below, limits state spending. Initiative 695, passed in
1999, reduced state revenues from vehicle registration taxes. Two new
initiatives, I-728 and I-732, required increased spending on education but
provided no new revenue.
Market Developments
There is a
great deal of concern about the health care market in Washington. Private
managed care plans and public programs have placed increasing pressure on
provider revenues. For state employees, Washington has used a managed
competition model in which employees have to pay more if they chose a high-cost
plan. As health care costs increased, the legislature added funds to support
state employees. But in general, rising costs mean employees will pay more and
have incentives to avoid higher cost plans. Medicaid and BHP have been
aggressive purchasers through their managed care programs. Historically, Washington has
had low health care costs in comparison with other states. Medicare payment
rates have also been low in the state, reflecting the state's low costs.
These factors
have created significant financial pressure on providers. Physicians have
become less willing to take risks and have been discussing unionization and
strikes, demanding higher rates from managed care plans, and pulling out of
public programs. Some physicians, reportedly, are leaving the state. Hospitals
have the lowest margins they've had in many years; there could be problems with
survival for some. Hospitals argue that costs and utilization are low by
national standards and that there is little room for improvement. Much of this
pressure has allegedly been affecting the safety net hospitals and their
ability to provide care to the uninsured.
The state does
have a medically indigent program for the uninsured and relatively rich
disproportionate share hospital (DSH) programs, though the DSH program has been
cut by the federal government. The state also benefits from relatively low
uninsurance rates. Even those hospitals that serve the poor are faced with
relatively few uninsured. Medicaid rolls are projected to increase significantly
faster than population growth, though the BHP is expected to contract somewhat.
Washington's
efforts to reform its individual insurance market collapsed in 1998 and all the
major plans refused to sell to new enrollees. The state enacted legislation in
2000 that partially resolved the problems in its individual market, and several
insurers have reopened enrollment.9 The state has
established a high-risk pool for those who fail a new health screening test but
relatively few have joined the pool, raising concerns that the state has solved
its private insurance market issues by excluding the sick. At the same time,
there seems to be little appetite for any substantial increase in public
coverage.
Fiscal Circumstances of the State
As shown in
table 3, Medicaid is a significant component of the state budget. Some health
spending is included in the "all other" category; for example, expenditures for
health insurance for noncitizen children, public health programs, and state
employee health benefits. Medicaid accounts for 15 percent of the state general
funds and 17 percent of overall spending (which includes federal revenues).
Medicaid expenditures are second only to K–12 education and are greater than
spending on higher education. Expenditures on Medicaid have increased faster
than most other expenditure items; the only significant exception is
corrections. When federal funds are included, spending on higher education also increased
faster than Medicaid in Washington. Transportation declined because of the
movement of these expenditures out of the general fund between 1995 and 2000.
|
| Table 3. Washington Spending by Category, 1995 and 2000 ($ in Millions) |
| |
| |
State General-Fund Expendituresa
|
Total Expendituresb
|
| |
Actual |
Estimated |
Annual Growth (%)
|
Actual |
Estimated |
Annual Growth (%)
|
| Program |
1995 |
2000 |
WA |
U.S. |
1995 |
2000 |
WA |
U.S. |
|
|
Total |
$8,760 |
$10,236 |
3 |
5 |
$16,565 |
$22,339 |
6 |
6 |
| |
|
Medicaidc,d
|
$1,183 |
$1,518 |
5 |
5 |
$2,887 |
$3,689 |
5 |
4 |
|
% of Total |
14% |
15% |
|
|
17% |
17% |
|
|
| |
|
K-12 Education |
$3,937 |
$4,644 |
3 |
7 |
$4,354 |
$5,335 |
4 |
7 |
|
% of Total |
45% |
45% |
|
|
26% |
24% |
|
|
| |
|
Higher Education |
$951 |
$1,228 |
5 |
5 |
$2,029 |
$3,488 |
11 |
5 |
|
% of Total |
11% |
12% |
|
|
12% |
16% |
|
|
| |
|
Public Assistance |
$362 |
$277 |
5 |
6 |
$662 |
$553 |
4 |
5 |
|
% of Total |
4% |
3% |
|
|
4% |
2% |
|
|
| |
| AFDC/TANF |
$244 |
$189 |
5 |
9 |
$516 |
$462 |
2 |
7 |
| % of Total |
3% |
2% |
|
|
3% |
2% |
|
|
| |
|
Corrections |
$352 |
$559 |
10 |
6 |
$405 |
$722 |
12 |
6 |
|
% of Total |
4% |
5% |
|
|
2% |
3% |
|
|
| |
|
Transportation |
$49 |
$6 |
34 |
5 |
$1,716 |
$1,736 |
0 |
6 |
|
% of Total |
1% |
0% |
|
|
10% |
8% |
|
|
| |
|
All Othere
|
$1,926 |
$2,005 |
1 |
5 |
$4,512 |
$6,818 |
9 |
8 |
|
% of Total |
22% |
20% |
|
|
27% |
31% |
|
|
|
Source: National Association of State Budget Officers 1997. 1996 State Expenditure Report. And 2000. 1999 State Expenditure Report.
a. State general-fund expenditures exclude other state funds and bond expenditures.
b. Total spending for each category includes the general fund, other state funds, bonds,
and federal aid.
c. States are requested by the National Association of State Budget Officers (NASBO) to
exclude provider taxes, donations, fees, and assessments from state spending. NASBO asks states to report these separately as "other state funds." In some cases, however, a portion of these taxes, fees, etc., do get included in state spending because states cannot separate them.
d. Total Medicaid spending will differ from data reported on the HCFA 64 for three
reasons: first, NASBO reports on the state fiscal year and the HCFA 64 on the federal fiscal year; second, states often report some expenditures (e.g., mental health and/or mental retardation) as other health rather than Medicaid; third, local contributions to Medicaid are not included but would be part of Medicaid spending on the HCFA 64.
e. This category could include spending for the State Children's Health Insurance Program,
institutional and community care for mentally ill and developmentally disabled persons, public health programs, employer contributions to pensions and health benefits, economic development,
environmental projects, state police, parks and recreation, housing, and general aid to local
government.
Note: Figures may not add to totals due to rounding. |
|
The state has
had a strong economy throughout the 1990s. For example, per capita income grew
by 16.4 percent between 1995 and 1999 versus 10.8 percent for the United
States. Nonetheless, the state is consistently faced with budget crises as it
attempts to enact its biennium operating budgets. While attempting to pass the
2002–2003 biennium budget, the 2001 legislative session became one of the
longest in state history, with three back-toback special sessions following the
close of the regular session in April.
The perennial
budget crises stem from a stringent expenditure cap, I-601, which was passed in
1994 and limits general fund spending growth to a three-year average of
inflation and population growth.10 Additionally,
if spending is held below the target the subsequent period's allowable growth
rate is applied to the lower amount (i.e., rebasing). Moreover, the inflation
rate that is used is based on the national implicit price deflator (IPD), which
has tended to rise more slowly than the national consumer price index (CPI) as
well as the Seattle CPI. While I-601 holds spending growth to inflation plus
population growth, state revenues grow with productivity as well as inflation
and population growth. Thus, in most years, including 1996 through 2000, state
revenues have grown faster than the state's allowable spending, causing
surpluses that are then deposited into a rainy day fund.11
The expenditure
cap has limited legislators' ability to budget more for the expansion of health
and other social programs. While the spending cap has clearly been
constraining, the problems facing the legislature have been manageable until
recently for several reasons: (1) because of welfare reform Aid to Families
with Dependent Children (AFDC) and Medicaid caseloads declined in the mid-1990s
before beginning to rebound, (2) there have been lower rates of medical care
inflation and the state has benefited from the impact of managed care on health
care costs, (3) there has been a slow rate of salary growth for state
employees, (4) there were new revenues from the tobacco settlement and ProShare
payment programs which have allowed the state to fund some health spending
outside of the general fund in the Health Services Account, and (5)
contributions to the police and firefighter pension fund have slowed because of
the stock market.12
This year's
budget problems are tied to the cap but have also been precipitated by revenue
shortfalls. The state does not have a personal income tax, but relies on
property, sales, and business taxes for its general revenues, making the
state's revenues highly susceptible to economic fluctuations. This year the
state faced a downturn in its economy, water supply reduction due to a drought,
an energy crisis, and an earthquake. These have caused increases in emergency
spending together with reducing revenues. For a variety of reasons that are
described below, health care spending is expected to increase well above the
rate of growth allowed by I-601. Finally, the two ballot initiatives requiring
the state to decrease class sizes and increase teacher pay will also cause
spending increases above the amount allowed by I-601.13
Because of the
spending limit and the reduced pressure to spend, the legislature found itself
in the mid-1990s economic boom with large unspendable state surpluses and
enacted several tax cuts that, by 2001, reduced revenue intake to the spending
limit.14 Therefore, this year as the economy slowed and
the state was hit with the mix of problems mentioned above, the state found
itself with a revenue problem for the first time since the spending cap was
imposed.
Health care
spending was an early target of the budget cutting. The limits imposed by I-601
affect spending out of the general fund, which includes the bulk of Medicaid
spending. The general fund receives revenues from the sales tax, the business
and occupation tax, and property taxes. Not all health care is funded out of
the general fund. The Health Services Account (HSA) funds the BHP, the state
share of Medicaid spending on children living below 200 percent of the poverty
level, SCHIP, and the recently enacted Medicaid Buy-In and coverage for women
with breast and cervical cancer, and some other smaller public health
initiatives. Spending from the HSA is limited by its revenues. The HSA is
funded by tobacco taxes, alcohol taxes, premium taxes on insurers, business and
occupational taxes, hospitals, ProShare revenues, and tobacco settlement funds.
Another major fund is transportation, which pays for road improvements and is
funded by a gasoline tax.
Until legislation
enacted in 2000, funds could not be transferred from the HSA to the general
fund to allow the state to increase spending. In 2000 a revision of I-601 was
enacted that said if a program or its revenues were transferred to the general
fund the spending limit would increase.15 This allowed
the state to move money from the HSA to the general fund and raise the spending
limit. This has helped the state manage its budget and legally stay within
I-601's parameters. In 2000 this allowed $123 million of revenues from the
tobacco settlement to be moved from the HSA to the general fund to solve that
year's budget problems.
For the
2002–2003 biennium the state faced serious budget problems. Rising health care
costs played a major role. State and employee health benefits were expected to
increase in the next biennium by 12 percent to 14 percent per year and the BHP
costs by 10 percent and perhaps more. Medicaid spending was expected to grow by
about 10 percent per year because of increases in managed care rates and rising
fee-for-service expenditures for the disabled, principally prescription drugs.
Caseload growth is forecasted to be about 3 percent per year and per capita
expenditures 7 percent per year. There were other needs outside of
health care. State employees sought wage increases, and the two ballot
initiatives that required reductions in class sizes and increased teacher pay
added $700 million–$800 million during the biennium.
There was a
general consensus that some cutting of health programs would be inevitable. The
budget proposals of the governor, the senate, and the house were all different.16 All of the proposals incorporated increased spending from the general fund to be used for teacher pay, with reserves to be used to increase spending for school construction. The governor proposed to increase premiums and cost-sharing for
the BHP, eliminate Medicaid vision coverage and cut dental care, and reduce
reimbursement for care for the medically indigent in hospitals. The senate
budget would have increased monthly premiums in BHP and imposed higher
copayments for prescription drugs. The house budget would have cut
the BHP to 100,000 persons (from 133,000) and increased BHP premiums and
cost-sharing. The house would also have created a waiting list for SCHIP, cut
emergency room spending on the uninsured, and reduced Medicaid dental services
for adults. All would cap SCHIP enrollment and require state employees to pay a
higher share of their health benefits. The proposed cuts in health care became
extremely controversial and the state was unable to enact a budget.
The solution to
the Washington budget dilemma came when state officials discovered a way to
expand their upper payment limit, or ProShare, program. Upper payment limit
programs work by increasing reimbursements to publicly operated hospitals and
nursing homes, collecting the federal match on the higher rate, and having the
facilities return a substantial share of the money to the state. The limit on
reimbursement rates is set by how much Medicare would pay, thus the term "upper
payment limit." The state's ProShare payments were made to 14 government-owned
nursing homes. The state had been calculating the difference in Medicaid and
Medicare upper payment limits for all 267 nursing homes. They used this sum to
determine the amount of the enhanced payments that could be made to the
14 nursing homes which would return about half the money to the state. The
Beneficiary Improvement and Protection Act enacted by the U.S. Congress in 2000
required states to calculate the difference between the Medicaid and Medicare
upper payment limits for just the 14 nursing homes. There was a transition to
the lower limits depending on how long the state had used the program;
Washington has a three-year transition period, so eventually the use of this
mechanism will be phased out.
In the midst of
the budget deadlock, the state discovered that if they used the Resource
Utilization Group System (RUGS) to calculate what the Medicare upper payment
limit would have been, the limit could be increased. With the new methodology,
the state would receive more than $450 million new federal dollars in 2002 and
2003 and retroactive payments for 2000 and 2001. These funds increased the
amount of revenue in the Health Services Account, which, because of the new
provisions allowing funds to be transferred to the general fund, allowed the
state to solve its budget problem.
Because of this
newfound revenue and a willingness to use excess pension fund revenue, the
house and senate agreed that there would be no cuts in Medicaid and that there
would be an expansion of coverage for uninsured women with breast and cervical
cancer, as well as for the working disabled through the newly enacted federal
Ticket to Work program. Although the governor had proposed a cap on SCHIP
enrollment, the final legislation eliminated the cap. The final legislation
increased premiums for state employees; there was a consensus across party
lines on these increases given that the premiums had not been adjusted for
inflation for several years. The two cuts that were made reduced funding to
125,000 as opposed to 133,000 slots in the BHP and increased drug copayments in
the BHP. Health care advocates were successful in putting forward a ballot
initiative (I-773), which passed and will increase cigarette tax revenue for
the Health Services Account and allow the state to expand BHP coverage by about
50,000 slots.
Medicaid Trends
Washington had
722,600 Medicaid enrollees in 1998 and spent over $3.6 billion on the program.
Table 4 provides HCFA data on Medicaid enrollment and spending for 1995 through
1998. The last year for which data was reported in a uniform manner for all
states is 1998. More recent data provided by the state is also presented.
Between 1995
and 1998 Medicaid enrollment in Washington grew by 3.3 percent per year
compared with an average national decline of 1 percent per year. The number of
elderly beneficiaries grew by 4.7 percent per year in Washington while staying
virtually constant in the United States as a whole. Most of this growth appears
to be driven by noncash enrollees (not shown). Since noncash enrollees are heavy
users of prescription drugs and home care services, the rapid growth in noncash
enrollees could be attributable to rising drug costs and to an increased number
of elderly becoming eligible to use home care benefits. The number of blind and
disabled beneficiaries grew at 1.9 percent per year, roughly half
the rate of growth experienced in the rest of the United States.
|
|
TABLE 4. Medicaid Enrollment and Expenditures in Washington, 1998 |
|
| |
Washington, 1998
|
|
Average Annual Growth (%), 1995–1998
|
| |
Total Annual
Expenditures
(in millions) |
Avg. Monthly
Enrollment
(in thousands) |
Avg. Annual
Expenditures
per Enrollee |
|
Total Annual Expenditures
|
Avg. Monthly Enrollment
|
Expenditures per Enrollee
|
| |
Washington |
United States |
Washington |
United States |
Washington |
United States |
|
| Total Expenditures |
$3,622 |
|
|
|
6.1 |
3.9 |
|
|
|
|
| |
|
|
Medical Services
By Eligble Group |
$3,012 |
723 |
$4,168 |
|
6.7 |
5.1 |
3.3 |
1.0 |
3.2 |
6.1 |
| Elderly |
$772 |
53 |
$14,469 |
|
8.3 |
4.3 |
4.7 |
0.1 |
3.5 |
4.2 |
| Blind and disabled |
$1,241 |
104 |
$11,875 |
|
8.4 |
8.5 |
1.9 |
3.6 |
6.3 |
4.7 |
| Adults |
$437 |
135 |
$3,231 |
|
4 |
1.4 |
3.6 |
4.4 |
7.9 |
3.1 |
| Cash assistance |
$229 |
70 |
$3,265 |
|
3.6 |
10.4 |
8.8 |
14.9 |
13.6 |
5.3 |
| Other enrollees |
$207 |
65 |
$3,193 |
|
4.4 |
7.8 |
3.6 |
9.3 |
0.8 |
1.4 |
| Children |
$562 |
429 |
$1,309 |
|
3.2 |
2.7 |
6.2 |
1.5 |
2.8 |
4.3 |
| Cash assistance |
$218 |
137 |
$1,585 |
|
12.8 |
8.8 |
11.2 |
12.2 |
1.8 |
3.9 |
| Other enrollees |
$345 |
292 |
$1,179 |
|
23.4 |
12.4 |
21.5 |
9.8 |
1.5 |
2.4 |
| |
|
|
| By Type of Service |
$3,012 |
|
|
|
6.7 |
5.1 |
|
|
|
|
| Acute care |
$1,803 |
|
|
|
5.2 |
4 |
|
|
|
|
| Long-term care |
$1,209 |
|
|
|
9 |
6.5 |
|
|
|
|
| |
|
|
| DSH |
$333 |
|
|
|
1.5 |
7.3 |
|
|
|
|
| Administration |
$278 |
|
|
|
10.9 |
8.5 |
|
|
|
|
|
Source: Urban Institute estimates based on data from HCFA-2082 and HCFA-64 reports.
Notes: Does not include the U.S. Territories. Enrollment data shown are estimates of the average number of people enrolled in Medicaid in any month during the fiscal year. Expenditures per enrollee shown reflect total annual expenditures on medical services for each group, divided by the average monthly enrollment within that group. "Cash assistance" refers to enrollees who receive AFDC/TANF or SSI, or who are eligible under Section 1931 provisions. "Other enrollees" include the medically needy, poverty-related expansion groups, and people eligible under Medicaid Section 1115 waivers. "Acute care" services include inpatient, physician, lab, X-ray, outpatient, clinic, prescription drugs, EPSDT, family planning, dental, vision, other practitioners' care, payments to managed care organizations (MCOs), and payments to Medicare."Long-term care" services include nursing facilities, intermediate care facilities for the mentally retarded, inpatient mental health services, home health services, and personal care support services. "DSH" stands for disproportionate share hospital payments.
Figures may not add to totals due to rounding. |
|
There was an
overall decline in adult enrollment (3.6 percent per year) but an increase in
the enrollment of children (6.2 percent per year). Washington, like other
states, experienced a substantial drop in cash assistance recipients from 1995
to 1998, 8.8 percent per year for adults and 11.2 percent for children. These
are slightly lower than the rates of decline seen elsewhere in the nation. In
Washington, only part of the drop in adult cash enrollment was made up through
increases in noncash enrollment. The number of adult cash enrollees dropped by
22.4 million while there were 6.6 million more adult noncash enrollees. On the
other hand, there was a net increase in the number of children covered under Medicaid.17 This is due to
the state's expansion of coverage of children living at up to 200 percent of
the poverty level and the state's integration of Medicaid with the BHP. As a
result, the drop in child cash enrollees was more than offset by the increase
in noncash enrollment of children. There was a decline of 58,900 children from
the cash assistance rolls but an increase of 129,300 noncash enrollees. While
the number of noncash enrollees grew in other parts of the country, the rate of
increase in noncash enrollees among children was nowhere near as rapid as it has been in Washington.
Total Medicaid
spending grew by 6.1 percent per year between 1995 and 1998 as opposed to 3.9
percent in the United States. Acute care services grew by 5.2 percent per year
in Washington and long-term care services by 9.0 percent per year in
Washington, versus 4.0 percent and 6.5 percent, respectively, for the United
States. The differences in growth between the state of Washington and the
United States can be explained by enrollment growth. The growth in spending per
enrollee was actually slower in Washington than in the nation, 3.2 percent per
year in Washington versus 6.1 percent for the United States. There was a slight
drop in spending for inpatient hospital, physician, lab, and X-ray services, but
most of this is probably because of increased enrollment in managed care plans
(where these services are not reported separately).18 Managed care
spending increased by 10.7 percent per year, a high rate of growth but less
than that seen elsewhere. The most notable change in long-term care spending is
in home care, which increased by 24.3 percent in Washington versus 14.3 percent
in the nation. Washington launched a major home and community-based waiver
initiative during this period. The rates of spending growth in nursing
facilities and intermediate care facilities for the mentally retarded were
relatively low. Disproportionate share payments fell by 1.5 percent on average
during the period.
Spending per
enrollee in Washington in the aggregate is below the national average for both
acute and long-term care services,19
but this tends to reflect the high proportion of
adults and children relative to the blind, disabled, and elderly. Acute care
and long-term care spending per enrollee for both the elderly and blind and
disabled populations are greater than the U.S. average. Spending on nondisabled
adults, principally acute care services, is also higher than the U.S. average,
while spending on children is somewhat lower.
The Medical
Assistance Administration (MAA) in Washington provided more recent data. The
MAA pays for and includes in its data medical care expenditures for TANF
populations; children living below 200 percent of the poverty level, including
noncitizen children covered under state-only coverage; pregnant women living at
up to 185 percent of the poverty level; acute care services for the aged,
blind, and disabled; the medically needy; medical coverage for unemployed
persons receiving General Assistance grant coverage; medically indigent
coverage; and payments made to Medicare for eligible disabled and elderly
patients. The Medical Assistance Administration expenditures do not include
long-term care, mental health, or substance abuse. The data in table 5 are not
comparable to the data in table 4.
Table 5
provides data on projected changes in enrollment and expenditures between 2000
and 2003. The MAA uses different enrollment categories than those in Table 4.
Nonetheless, the data do allow us to understand projected trends. For the
period 2000 to 2003 the state projects an increase in TANF enrollment over the
period of 4.1 percent per year. This is seemingly due to both a rebound from
the large drop following federal welfare reform and the slowing Washington
economy. The number of aged, blind, and disabled enrollees is expected to grow
by 3.4 percent, consistent with demographic projections and new
enrollment projected to be generated by the state's large home and community-based
waiver program. The number of pregnant women covered under Medicaid is not
expected to increase. However, the number of covered children living below 200
percent of the poverty level is expected to grow by 5 percent per year. This is
largely attributable to the indirect effects on Medicaid enrollment from SCHIP
applications as well as general outreach efforts conducted by the state and by
localities and nonprofit organizations. Overall, enrollment is expected to
increase by 3.6 percent per year.
|
|
TABLE 5. Projected Growth in Medicaid Enrollment and Expenditures |
|
Eligibility
Categories |
Average Monthly Enrollees
in thousands
|
Average Expenditures
in millions
|
Expenditures
per Enrollee
|
| |
Active |
Forecast |
% change |
Active |
Forecast |
% change |
% change |
|
| TANF |
256.7 |
281.9 |
4.1 |
492.9 |
694.2 |
12.0 |
7.6 |
| |
| Aged, Blind, and Disabled |
149.0 |
165.1 |
3.4 |
746.1 |
1,091.60 |
13.4 |
9.7 |
| |
| Pregnant Women |
21.8 |
22.0 |
0.3 |
177.4 |
209.4 |
5.6 |
5.3 |
| Other Kids |
278.5 |
315.9 |
5.0 |
331.2 |
444.0 |
10.1 |
4.9 |
| Medically Needy |
13.4 |
15.8 |
5.6 |
71.3 |
96.4 |
10.5 |
4.6 |
| QMBs |
4.5 |
5.0 |
3.5 |
1.3 |
1.7 |
9.3 |
5.6 |
| |
| Total |
723.9 |
805.7 |
3.6 |
1,820.20 |
2,537.30 |
11.6 |
7.7 |
|
Data provided by the state of Washington Medical Assistance Administration.
Data do not include expenditures for long-term care services.
QMBs = Qualified Medicare beneficiaries |
|
Table 5 also
shows that the state anticipates annual Medicaid expenditure growth of 11.6
percent from 2000 to 2003. Spending on the TANF population is expected to
increase by 12 percent per year; on a per enrollee basis, growth is expected to
be 7.6 percent per year, consistent with projected spending under the state's
managed care program, Healthy Options (HO). Spending on the aged, blind, and
disabled is projected to increase by 13.4 percent, or 9.7 percent on a per
enrollee basis. The aged, blind, and disabled, including dual eligibles
(eligible for both Medicare and Medicaid), account for 38 percent of MAA
expenditures; of this 41 percent is on prescription drugs. For dual eligibles,
prescription drugs are 70 percent of spending. For the aged, blind, and
disabled who are not dual eligibles, 28 percent of spending is for prescription
drugs. The high reliance on prescription drugs is important because these
expenditures are projected to increase by 16.8 percent per year.20 None of the aged, blind, and disabled are in Medicaid managed care; clearly, fee-forservice
expenditure growth for this population is a major issue. Spending increases for
other populations, on a per enrollee basis, are expected to grow by
approximately 5 percent per year.
Health Insurance Coverage
The 1993 Health Reforms
The aftershocks
of Washington's efforts to provide statewide universal health insurance in the
early 1990s continue to affect health care policymaking in the state eight
years later. Although many of the most ambitious 1993 Health Services Act
reforms, including the employer mandate, were repealed several years later,
other reforms—such as the expansion of the BHP, small group and individual
market reforms, and the increased Medicaid eligibility threshold—significantly
influence today's health insurance coverage issues.
One major goal
of the 1993 reforms was to adequately provide health insurance to the state's
working poor residents who often do not have access to employer-sponsored
coverage. To accomplish this, the reforms expanded the BHP, a state-only funded
health insurance program, from a small pilot project to a program that covered
60,000 individuals statewide by the end of 1995. Administered by the Health
Care Authority (HCA), not the state's Medicaid agency, and funded through the
state's Health Services Account, the BHP aims to provide
health insurance to the low-income working population.21
The BHP provides a subsidy to families and individuals earning less than 200
percent of the FPL, with sliding scale-premiums starting as low as $10 per
month. Additionally, the 1993 reforms extended BHP availability to families and
individuals earning over 200 percent of the FPL who could enroll without a
subsidy but would bear the full cost of coverage. In 2001, about 130,000 people
receive coverage through the BHP.
In the
individual market, the 1993 health reforms granted protections, such as
guaranteed issue, guaranteed renewability, portability, a three-month waiting
period for preexisting conditions, and the elimination of individual
underwriting.22 Additionally, the health insurance commissioner,
an elected official, gained the authority to approve individual market rates.
These changes led to adverse selection and rising costs that could not be fully
passed on to consumers. Faced with rising costs and unable to increase premiums
sufficiently, insurers eventually refused to sell new policies in the
individual market.
To further
increase coverage of Washington's poor, a third health reform expanded the
Medicaid eligibility threshold. Beginning in 1994, Washington extended Medicaid
coverage for children living at up to 200 percent of the FPL, which was one of
the highest levels nationally at the time. This expansion would eventually
reduce the state's receipt of SCHIP funding and shaped the development of its
small SCHIP program.
The Basic Health Plan
The BHP is an insurance program aimed at uninsured, low-income working families.23 It subsidizes coverage of adults and children living at up to 200 percent of the FPL and has allowed others to buy into the plans (unsubsidized), although, as
discussed below, this group is now very small. The BHP is fully state funded,
though coverage of most children is coordinated with Medicaid and the state
receives federal matching funds for them. The BHP is not an entitlement program
and its funding is limited by state appropriation. All enrollees pay some
premiums and there have been waiting lists at times.
Since 1993,
when the subsidized BHP was expanded and the nonsubsidized BHP was created,
these two components of the BHP followed divergent courses. When the program
was initiated, the two components were linked by the "106 percent rule." An
insurer wanting to bid to offer insurance had to do so on both parts and could
not charge more than 106 percent of the cost of subsidized BHP for
nonsubsidized BHP.24
By 1998, the failing individual insurance
market caused adverse selection in nonsubsidized BHP, which dramatically
increased costs. As a result, HCA delinked the subsidized and nonsubsidized
bidding and pricing to protect subsidized BHP.
Following the
separation, subsidized BHP has been successful. Until this year's budget crisis,
the legislature maintained funding for 133,000 people.25
Conversely,
nonsubsidized BHP has felt the effects of adverse selection and resulting
premium increases, and eventually its enrollment plummeted. Today,
nonsubsidized BHP only exists in a few counties,26 with
approximately 1,400 enrollees.27
Subsidized BHP.After
expanding subsidized BHP across the state in 1993, enrollment had grown from
22,000 to 60,000 by 1995. Despite ending all advertising and outreach in 1996,
when increased applications forced the creation of a waiting list, BHP
continues to enroll as many people as funds permit, with the program's
availability spread through word of mouth and by clinics and hospitals. The
need for a waiting list was eliminated in May 1998 and it was not until early
2001 that applications again grew slightly faster than the attrition
rate. A waiting list has not yet been necessary, as HCA officials temporarily
solved the problem by slowing the application process, taking about a month
between application and enrollment.
During the
1999–2001 biennium, the legislature approved a BHP budget that was expected to be
sufficient to cover 133,000 subsidized BHP members. Because the average subsidized
BHP enrollee is slightly older, and therefore more costly, the subsidized BHP
enrolls around 130,000 people.
Of the 130,000
BHP regular subsidized enrollees, 101,375 individually pay their premiums, with
the remainder receiving financial sponsorship from another source, such as an
employer, clinic, or tribe.28 In 1995, the
legislature had hoped that by allowing employee sponsorship of BHP, they could
increase BHP enrollment to 200,000 people with about one-half receiving
financial support from an employer. Unfortunately, few employers enrolled
primarily because it was much less expensive to join as individuals. Without
the anticipated employer premium, funds were quickly exhausted, resulting in a
significant reduction of the 200,000 figure to the current 130,000 level.
The figures
above do not include Department of Social and Health Services (DSHS) funded
home care workers or the children and pregnant women who are enrolled in BHP
but funded through Medicaid. In 1996, home care and personal care workers
funded by DSHS became eligible for subsidized BHP at reduced premiums. In 2001,
1,523 home care workers are enrolled. Additionally, children whose parents are
BHP enrollees and pregnant women are eligible to enroll in BHP while being
funded through Medicaid.
Although
Medicaid eligibility does not preclude BHP enrollment, HCA officials coordinate
enrollment of eligible children and pregnant women into Medicaid rather than
BHP.29
As the Medicaid threshold is 200 percent of the FPL, most
children with BHP parents are Medicaid-eligible. To make this system
"seamless," the Medicaid-eligible children are enrolled in a program called BH Plus.
BH Plus children receive a Medicaid benefit package with no cost-sharing and
are funded with DSHS MAA dollars. However, they are enrolled not in Healthy
Options (see the section on Medicaid Trends) but in the same BHP insurance plans
as their parents. There are approximately 55,000 BH Plus children. Women in BHP
who become pregnant, around 1,000 at any time, remain with BHP insurance plans
but are temporarily transferred to Medicaid funding. BHP itself funds very few
births.
Although BHP
subsidizes individuals with a family income up to 200 percent of the FPL, 36
percent of regular subsidized enrollees earn less than 65 percent of the FPL.
The enrollees who receive the greatest subsidies, those earning less than 125
percent of the FPL, compose three-quarters of the total subsidized population.
HCA officials estimate that at least 85,000 of the subsidized enrollees are not
eligible for Medicaid, often due to Medicaid's assets test.30
BHP
does not have an assets test, so there are no restrictions on home or vehicle
ownership.
Nonsubsidized
BHP.
The delinking of subsidized and nonsubsidized BHP pricing in 1998
sent the nonsubsidized program into a death spiral.31
Premium
costs, which were no longer tied to the subsidized program, significantly
increased. Healthy individuals able to find insurance elsewhere left
nonsubsidized BHP, causing the insured pool to be smaller and sicker. This
adverse risk selection forced January 1999 premiums to rise by 61 percent ver the 1998
rates, and a large number of enrollees dropped coverage. Enrollment plunged
again in January 2000 when HCA officials, attempting to preserve the subsidized
market, did not require insurers to bid on both parts of BHP. Due to the high
cost and few enrollees, most insurers opted not to bid on nonsubsidized BHP and
nonsubsidized enrollment remained open in only a few counties. In 2001, there
are only a little more than 1,400 people covered by nonsubsidized BHP.32
BHP contracting with Managed Care. The provision of BHP services annually occurs through
competitive contracting of insurance companies on a county-by-county basis. For
subsidized coverage in 2001, BHP contracted with nine plans. At least two
different plans are operating in 27 counties, and there is only one, the
Community Health Plan of Washington, in 12 counties. From 1998 through 2001,
BHP, Healthy Options, and state employee insurance used the same bidding
mechanism and process, but insurers competed separately, allowing for
differences in contracted insurers and service areas. For example, Kaiser and
Regence were available only in BHP, not HO. The HCA does not negotiate rates
for BH Plus children. By accepting a BHP contract, the insurer must accept the
HO (or Medicaid) negotiated rate for the BH Plus children. For example, in 2001
Regence was excluded from HO; however, by contacting the BHP, it accepted the
HO payment rates for BH Plus children.
Costs and Benefits. In 2000, it cost $145.90 per month to insure a subsidized BHP
enrollee.33 The benefit package includes emergency care,
hospital, office visits, preventive care, obstetrics and well-baby services,
organ transplant, and chemical dependency or mental health treatment. There is
also a prescription drug benefit. Drug copayments, recently increased in the
final budget compromise, vary by type of drug, with a $3 copayment for
generics, $7 for on-formulary brand names, and a 50 percent copayment for all
off-formulary drugs. Vision, dental, and physical or occupational therapy are
not included in the BHP package. There is a $10 copayment for office visits,
$100 for hospital admissions, and $50 for emergency room visits. Last year cost
growth was 12 percent and officials are forecasting similar growth this year.
The Individual Market
The 1993 Health
Services Act placed some of the nation's tightest regulations on the individual
insurance market.34
The most important changes were that the 1993
legislation mandated guaranteed issue and renewability and a three-month limit
on waiting periods for preexisting conditions. It also required
portability—that insurance be carried over from job to job. The insurance
commissioner, an elected official, was authorized to approve premium increases.
Not
surprisingly, guaranteed issue and a three-month waiting period for preexisting
conditions proved to be an invitation to adverse selection and, combined with
restrictions on premium increases, resulted in losses for health plans. Health
plans responded by offering different benefit packages, some not including
maternity care and prescription drug coverage. This segmentation of the market
allowed the plans to reduce premiums to those not wanting those benefits but
increase the cost of the plans with those benefits. These changes were not
adequate to stop insurer losses.
By November
1998, only three plans (Premera Blue Cross, Regence Blue Shield, and Group Health
Cooperative) remained in the market, and these only served roughly half of the
counties.35
Most of the counties in the rural eastern part
of the state had no insurers. In December, Premera Blue Cross, which had 60
percent of the individual market, stopped selling new policies, blaming the
effects of the insurance reforms.36 By December 25,
1998, Group Health Cooperative and Regence Blue Shield also dropped out of the
market.37
Legislation
enacted in 2000 extended preexisting condition waiting periods from three to
nine months.38
It also removed the commissioner's rate-making
authority and required all comprehensive plans to offer maternity and drug
benefits. It called for the development of a health care screening instrument
intended to result in plans being able to screen out the 8 percent most costly
applicants. This population was then to have access to the Washington State
Health Insurance Plan (WSHIP), which provides a very comprehensive benefit package
at premiums equal to 125 or 150 percent of individual market rates depending
upon whether the WSHIP enrollee chooses a managed care or indemnity product.
The legislation required a minimum 72 percent loss ratio. If the loss ratio
fell below 72 percent, plans had to give a refund.
As a result of
these changes carriers came back in, and there is now private coverage in all
39 counties, though in 10 rural counties there is only one plan. One concern is
that rates in the individual market have not fallen much. Plans seem to have
developed rates for the new enrollees based on their experiences with existing
enrollees. Those who have stayed with individual coverage because of guaranteed
renewal have gotten older and presumably are sicker. These rates are relatively
high, and rates for new enrollees are averaging 80 percent of current premiums
in the individual market.
Since the
screening program began in January 2001, 21,683 individuals have been screened;
1,448 were rejected.39
Of these, only 240 have enrolled in
WSHIP. The remainder of WSHIP's 2,171 enrollees are those who have stayed in
the pool even after it was closed to new enrollees. State officials are not
sure why only 240 of the 1,448 rejected have signed up with the risk pool, but
it is a considerable concern. Rates in the individual market have remained high
as indicated above. This could reflect the underlying rise in health care costs
but also could reflect the absence of competition in the health care market.
State Children's Health Insurance Program (SCHIP)
Washington
established a separate SCHIP program, called CHIP, for non-Medicaid-eligible
children living between 200 and 250 percent of the poverty level. The state uses
the Medicaid benefit package and charges copayments ($5 for office visits) and
premiums ($10 per child per month premium; $30 family maximum per month).
Medicaid and
SCHIP, both administered under the DSHS MAA, have a joint Medicaid-SCHIP
application with self-declaration of income.40 The state has
incorporated innovative mechanisms to ensure coverage of eligible individuals
who apply. Both programs use the same income-counting methods, and an in-person
interview is not required. This, along with their already high Medicaid
eligibility levels, has resulted in a large Medicaid spillover effect, with 70
to 75 percent of those applying for SCHIP eligible for Medicaid. The state also
has seen a significant growth in its Children's Health Program, which provides
medical coverage to noncitizen children in households living below 100 percent
of the poverty level.
Washington's
SCHIP implementation occurred in 2000, later than most states. The state's
reluctance to participate in SCHIP stemmed from its inability to obtain
enhanced matching funds for children living below 200 percent of the FPL
because they were already covered under Medicaid.41 Similar to
Minnesota and Vermont, the state felt it was unfairly penalized by not
receiving the enhanced SCHIP match for children eligible for Medicaid due to
the 1993 reforms, which resulted in the state already covering children living
at up to 200 percent of the poverty level by the time of the SCHIP legislation.
As such, in 1997, SCHIP was viewed unfavorably and was not seen as a major
funding source. In 1998, SCHIP bills were introduced, but never advanced from
committee. By 1999, the state passed legislation to develop a Medicaid
look-alike program with some cost sharing for children living at 200–250
percent of the FPL.
Initially, the
state used the same contract and the same type of bidding process as is used
under Medicaid but had a separate bidding process for SCHIP. However, insurers
had little interest in bidding for SCHIP because the target population was so
small, and there were concerns over adverse selection. Consequently, SCHIP does
not offer statewide managed care coverage, and about 50 percent of enrollees
are fee-for-service. Beginning with the 2002 bidding, SCHIP and Medicaid
children will be combined. Because the state did not receive
SCHIP funding for children living below 200 percent of the poverty level, the
state spent only $2.2 million of the $46.7 million FY 1999 allotment.
Other
The state
established a children's health program (CHP) in 1990 with state funds. Soon
thereafter the state expanded coverage under Medicaid using Section 1902(r)2 to
children living below 200 percent of the poverty level. However, this Medicaid
expansion did not include children who were not citizens. The state maintained
the Children's Health Program to cover noncitizen children living at up to 100
percent of the FPL. There are now slightly more than 15,000 children covered
under this program. Enrollment is expected to exceed 20,000 by 2003.42
In late 2001
Washington also submitted a Section 1115 waiver proposal to CMS, which if
granted would reduce outlays and increase federal matching funds. Under the
waiver proposal the state would impose premiums on children and pregnant women
with incomes above 100% of poverty, up to 5% of income, shift BHP parents into
SCHIP, obtain the higher SCHIP match and make use of the state's SCHIP
allotment. The state has asked for authority to impose cost sharing on optional
services for all mandatory eligibles and on all nonpreventive services for
optional groups, as well as authority to cap enrollment for all optional
eligibility groups in Medicaid. It appears unlikely that CMS will approve this
waiver in its current form.
Acute Care Issues
Managed Care
As of June 2000
there were 430,000 enrollees in the Healthy Options plan, Washington State's
Medicaid managed care program. This is about 60 percent of Medicaid enrollees.
Premiums paid to managed care plans were $630.1 million in 2000 and were
expected to increase to $876.7 million in 2003, an increase of 11.5 percent per
year. Per enrollee costs are expected to increase 8 percent per year.
Only TANF
families and other nondisabled adults and children are in Medicaid managed
care. Washington had attempted to enroll the Supplemental Security Income (SSI)
population in managed care in eastern Washington. Managed care for the SSI population
failed because of several factors, including a major withdrawal of health plan
coverage in eastern Washington, a consolidation of health carriers, the fact
that new enrollees entered with pent-up demand, and reportedly inadequate
rates.43 The experience led to widespread questioning of
the managed care plan in general, particularly the adequacy of rates. The low
Medicaid rates for the SSI population reportedly resulted in plans being more
aggressive politically and in challenging rates on the general Healthy Options
population.
In 1997 the
state initiated a competitive bidding process. If plans were deemed qualified,
they could continue to bid for coverage the next two years: 16 plans received
contracts, 8 in Seattle. Plans were expected to submit new bids each year. The
state was not aggressive in excluding plans and the rates were thought to be
adequate, if not generous. In fact, in the Urban Institute's capitation rate
survey, the rates in Washington were above average compared with those in the
rest of the country.44 Despite 7 percent increases in rates each
year, plans reportedly lost money on the basis of the rates that were bid
and/or negotiated in 1998 and 1999. In 2000 they negotiated a 12.9 percent rate
increase.
Individuals who
do not select plans are automatically assigned to one. Washington has
auto-assigned these enrollees to the plans with the lowest bids. The lowest
bidding plan gets 60 percent of the auto assignees, the second lowest 30
percent, and the third lowest 10 percent. The problem is that those who are
auto-enrolled are thought to be difficult and high-cost beneficiaries. To
compensate, the low bid plan submits a high bid with the result that another
plan becomes the low bid plan, and consequently there is a large amount of
shifting of enrollees between plans.
Plans were also
strongly encouraged to contract with the BHP if they wanted to participate in
HO. However, the BHP was having problems in the late 1990s that affected the
attractiveness of the HO market. Following the collapse of the individual
insurance market described above, plans began to leave the market and
individuals who needed insurance began to enter the BHP. In 1996 the state
closed its high-risk pool to new enrollees, many of whom also entered the BHP.
Because of this adverse selection, the rates of plans participating in BHP became
increasingly inadequate. In 2000 the state allowed plans to participate in
Healthy Options without having to participate in the BHP.
Most of the
plans in the Washington Medicaid managed care market are local; national plans
have not made big inroads.45 The dominant
plans have been Group Health Cooperative of Puget Sound (now affiliated with
Kaiser Permanente), Primera Blue Cross, and Regence Blue Shield. The other key
plans are the Community Health Plan of Washington (organized by the community
health centers) and Molina (which purchased QualMed).
In 2001 the
state went through a new competitive bidding process and was able to achieve a
much smaller increase in rates—the average rate increase was 3.5 percent in
2001 over 2000. In the previous three years it had been 7 percent, 7 percent,
and 12 percent. However, as part of the competitive bidding process, Regence
Blue Shield and Kaiser were excluded because of their high bids. Other plans
dropped out of specific counties. The state believed that it would save $90
million relative to what rates would have been. Out of 430,000 people enrolled
in Healthy Options, 130,000 were reassigned because of the exclusion of these
two plans and the exit of plans from several counties. The state acknowledged
that it had saved quite a lot of money and that 3.5 percent rate increases were
not sustainable.
Plans in the
state are facing great difficulties in attracting physicians, are having a much
harder time negotiating with hospitals than in the past, and are facing higher
drug costs. For at least the next several years, the state does not intend to
use either a managed-competition model or its 2001 model. Instead, it will set
rates to reflect an aggregate target rate of increase with adjustments for
geographic differences in need. The state is also implementing a system that
adjusts for risk borne by different plans as determined twice a year based on
encounter data. Rates will no longer be determined by plans' bids but rather plans will
choose whether or not to accept the state's risk-adjusted offer. For 2002–03
the rates will go up by 8 percent per year. Based on initial response from
plans, this approach appears to have stabilized plan participation and expanded
coverage. Regence will be returning, Group Health Cooperative will be expanding
back into other counties, and other carriers are willing to expand into
additional rural areas.
Prescription Drugs
Prescription
drug costs are high and increasing rapidly in the state. The Medical Assistance
Administration projects that drug spending will increase by 16.8 percent
between 2000 and 2003 or about 13 percent over and above enrollment growth. The
state reimburses pharmacists at 89 percent of the average wholesale price, more
or less in line with policies in other states. The state participates in the
federal drug rebate program, which provides the state with rebates from major manufacturers
in exchange for offering all their drugs. In this year's legislative debate,
the government sought to control drug spending by various means; most
initiatives were defeated, attributed by many to heavy
lobbying from
drug manufacturers. The state sought authority to develop a prior authorization
program for drugs with therapeutic equivalents, that is, all drugs in a class
that are deemed equally efficient. The state would bargain and would identify
drugs with the best price and require prior authorization for others. This was
defeated. The legislature also did not adopt policies to reduce payments to
pharmacists. However, the legislature directed MAA to achieve a 3 percent
savings in program expenditures through various cost containment and utilization
initiatives.
In response to
the worsening economic outlook, in January 2002 the Administration has again
proposed to cut drug reimbursement rates. There is also renewed interest in a
joint formulary that would be used by state employees, BHP, and other
non-Medicaid state purchasers. Physicians not accepting the formulary would be
subject to extensive prior authorization. In the current fiscal environment
opposition to this approach is weakening.
Hospital Payments
The hospital
payment system is a diagnostic-related group–based system and rates have been
increasing by about 5 percent per year. Hospital expenditures are expected to
increase by 9.8 percent per year between 2000 and 2003.46
Hospital
margins are quite low in the state and hospitals are concerned about rates of
payment. The state has reduced the burden on hospitals through its medically
indigent program (for the uninsured) and its General Assistance for the
Unemployed (GAU) program (a program for the temporarily disabled). Both pay
hospital bills for people who are otherwise uninsured, though both programs pay
hospitals less than their full costs. The state also has a relatively large DSH program. While
this has been scaled back in recent years because of the Balanced Budget Act,
it is targeted to those hospitals that provide a large amount of care through
Medicaid. DSH payments are projected to fall from $240 billion in 2000 to
$193.3 billion in 2003. Hospitals are greatly concerned about these reductions
because they are on top of the larger pressures coming from Medicare and
private payers.
Physician Payments
Physician
payments are expected to increase from $184.9 million in 2000 to $247.9 million
in 2003, or an annual rate of increase of 10.2 percent. The 10.2 percent
reflects enrollment growth as well as rate increases and additional
utilization—per capita physician expenditures are anticipated to increase about
6 percent per year. Since these are fee-for-service expenditures, this largely
reflects the anticipated experience of the aged, blind, and disabled
population. Medicaid rates are low relative to Medicare except for primary care
services and maternity.
For example, a recent report on primary care physicians conducted by the
University of Washington concluded that Medicaid payment rates, both
fee-for-service and through Healthy Options, averaged 86 percent of Medicare
rates.47 They also found that fee-for-service rates for
services used by children averaged 92 percent of Medicare rates, while services
more likely to be used by adults averaged 60 percent of Medicare rates.
Issues in Long-Term Care
Long-Term Care for the Elderly, Mentally Ill, and Developmentally Disabled
Washington has
been known as a leader and innovator in long-term care services due to policy
initiatives to shift Medicaid recipients out of nursing homes and expanded care
options in community-based settings. Leaders in Washington continue to support
and expand these shifts for the elderly and persons with mental illnesses and
developmental disabilities. However, as new care settings, such as adult family
homes, assisted living facilities, and board and care homes, take on a larger
share of long-term care recipients, concern has grown about the quality of care
given in these facilities and the level of regulation necessary to ensure
quality. In addition to regulation of facilities, there are concerns regarding
training standards and wage levels for aides working in community-based
facilities.
In 1999, the
Supreme Court ruled in Olmstead v. L.C. that inappropriate
institutionalization was discriminatory against people with disabilities and
illegal under the Americans with Disabilities Act. However, Washington began
transitions to the community much earlier and the Olmstead decision is
not viewed as having major consequences for the state. In 1993, Washington
legislators enacted legislation promoting home and community-based care and
mandated that nursing home residents with fewer needs be moved into community
settings. The state has also limited the growth of nursing home services with
certificate of need requirements.
Washington's
long-term care system provides a diversity of services to the elderly and
younger people with disabilities. The supply of institutional services and
community-based services in Washington is far more balanced than the national
average. In 1998 Washington had 285 nursing facilities housing 27,204 nursing
home beds. This represented 41.7 beds per 1,000 people age 65 and over compared
with the national average of 52.5 beds per 1,000 people age 65 and over. This
relatively low supply of beds results from recent declines in nursing home beds
over the past decade. The number of beds has decreased by 1,432 since 1989,
with a significant portion of this decline occurring in recent years; 570 beds
were lost between 1997 and 1998.48
While the
number of nursing home beds has decreased, the supply of nonmedical residential
facilities, such as family homes, boarding homes, and assisted living
facilities, has increased. In 1998 there were 32,080 beds in nonmedical
facilities, representing an increase of 2,470 beds from 1997. There were 49.2
beds per 1,000 people aged 65 and over in nonmedical residential facilities.
This ratio is far greater than the national average of 25.5 beds per 1,000
people aged 65 and over.49
Medicaid,
including Washington's home and community-based waiver services, funds a
significant portion of the long-term care received in the state. Of all nursing
facility residents, 63 percent depend on Medicaid to pay for their care.50 While the
supply of nursing facility beds has declined in recent years, a large portion
of total public expenditures on long-term care is still devoted to paying for
care in nursing facilities. Of Washington's $777 million spent on long-term care in fiscal
year 2000, 61.7 percent of these funds was paid to nursing facilities, while
the remaining 38 percent was spent on community-based services.51
Medicaid is a
main payer of home and community-based services in Washington, indicating the
significant role state funding priorities have had in shaping the long-term
care system. Washington has two major Medicaid programs providing home and
community-based services to the elderly and persons with disabilities: the
Medicaid personal care benefit and the Community Options Program Entry System
(COPES), Washington's home and community-based services waiver. Washington also
has a small state-funded program, the Chore program, that provides personal
care and volunteer homemaker services to those with incomes and assets that
exceed Medicaid eligibility levels.
Olmstead
The Olmstead decision affected long-term care policymakers across the nation in 1999, requiring that state long-term care programs make reasonable efforts to place Medicaid
recipients in the least restrictive settings possible. Strictly enforced, this
policy would require many states to restructure their long-term care system
away from institutional settings in order to make more community services
available. However, due to Washington's history of policies concentrating on
home and community-based care, the Olmstead decision did not shift the
state's policy direction.52 Washington has
looked to community-based care as a route to decreasing long-term care costs
since the early 1990s, especially with the pressure of cost-containment
measures such as Initiative 601. Strong political support and funding of home
and community-based services fueled the increasing numbers of adult family
homes, boarding homes, and assisted-living facilities in the 1990s while
restrictions on nursing home growth and payments constricted supply of
institutional services.
Given the
shifts in the long-term care system for the elderly and younger people with
disabilities in recent years, it is unlikely that the Olmstead decision
will significantly alter the state's policy direction. However, the state had
made fewer efforts to revise the long-term care system for persons with
developmental disabilities before Olmstead. Currently, there are fewer
community services in place for this population, and large institutions still
care for many individuals. In February 2001, Governor Locke proposed a plan to
move residents out of psychiatric hospitals into community-based facilities by
cutting $32 million in funding for
the hospitals over two years. Critics balked at the plan, asserting that
community facilities do not currently have the capacity for such large
transitions.53 Some also question whether community services
are adequate for individuals who are institutionalized because they have been
deemed dangerous to themselves or other people.
Boren Amendment
The Balanced
Budget Act (BBA) of 1997 repealed the Boren Amendment allowing states to design
more flexible nursing home payment schemes that were no longer tied to quality
standards. Washington has made some changes to its payment system since the
enactment of the BBA in reaction to cost-containment strategies for nursing
home expenditures enforced throughout the 1990s. Washington used a
facility-specific prospective payment method beginning in 1980. A
patient-specific case-mix system was implemented in 1999.54
The payment systems seem to have slightly decreased the growth in nursing home
expenditures over the years. The Washington Health Care Association reports
that increases in payment rates since 1997 have been consistently lower than
the increases allowed for inflation and population growth through Initiative
601.55
While nursing home representatives have expressed
frustration over low reimbursement levels, average payment rates of $116 per
day in 1998 were above the national average of $96.56 The problems
the state faces are that (1) with declines in nursing home usage, acuity is
increasing and (2) workforce shortages are forcing wage increases that
ultimately need to be reflected in rates. While state officials believe the
rate-setting system is sensitive to these issues, nursing home officials argue
that rate increases are not keeping up with cost growth and that Medicaid rates
were only 81 percent of costs in 2000, falling from 95 percent in 1995.57
Washington has
limited the supply of nursing home beds in order to fulfill cost-containment
goals for nursing facility services. Washington has required a certificate of
need (CON) for nursing facilities since 1978. There also has been a CON
requirement for the conversion of hospital beds to nursing home beds.
Currently, the CON target ratio of beds to population is lower than the supply
of beds in institutions. A bed-banking policy further limits the number of
available nursing home beds by allowing nursing homes to sell the rights to
beds when facilities close and providing incentives to convert nursing home
beds into assisted-living beds. However, "banked" beds are still used in the
calculations to determine the supply of nursing facility beds.
Washington,
like the rest of the country, has struggled to fill the increasing number of
positions available for long-term care providers due to a period of low
unemployment rates combined with the low wages these workers typically receive.
While a general shortage of registered nurses has made recruiting skilled staff
difficult, attracting lower skilled aides has been an even more acute problem.
One stakeholder reports that some nursing facilities have nearly complete
turnover of aide staff in six months.58 There were
concerns that the problem of the shortage of aides could not be solved with
current nursing home rates, and the legislature has been unwilling to make significant adjustments.
There have been
concerns raised recently over the quality of care delivered to the elderly and
people with disabilities. Much of these concerns have focused on home and
community-based services, which have grown significantly in recent years, and
stakeholders believe that quality assurance mechanisms have not been sufficient
to regulate this new industry. Costs are tightly controlled, with limits on the
hours of care provided, linked to patient assessments, and on hourly payment
rates to independent providers and to home care agencies. There were concerns about
the quality of care provided by low-paid home care workers. There were also
concerns about the quality of care in assisted living facilities with personal
care services provided by nonprofessionals with very little case management and
little access to nurses.
Other Issues
Prescription Drugs for Seniors: The AWARDS Program
With the federal government slow to act on the politically difficult issue of
prescription drug costs, states have begun to pass various forms of relief
programs for seniors. Bypassing the legislature, the governor established the
Washington State Alliance to Reduce Prescription Drug Spending, the "AWARDS"
program, by executive order on August 24, 2000.59
AWARDS is not a prescription drug
insurance program, but a prescription drug "buyers' club." Similar in concept
to SAM's or Costco, seniors pay $15 a year (or $25 per family) to join the
program and then may purchase reduced-price drugs as are already provided to
state employees through Washington's Uniform Medical Plan. Upon the program's
announcement, Governor Locke's officials claimed seniors would see a 15 percent
to 49 percent reduction in drug costs, with an estimated 15,800 participating
seniors.60
On January 5,
2001, the Coalition for Affordable Prescriptions for Seniors, a group mostly
representing pharmacists, filed a motion to stop the implementation of the
AWARDS rules as established by the Department of Health.61
The
Coalition claimed that drug prices were not renegotiated with manufacturers
prior to seniors entering the program, yet pharmacists continued to pay the
same wholesale drug costs. Therefore, they argue, any "savings" seniors see
would come solely from reducing pharmacists' revenues, as seniors who used to
pay full price were now granted discounts. In the motion, the Coalition made
two claims. First, they claimed that the regulations passed did not follow the
intent of the executive order, which explicitly stated that drug prices would
be negotiated with manufacturers, and that no negotiations were planned. A judge denied this motion in mid-January, and at the beginning of March, the
state began enrolling seniors. In its second claim, the Coalition challenged
the Health Care Authority's statutory authority to implement the AWARDS
program. On May 25, a state court judge agreed and struck down the program.
Patient Bill of Rights
The Washington
Patient Bill of Rights has been touted by bipartisan government officials in
Washington as a concrete step in an age of managed care toward creating a
balance between providing quality health care and containing rising health care
costs. It has also been lauded for its objective of shifting health care
decision-making power from insurance carriers back into the hands of patients
and doctors. As a result, the Patient Bill of Rights and its goals of managed
care accountability and enrollee protection have generally received strong
political support from both political parties and from grassroots activist
organizations in the state of Washington.
The key
concepts of the Patient Bill of Rights are insurance carrier accountability and
patient protection.62 To achieve this, whenever a dispute
arises over the potential denial of care in Washington, the bill makes
provision for a speedy internal grievance process that is provided by the
insurer and that conforms to standards set by the Washington State Office of
Insurance Commissioner. Insurers are required to give consumers notice of any
decision to deny, discontinue, or limit a health service. In addition, health
insurers are held to the same standards of care and practice as doctors and
other health care practitioners and can be held accountable for harm proven to
be directly caused by a failure to follow this standard of care.63
It is also the insurers' obligation to provide assistance for enrollees who want
to file complaints and to investigate and resolve grievances in a timely
manner.64
Consumers who
are ultimately denied specific services have the right to seek an independent
third party review. In these cases the insurer must pay for the independent
review, but enrollees have to first exhaust all internal complaint processes
before requesting this review. At this stage, carriers have three days to
provide all relevant information to the independent review organization, which
has broad authority to review and override an insurance plan's medical
necessity standards.65 Although the decisions of the independent
review are binding, if an enrollee remains unsatisfied, the Patient Bill of
Rights provides consumers the option to sue their health insurers. This
provision was perhaps one of the most contentious components of the bill.
Insurance providers claimed that the potential increase in
litigation would inevitably drive up insurance premiums for all enrollees and
potentially increase the number of uninsured individuals in Washington.66 Several key legislators successfully countered that these were "alarmist charges" that could not be proven with evidence from other states with similar legislation.
In an effort to
facilitate informed decisions in the purchase of health insurance products,
Washington's Patient Bill of Rights also makes provisions for the disclosure of
health plan benefits, including exclusions. The bill requires that insurance
carriers provide a copy of the drug formulary and policies regarding coverage
of drugs, definition of medical necessity or other coverage criteria,
explanation of benefits, privacy, grievance, and cost-sharing. Finally, a
central component of Washington's Patient Bill of Rights is to ensure that
enrollees must have adequate choice among health care providers. The insurance
commissioner states that "adequate" will be "determined in part by both the
geographic service area and the enrollee demographics."67
Consumers are given the right to be referred to specialists when specialty care is
warranted, and to obtain a second opinion. In addition, primary care providers
must be permitted to continue seeing patients for up to 60 days following
termination from a health care network.68
Finally, the
legislation has provisions that protect enrollees from unneeded invasions of
their privacy. Health care carriers are prohibited from releasing personally
identifiable health information unless it is authorized in writing, unless it
is required for public health purposes, or unless it is covered by existing
privacy laws applying to health information.
Conclusion
Washington will
confront many difficult issues in the near future. It seems inevitable that
health care spending through the state employees' plan, Medicaid, and the BHP
will place ongoing pressure on the state budget. State spending will be limited
by I-601, although the state recently has found ways of transferring funds from
other sources to alleviate the constraints from I-601. But these transfers
require new revenue sources. Thus state spending is also limited by the growth
in state revenues, which in turn are dependent on the growth in the state's
economy.
In the last two
budget cycles the state solved its fiscal problems through tobacco settlement
revenues and increased use of upper payment mechanisms. Neither of these will
be available in the future to enhance state revenues. In the past budget cycle
the state avoided significant cuts in the BHP; they may not be able to do so in
the future. The state will be able to use new tobacco revenues to expand the
BHP but is unlikely to enact further coverage expansions absent any new federal
legislation. Washington has gone from being a leader among states in health reform
to a state struggling to maintain its existing coverage programs.
The state faces
other problems that have fiscal implications. Providers, primarily physicians but
also hospitals, have been frustrated with years of constraints on rates through
private managed care, Medicare and Medicaid policies, and the managed
competition policies of the state employees' health plan and the BHP.
Physicians are increasingly unwilling to accept risk and to participate in
managed care plans. Hospitals have also been aggressive in seeking financial
relief from the state. The state seems likely to face great difficulty in
controlling costs through limits on managed care or fee-for-service payment
rates.
The state will
also have to confront the issues of shortages of nurses and home care workers.
The problem is well-known in the state, but the legislature has not responded
by increasing rates (the state is now proposing to reduce them) that would
allow nursing homes and home care agencies to increase payment rates and alleviate
workforce shortages. It is not clear how long this problem can be allowed to
continue.
Finally, the
state faces problems with its individual insurance market. Reforms enacted in
the early 1990s led to adverse selection and the exit of plans from the individual
market. It was the intent of the legislation that those people failing the
screenings would join the state's high-risk pool. To date, most of those who
have been screened out have not joined the pool. Thus, it seems that the state
essentially solved its problems in the individual market by excluding the
sickest. The state will eventually have to confront this issue. In sum, the
state has been a leader in health reform but will face serious problems in the
near future if it is to sustain its achievements.
Endnotes
1. The other 12
states are Alabama, California, Colorado, Florida, Massachusetts, Michigan,
Minnesota, Mississippi, New Jersey, New York, Texas, and Wisconsin. The 13
states studied were selected to present a balanced view of state activity and
its impact on low-income families. See Kondratas, Anna, Alan Weil, and Naomi
Goldstein. 1998. "Assessing the New Federalism: An Introduction." Health
Affairs 17(3): 17–24.
2. The prior
study's site visit interviews occurred in July and August 1996. It covered
somewhat more topics and contained more historical information. See Nichols,
Len, Leighton Ku, Stephen Norton, and Susan Wall. 1997. "Health Policy for
Low-Income People in Washington." Washington, D.C.: The Urban Institute.
3. Barone,
Michael, and Grant Ujifusa. 1999. The Almanac of American Politics 2000. Washington,
D.C.: National Journal Group Inc.
4. Nichols, Len,
Leighton Ku, Stephen Norton, and Susan Wall. 1997. "Health Policy for
Low-Income People in Washington." Washington, D.C.: The Urban Institute.
5. Barone,
Michael, and Grant Ujifusa. 1999. The Almanac of American Politics 2000. Washington,
D.C.: National Journal Group Inc.
6. Washington
State Legislature. 2001. http://www.leg.wa.gov.
[date accessed: September 5, 2001].
7. Barone,
Michael, and Grant Ujifusa. 1999. The Almanac of American Politics 2000. Washington,
D.C.: National Journal Group Inc.
8. National
Conference of State Legislatures, Health Policy Tracking Service. http://www.hpts.org/hpts97/NFTS2001.nsf/2b9b8a662962da34852563160055785b/da97d0c196584e9c852569d200710111?OpenDocument.
[date accessed: May 22, 2001].
9. Premera Blue
Cross Press Release, December 1, 2000. Health Care Report: State News.
The Bureau of National Affairs, Inc.
10. Haugen, J.
Christopher. 2000. The Noose Tightens: Washington State's Looming Fiscal
Crisis. Seattle: University of Washington.
11. Lefberg,
Irv. 1999. Changing the Rules of the Game: Washington Fiscal Developments
Before and After Initiative 601. Seattle: University of Washington.
12. Ibid.
13. Initiative
732, mandating teacher raises, and Initiative 728, reducing class sizes, passed
in the November 2000 election. Seattle Times. 2001. "State Budget: A
Grim Outlook." 25 February.
14. Haugen, J.
Christopher. 2000.
15. Interviews
with State Budget Officials.
16. Governor's
Proposed Budget Highlights; http://www.ofm.wa.gov/budget01/highlights/toc.htm.
[date accessed: August 9, 2001]. Senate 2001–2003 Operating and Capital Budget
Highlights, Senate Ways and Means Committee; April 2, 2001. Proposed 2001–2003
Operation Budget: Budget Highlights, House Appropriations Committee; April 25,
2001.
17. Data not
shown. Urban Institute estimates based on data from HCFA 2082 reports.
18. Ibid.
19. Ibid.
20. Unpublished
data provided by the state of Washington Medical Assistance Administration.
21. Washington
State Health Care Authority. 2001. Understanding Basic Health. Olympia.
22. Washington
Insurance Commissioner. 1995. "Health Insurance Reforms in 1994–96." http://www.insurance.wa.gov/health/hcreform.txt.
[date accessed: May 17, 2001].
23. Nichols,
Len, Leighton Ku, Stephen Norton, and Susan Wall. 1997. "Health Policy for
Low-Income People in Washington." Washington, D.C.: The Urban Institute.
24. Washington
State Health Care Authority. 2001. Washington Basic Health: Background and
Program Philosophy. Olympia.
25. Office of
Financial Management. 2001. 2001–2003 Enacted Budgets. http://www.ofm.wa.gov/legbudgets/legbudgets.htm.
[date accessed: August 9, 2001].
26.
Nonsubsidized BHP is available through Columbia United Providers only in Clark,
Cowlitz, Klickitat, Skamania, and Wahkiakum Counties.
27. Washington
State Health Care Authority. 2001. Basic Health Enrollment Summary.
Olympia.
28. Ibid.
29. Interviews
with Health Care Authority Officials. June 5, 2001.
30. Ibid.
31. Gannaway,
Gary. 1999. "State's Basic Health Plan in ‘Death Spiral.'" Seattle Times.
30 March.
32. Washington
State Health Care Authority. 2001. Basic Health Enrollment Summary.
Olympia.
33. Washington
State Health Care Authority. 2001. Basic Health Subsidized, Historical
Actual Dollars Spent. Olympia.
34. Washington
Insurance Commissioner. 1995. Health Insurance Reforms in 1994–96. http://www.insurance.wa.gov/health/hcreform.txt.
[date accessed: May 17, 2001].
35. Neurath,
Peter. 1998. "Crisis in Individual Coverage Spurs Talks." Puget Sound
Business Journal. 9 November.
36. American
Health Line, Managed Care Monitor. 1998. "Premera: Washington's Largest
Individual Insurer Pulls Plan." 3 December.
37. Beason,
Tyrone. 1998. "Two More Insurers Won't Sell Health Policies." Seattle Times. 25 December.
38. Ostrom,
Carol M. 2000. "Law Likely to Restart Health Coverage." Seattle Times.
24 March.
39. Hagens,
Bill. 2001. Presentation from the Task Force on Health Care Reinsurance. 1 May. Olympia.
40. Ross, Donna
Cohen, and Laura Cox. 2000. "Making It Simple: Medicaid for Children and CHIP
Income Eligibility Guidelines and Enrollment Procedures." Washington, D.C.:
Center on Budget and Policy Priorities. http://www.kff.org/content/2000/2166/hjksmall.pdf.
[date accessed: July 16, 2001].
41. Based on a
site visit conducted on October 11, 2000, as part of the Urban Institute's
SCHIP Evaluation, Assessing the New Federalism project.
42. Data
provided by the Medical Assistance Administration.
43. Washington
state officials. Interview by authors. June 5, 2001.
44. Holahan,
John, Suresh Rangarajan, and Matthew Schirmer. 1999. Medicaid Managed Care
Payment Methods and Capitation Rates: Results of a National Survey.
Washington, D.C.: The Urban Institute. Assessing the New Federalism Occasional Paper
No. 26.
45. Coughlin,
Teresa A., Sharon K. Long, John Holahan, Jessica Kasten, Susan Goldenson, and
Stephanie Kendall. 2000. "Commercial Health Plan Participation in Medicaid
Managed Care: An Examination of Six Markets." Washington, D.C.: The Kaiser
Commission on Medicaid and the Uninsured. http://www.kff.org/content/2001/2219/2219.pdf.
[date accessed: July 17, 2001].
46. Data
provided by the state of Washington Medical Assistance Administration.
47. Katz, Aaron,
Mark Gardner, George Wright, Peter House, Gail Wellenstein, Chris Hwang, and
Staci Richards. 2001. State Primary Care Provider Study. Seattle:
University of Washington.
48. Harrington,
Charlene, James H. Swan, Valerie Wellin, Wendy Clemeña, and Helen M. Carrillo.
2000. 1998 State Data Book on Long-Term Care Program and Market Characteristics. San Francisco: University of California.
49. Ibid.
50. AARP. 2000. Across
the States 2000: Profiles of Long-Term Care Systems, 4th ed. Washington,
D.C., p. 202.
51. Aging and
Adult Services Administration, Washington Department of Social and Health
Services, 2000.
52. Washington
Department of Social and Health Services. 2001. 2001–03 DSHS Budget Brief:
Implementing the 'Olmstead' Decision. Olympia.
53. American
Health Line. 2001. "Washington: Plan to Move Mentally Ill to Community
Care." 20 February.
54. Wiener,
Joshua M., and David G. Stevenson. 1998. "Repeal of the ‘Boren Amendment':
Implications for Quality of Care in Nursing Homes." Washington, D.C.: The Urban
Institute. Assessing the New Federalism Policy Brief A-30.
55. Washington
Health Care Association. 1999. "History of Percentage Change of Total Medicaid
Weighted Rate Compared to 601 Fiscal Growth Factor." Olympia.
56. AARP. 2000,
p. 204.
57. Ostrom,
Carol. 2001. "Medicaid Windfall Sets Off Scramble." Seattle Times. 3
June.
58. King,
Marsha. 1999. "New Ways of Caring for Elders." Seattle Times. 24 August.
59. Governor
Gary Locke. 2000. Executive Order 00-04. "Establishing a Washington State
Alliance to Reduce Prescription Drug Spending ‘AWARDS' Program." August 29.
60. American
Health Line. 2000. "Politics and Policy—RX Drug Roundup: State Politicians
Propose Solutions." 5 September.
61. Health Care
Policy Report. 2001. Pharmacies Seek Stay of Rules on State's Discount Drug
Program. The Bureau of National Affairs, Inc. 15 January.
62. Washington
State Legislature. http://www.leg.wa.gov/pub/billinfo/1999-00/senate/6175-6199/6199-s2_sl_03152000.txt.
[date accessed: May 18, 2001].
63. Washington
State Insurance Commissioner. http://www.insurance.wa.gov/Health/pbor/pborindex.htm.
[date accessed: May 18, 2001].
64. The
Washington State Insurance Commissioner requires that grievance procedures
conform to the following standard: Written notice of health care decisions;
appeals of health care decisions without consumer filing of a complaint;
appeals decided within 30 days; expedited review within 72 hours of request;
disclosure of medical basis of denial of care; and continuation of coverage
pending appeal, but enrollee may be liable for care if the carrier wins.
65. Washington
State Insurance Commissioner. http://www.insurance.wa.gov/Health/pbor/pborindex.htm.
[date accessed: May 18, 2001].
66. Senn,
Deborah. 2000. "Patients' Bill of Rights Protects Consumers." Consumer Law
Reporter (Spring). http://www.insurance.wa.gov/Health/pbor/consumerlawreport.htm.
[date accessed: May 18, 2001].
67. Washington
State Insurance Commissioner. http://www.insurance.wa.gov/Health/pbor/pborindex.htm.
[date accessed: May 18, 2001].
68. Washington
State Insurance Commissioner. http://www.insurance.wa.gov/Health/pbor/pborindex.htm.
[date accessed: May 18, 2001].
Table 1 Notes
a. U.S. Census Bureau. 2001. Profiles of General Demographic Characteristics 2000. http://www.census.gov/Press-Release/www/2001/2khus.pdf.
b. Urban Institute Calculations: Derived from the 1999 National Survey of America's Families. Note: All calculations only include residents under age 65.
c. U.S. Department of Commerce, Bureau of Economic Analysis, News Release April 24,
2001: "State Personal Income and State Per Capita Personal Income: 2000. State
Personal Income: Fourth Quarter 2000." http://www.bea.doc.gov/bea/newsrel/spi0401.htm.
d. U.S. Department of Commerce, Bureau of Economic Analysis, News Release September 12,
2000: 1999 State Per Capita Personal Income Revised. Table 1: Per Capita
Personal Income, by State and Region, 1995–1999 (Dollars). http://www.bea.doc.gov/bea/newsrel/spi0900.htm. Note: Percent change calculated in inflation-adjusted dollars by The Urban
Institute based upon the CPI-U as published in the Economic Report of the President. 2000. Table B-60. Washington, D.C.: U.S. Government Printing Office, February.
e. U.S. Department of Labor, Bureau of Labor Statistics. 2001. "Regional and State
Employment and Unemployment: April 2001." Table 3. ftp://ftp.bls.gov/pub/news.release/History/laus.05182001.news.
f. Zedlewski, Sheila. 2000. "Family Economic Well-Being." In Snapshots of America's Families II: A View of the Nation and 13 States from the National Survey of
America's Families. Washington, D.C: The Urban Institute. Notes: Percent change in poverty rates (1996–1998) calculated by the Labor and Social Policy Center, The Urban Institute. 1998 national and state adult and child poverty estimates show statistically significant decreases from the 1996 estimates at the 0.10 confidence level, calculated by the Assessing the New Federalism project, The Urban Institute.
g. The National Governors' Association. 2001. "The Governors, Political Affiliations, and Terms of Office, 2001." http://www.nga.org/cda/files/govlist2001.pdf.
h. The National Conference of State Legislatures. 2001. http://www.ncsl.org/ncsldb/elect98/partcomp.cfm?yearsel=2001. Note: D indicates Democrat, R indicates Republican, I indicates Independent, O indicates other, V indicates Vacant.
i. Two Urban Institute calculations: (1) Average monthly number of AFDC 1996 recipient children divided by number of children in poverty in 1996: U.S. Department of Health and
Human Services. Administration for Children and Families. 1997. Characteristics and Financial Circumstances of AFDC Recipients FY 1996. Table 18. "Percent Distribution of AFDC Recipient Children by Age (October 1995–September 1996)"; (2) Average monthly number of TANF 1998 recipient children divided by number of children in poverty in 1998: U.S. Department of Health and Human Services. Administration for Children and Families. 1999. Second Annual Report to Congress August 1999. Table 9:22. "Percent Distribution of TANF Recipient
Children by Age Group (October 1997–September 1998)." The numbers of children in poverty in 1996 and 1998 are Urban Institute calculations from the National Survey of America's Families II.
j. Based on three sources: (1) Urban Institute's TRIM [Transfer Income Model]; (2) Smith,
Vernon K. 1999. "Enrollment Increases in State CHIP Programs: December 1998 to June 1999." Health Management Associates, July; (3) Urban Institute analysis of 1999 SCHIP [State Children's Health Insurance Program] Annual Report. Rules for 1996 and 1998 are policies in place the majority of the year. Rules for 2000 represent plans approved as of January 1, 2000.
k. In 1996, the threshold represents the state Medicaid threshold for poverty-related
eligibility or AFDC-related eligibility. Higher thresholds for separate state-financed programs (such as in New York) are not represented here.
l. The figure for 1998 represents the higher of the state threshold for Medicaid eligibility,
or the state threshold for Medicaid expansions or stand-alone programs enacted under the SCHIP legislation.
m. The figure for 2000 represents the higher of Medicaid or SCHIP eligibility. In 2000, all
states covered at least some children through SCHIP; certain groups in some states are only eligible through Medicaid.
About the Authors
John Holahan is director of the Health Policy Research Center
at the Urban Institute. He has authored several publications on the Medicaid
program. He has also published research on the effects of expanding Medicaid on
the number of uninsured and the cost to federal and state governments. Other
research interests include health system reform, changes in health insurance
coverage, physician payment, and hospital cost containment.
Mary Beth Pohl is a research assistant in the Urban Institute's
Health Policy Center. Her research examines and models public health insurance
expansion programs for the adult uninsured. Much of her work involves the
Census Bureau's Current Population Survey.
The authors would like to thank all of the government and program officials whose
willingness to share their time and expertise have contributed to this state
update.
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