Fiscal Fitness: How States Cope

Though concerns about the health of children abounds, states feel time is right for progress

In spite of the significant fiscal problems they face — or, perhaps more importantly, because of those fiscal problems — officials of many states believe they are in an excellent position to take some steps that would have a positive impact on children's health.

Many of those officials say they're ready to move forward, says Health Management Associates principal Vernon Smith, who recently led a Commonwealth Fund-supported, daylong conversation with senior government officials involved with child health in many states.

"A time of fiscal stress is a good time to talk about issues like quality," Mr. Smith tells State Health Watch. "States always have limited resources and they always need to work to get the best value for the money they spend, and that means as high quality as possible."

Mr. Smith turned the results of the conversation with state officials into a Commonwealth Fund Issue Brief. He notes the health of American children has improved over recent generations, with infant mortality declining and vaccines developed for polio and chickenpox reducing the number of children with serious disabilities. But even with these improvements, there remains strong evidence that the quality of children's health care is inadequate, he says. Research has found that up to 75% of children don't receive recommended health care services to prevent disease, reduce disease complications, and achieve optimal health and development. Children often receive inappropriate care, such as antibiotics for the common cold and unnecessary hospital admissions. In addition, poor children and minority children are more likely to receive inferior care, and the level of care varies substantially across geographic regions in ways that appear to be unrelated to health needs.

According to Mr. Smith, the incidence of illnesses such as asthma and cancer is rising to a disturbing extent. And while it is recognized that developmental assessments are especially important for children from birth to age 3, several studies have documented that all too often young children are not assessed or diagnosed until they reach school. Even when assessments are done, a recent study found that one-third can't adequately identify early signs of disease and learning disabilities.

State resources are stretched thin

"Clearly state policy-makers must address these issues to improve the quality of health care for children," Mr. Smith wrote. "State resources, however, have been severely stretched during the recent economic downturn, forcing cutbacks in virtually every state program. From 2001 to 2004, every state initiated actions to slow the rate of growth in Medicaid spending. In this fiscal environment, states cannot afford to waste resources by paying for poor quality care or for care that is ineffective or unnecessary."

Despite their fiscal challenges, Mr. Smith and the state officials concluded, states are in key positions to affect children's health care as they bear primary responsibility for critical programs and services, especially Medicaid and SCHIP, but also mental health, public health, and education programs that significantly affect health and health care for young children.

Also, states are significant purchasers of health care due to the coverage they provide for state workers and their dependent children. Altogether, states administer health programs that serve about 100 million Americans, about half of whom are children.

"State governments... have unique opportunities to directly affect quality of care for children," Mr. Smith wrote. "As purchasers, states can also powerfully influence quality by defining expectations and incentives for improvements and by rewarding performance that meets these expectations."

While the federal government has an impact on quality through setting the rules under which states administer programs financed with federal funds, it generally is the states that administer and make key decisions about the programs.

"Without question," Mr. Smith says, "states today are in the best position, among all American entities and organizations, to influence young children's health and health care."

Because programs for children generally enjoy broad support among public policy-makers in both legislative and executive branches of state governments, it may be easier to build consensus around specific quality improvement strategies.

Potential strategies for promoting higher quality in children's health identified in Mr. Smith's conversation with state officials include:

Promoting a common vision for improving quality through conferences and programs of national advocacy organizations. Such efforts can reinforce the notion that quality is a priority.

Encouraging small changes in the right direction such as improving data systems, adopting reimbursement systems to reward higher quality, or incorporating measures of quality development by national standard-setting organizations into Medicaid, SCHIP, or state employee health plan contracts. Short-term goals can help states be laboratories for innovation and progress, Mr. Smith says, and demonstration projects can build expertise, develop capacity, foster new ideas, facilitate coalition and partnership relationships, demonstrate the impact of new approaches, and provide models for others.

Defining indicators of quality and performance that can be measured, since this is the key to quality improvement, although states often don't have expertise in development and use of quality measures and thus may need technical assistance that can come from work being done in other states to help ensure uniform measurements.

Developing reimbursement methodologies to encourage quality performance through incentive-based, pay-for-performance mechanisms that reward quality. States also can pursue partnerships with private sector organizations such as business groups that are pursuing quality improvement.

Making information about quality performance available to the public since providers, consumers, and policy-makers can use readily available data when making decisions.

Steering business to providers based on quality performance. Because managed care plans depend on new members to maintain enrollment levels, they are motivated to focus on quality measures that feed Medicaid enrollment including HEDIS or EPSDT measures that relate to children.

Educating parents by providing good information so they can make informed choices to help improve the quality of health care for their children. Parents with good information are better prepared to ask pertinent questions and be informed advocates. States can help provide information to parents through printed materials or telephone nurse hotlines and can encourage parents to take greater personal responsibility for ensuring quality health care. Mr. Smith says such efforts can result in appropriate self-treatment of minor medical issues, fewer unnecessary visits to the doctor or hospital emergency room, and improved adherence to medical recommendations.

Making the business case for quality, because its absence is seen as a significant obstacle to investment in quality improvement initiatives. A health care business case has to go beyond the strict definition of a financial return on investment (ROI) since clear, positive ROI evidence in health care is more often the exception rather than the rule. Mr. Smith says demonstrating a business case for children's health care may be even more difficult, requiring a less fragmented system of financing and delivery and a newly defined approach to providing excellent, family-centered care.

Involving the community as partners for moral and ethical reasons, rather than because of a valid business case, and because there may be opportunities to develop a coordinated local referral system and financing base.

Break down silos

Mr. Smith tells SHW that one of the key things that came out of his meeting with state officials was the realization that the various areas of state government tend to operate in isolation from each other and breaking down that isolation through collaboration could yield positive results.

"I think our discussions opened their eyes to the need to work across organizational lines," he says.

Because every state's situation and dynamics are different, the strategy that is most important in each state will vary. What they may have in common, however, is the need for a champion, a public official who has improvement of health care quality for children as a significant part of his or her agenda and wants to get something accomplished.

"If that kind of champion brings the right groups together and encourages them to share a common vision, they could make a real difference," Mr. Smith asserts.

Mr. Smith's conversation also identified what he says are considerable but not insurmountable challenges in improving health care quality, including challenges:

• in the health care delivery system since the current system's culture, traditions, and practice patterns may include incentives that encourage poor quality or inappropriate care such as use of hospital emergency rooms to provide non-urgent care. Mr. Smith says state officials have "powerful tools and assets" at their disposal to change such incentives, including using different reimbursement incentives, publishing and distributing performance results on key quality measures, using performance measures in purchasing decisions, and enforcing compliance with quality performance requirements.

• in financing since it is difficult for states to invest in quality improvements, particularly expensive information technology tools, in an environment of fiscal distress and budget shortfalls. Mr. Smith notes that while some quality improvement initiatives reduce costs, available studies often don't satisfy budget officials who demand evidence of fiscal impact to justify funding decisions. Additional documentation would go a long way in assisting state decision makers, he adds.

• of "silo" organizations, programs, and funding that often prevent states from taking full advantage of their market strength. Because restructuring existing systems would be very difficult. Mr. Smith suggests states seek to improve quality within the current organizational and funding systems. One approach could be creation of a cabinet position focused on children.

• of leadership so a champion is identified who sees the value and payoff of improving health care quality for young children and is able to communicate a way to turn that vision into action.

• of a short-term state policy focus, realizing that while what needs to be done may well take longer than a current legislative session, budget year, or term of office, policy-making often focuses on what can be achieved in the immediate future.

• of inadequate data and information systems, since quality improvement requires a benchmark for performance and data to document progress.

• of inadequate measures of quality for children, with the National Quality Forum pointing to a "paucity of child-relevant measures in widespread use and concluding that performance measures applicable to children are markedly underrepresented in the universe of national voluntary consensus standards."

"There's no underestimating these challenges," Mr. Smith tells SHW. He says the most important thing may be to recognize how long it will take to accomplish goals that are set and to find champions who are committed to getting something done even if it takes longer than the time they expect to be around.

"The priority should be to develop performance measures for key elements of state programs, generate the best data possible on those measures, share the results broadly, and use the data to reward good performance," Mr. Smith says. "Working with key policy-makers and officials will be of central importance, to encourage these leaders to become champions of the cause. State officials are more likely to realize improvements when they work across departmental lines collaboratively, with a focus on the health of the child rather than the individual program."

Mr. Smith says the feedback received so far on the issue brief has been positive, with some state officials even indicating a desire to move forward with some steps in their states.

"In the spectrum of health care issues, none has more broad support than health care for children," he says. "There's always a great interest in what can be done to make things better. The future of all health care is quality improvement for public purchasers. States have an obligation to get the best value, and they can't get the best value without good quality. Public officials are so stretched and stressed that focusing on something like this is a luxury for them, but when they do it, something good can happen."

[The brief is available from the Commonwealth Fund's web site at Contact Mr. Smith at (517) 482-9236 or e-mail him at]