Will federal relief come? States need help now

It's not yet known exactly what federal help will be forthcoming to struggling state Medicaid programs, but one thing is clear: Many states are in survival mode and planning for the worst-case scenario.

"The reality is, there are people on Medicaid using services every day, and bills are coming in. States don't have the luxury of waiting and seeing what is going to happen," says Robert W. Seifert, senior associate at the Center for Health Law and Economics at University of Massachusetts Medical School in Charlestown. "And the later it gets in the fiscal year, the more dangerous it gets for states. You are watching your spending as the year goes on, and you know that by the end of year, you need a balanced budget."

For that reason, states are hoping for an indication early on that there will be some federal help in an economic stimulus package. "It won't happen before the federal administration changes and the new Congress convenes. But if there were some indication it was going to be retroactive, all the better," says Mr. Seifert. "Then states could breathe a little bit of a sigh of relief. But it's a tight year, however you look at it."

Nevada has gone through four cycles of budget reduction and, thus far, has only had to cut services and provider payments for its Medicaid program in the third round of cuts, which were implemented in September 2008.

Those cuts included reduction of hospital payments by 5% in aggregate, psychiatric payments, payments for certain pediatric specialty care services and obstetrical care services, services to people with long-term care needs who live at home, reduced available hours for personal assistance with activities of daily living, some significant reductions in the State Children's Health Insurance Program, capping dental coverage at $600 per year, and eliminating orthodontia and vision coverage.

"Those are the big things we have had to do," says Charles Duarte, administrator for Nevada's Division of Health Care Financing and Policy. "Luckily, with the other budget reduction rounds we went through, there were either reserve funds or other pools of existing funding out there that we were able to tap, to avoid more drastic reductions in services or payments."

In the state's proposed budget for fiscal year 2010/2011, additional reductions are outlined that have not yet been accepted by the governor. "But the projections in declining state revenue have worsened significantly since that document was produced in September 2008," he points out.

Mr. Duarte says the current downturn is "dramatically worse than the previous downturn," and that he is eagerly awaiting word of possible federal assistance. "We are certainly anxious to get some federal help," he says. "It won't help with our whole problem, but it could provide us in excess of [$50 million] and we'd be grateful if that were to happen."

If the worst-case revenue scenarios do materialize and there isn't any new revenue produced, such as with taxes, Mr. Duarte says there would need to be very dramatic cuts "across the board" to services for children and families, as well as the elderly and the disabled. "That would include reductions in optional services, elimination of programs altogether, and cuts in eligibility for optional groups," he says.

These are times when states are certainly not going to be adding anything new to any great degree, says Mr. Seifert. "I'd be very surprised if states were not just trying to stay where they are in terms of eligibility and benefits. That's probably the best that anybody could hope for."

Survey: Employers say cost is key barrier to coverage

Most employers that don't offer health coverage would not be willing to spend more than $50 per employee to offer a health plan to their workers, according to a new survey by benefits consultant Mercer. (Editor's note: The survey can be accessed at http://www.mercer.com/referencecontent.htm?idContent=1325605.)

The survey was completed by 545 employers that do not offer employee health coverage and nearly 2,900 employers that do.

When asked their primary reason for not offering health coverage, 43% said they can't afford it. Other reasons included employees being covered under other plans (20%), high work force turnover (9%) and the perception that employees would rather have more pay than health coverage (9%).

Asked how much they would be willing to contribute to offer a health plan, 59% cited $50 or less, the association says. Only 10% said they would pay at least $200. To put those results in context, Massachusetts' "play-or-pay" law requires employers who don't meet the "play" standard to pay $295 per employee per year to the state, and indications are that this amount might soon be adjusted upward, according to Mercer.

Half of all employers oppose play-or-pay laws, which would require employers to offer health coverage or pay into a government fund to cover the uninsured. Just 31% are supportive, and 19% neither approve nor disapprove. Wholesalers/retailers (68%) and manufacturers (56%) are most likely to disapprove of a play-or-pay requirement.

According to Mercer, almost all employers that do not sponsor health coverage have fewer than 500 workers.

"This finding highlights how tough it's going to be to ask very small employers to voluntarily take on the expense of providing health coverage," said Mercer partner Linda Havlin. "It also helps explain why even relatively low-cost catastrophic plans like HSAs have not made great inroads with small employers that find it financially challenging to offer coverage."

Just over half (53%) of employers support requiring individuals to have health coverage if they can afford it, either through their employer or purchased on their own. Nearly half of employers (46%) support having the federal government provide stop-loss protection to cover an employer's catastrophic expenses.

The survey identified employers with workers in Massachusetts, San Francisco, and Vermont, which have enacted broad-based health care reforms requiring employer compliance. The survey asked them what actions they had to take to comply and how burdensome those actions were.

Of the 384 employers with workers in Massachusetts, where reforms are the most complex, 79% have been required to take some action:

• collecting information to meet new reporting requirements (72%);

• establishing a new Section 125 (cafeteria) plan (41%);

• modifying an existing plan (12%);

• establishing a new plan to comply with the Employee Retirement Income Security Act (ERISA) (10%).

Interestingly, only 4% reported that those efforts required "considerable" resources. Most reported that they required "minimal or no resources" (58%), or "some resources, but [not enough to affect] other priorities" (38%).

Most employers are concerned about the potential impact of state or local health reform initiatives. Almost nine out of 10 large employers (86%) said they were concerned or very concerned about the impact on cost. In comparison, 71% are concerned about losing the flexibility to design programs to meet organizational needs, and 64% are concerned about losing ERISA protections.

About half of these employers say it is very unlikely that they will offer a plan in the next three years (49%), and only about one-fourth say it is even somewhat likely.