Trouble lurks as budgests rebound and state create new opportunities

The fifth State Coverage Initiatives’ State of the States report, summarizing state activities to expand health coverage through the past year, found that 2005 was “unfortunately, not much different from that of last year. Times still are difficult for states and for coverage in general. No progress has been made to address the uninsured in a comprehensive way at the national level, and the numbers keep on rising. But the silver lining is that state leaders continue to be creative in finding new opportunities to expand coverage.”

AcademyHealth State Coverage Initiatives director Alice Burton says although some state budgets are beginning to rebound, health care costs are a growing portion of state budgets and that many state policy-makers believe the solid budgets are unsustainable.

“State leaders recognize that their ability to fully address the problem of the uninsured is dependent on a federal partnership,” she says. “There does not appear to be a consensus on a comprehensive national solution to address the uninsured.”

Ms. Burton tells State Health Watch that analysts found no surprises in the 2005 report.

“This report continues the trend we’ve been seeing,” she says, “building on state activities from the last report.”

The theme of the report — Finding Their Own Way — pays tribute to the “creativity and persistence of state policy-makers to keep access to health care on the agenda and expand health insurance coverage. It summarizes strategies states are implementing or considering and their early experiences.”

While many state policy-makers are working toward a clear goal of increasing insurance coverage, although through many different ways, such as public expansions and market-based strategies, others are waiting for the policy window to open before trying to strengthen the safety net.

The report found the number of uninsured in the United States grew for the fourth year in a row, reaching an all-time high of 45.8 million people in 2004.

“Had public programs such as Medicaid and SCHIP not enrolled more individuals, the number would have been higher,” the analysts said, noting the “percent of individuals covered by their employers has declined to 68.1%, the lowest level since 2000.”

Care costs also are still on the rise, driven by high utilization of services and advances in technologies. The report said payers are beginning to focus on targeting the underlying drivers that will decrease costs over the long term.

Budget ‘ups and downs’

From a budget perspective, 2005 was a year of ups and downs for states. Financial conditions appeared to improve for many states, demonstrating a gradual recovery following years of intense fiscal stress. The recovery has been signaled by smaller budget shortfalls and stronger revenue growth than in recent years. But many states still face serious challenges, ranging from a backlog of expenditures and spending increases for many programs to the uncertain economic impact of the 2004 major hurricanes.

“And then there is Medicaid,” the report declared. “States have been aggressive in containing costs in the Medicaid program as it continues to be a growing portion of their budgets. They have focused on strategies that encourage more cost-effective use of services, but have also had to rely on more traditional methods that reduce eligibility, cut benefits, or reduce payments to providers. While some states cut benefits or eligibility, a few states, including Washington and Texas, were able to restore eligibility and benefit reductions from prior years.”

States developed new ideas for mandating coverage. Maryland passed legislation to require employers to pay their “fair share” and Massachusetts considered an individual mandate. Some states built on the purchasing power of large groups for lower cost, higher-quality coverage. Several examined the New York model for public reinsurance to make premiums more affordable. And Pennsylvania developed a partnership with the Blue Cross plans to fund coverage through the state’s adultBasic program. Maine, Oklahoma, New Mexico, and West Virginia implemented new coverage initiatives in 2005 and worked through start-up challenges.

Because of continuing budget challenges and the threat of federal changes to the program, many states have developed Medicaid reform proposals. States also have looked to community-based coverage strategies as a major part of efforts to address the ever-present dilemma of the uninsured.

Number of uninsured rising

The report’s section on Uninsurance in America said that while no one report card exists on how the United States is faring on health insurance coverage, it is clear the number of uninsured is rising.

“The reasons for the increase in the uninsured are complex,” analysts said, “including the state of the economy, the labor market, the cost of health care, and the availability of insurance in the private market and through public programs.”

The 2004 figure of 45.8 million uninsured represents 15.7% of the population, according to data from the Current Population Survey released last year.

The report cites an Urban Institute analysis of insurance coverage changes between 2000 and 2004 that found lack of insurance coverage is beginning to affect middle- and higher-income Americans. They found the number of uninsured nonelderly adults grew by more than 6 million between 2000 and 2004, with one-third of the growth in uninsurance occurring among those above 200% of the federal poverty level.

The decrease in employer-sponsored coverage is occurring across the states, with declines even in states with traditionally high levels of employer-sponsored insurance.

Statistics relating levels of uninsurance and underinsurance are important, the report said, because they attest to our nation’s health.

“There is a well-documented connection between insurance coverage and access to care and health,” the report said. “The uninsured are more likely to go without needed care and have poorer health outcomes than those with insurance. There is a cost to the nation as a whole for failing to address the number of uninsured — at least $35 billion in uncompensated care is absorbed by providers and ultimately results in higher costs for those with insurance.”

New challenges not yet clear

Looking ahead, Ms. Burton says it is unclear what challenges and opportunities will come in 2006 for state coverage efforts. She says it is clear there will be implications for states in the budget reconciliation bill that made Medicaid changes to save an anticipated $4.8 billion over five years. With budget reconciliation behind Congress, most people agree that further comprehensive federal action on coverage issues is unlikely.

States are expected to continue to grapple with their Medicaid programs as those budgets continue to consume more and more state funds.

“We are likely to see more far-reaching Medicaid reform proposals with enhanced flexibility provided under the federal budget reconciliation,” the report said. “The implementation of the Medicare Part D benefit is also of concern and will require states to become accustomed to a new set of protocols and may incur more costs.”

On a more positive note, Ms. Burton sees new state initiatives playing out this year. Massachusetts has come close to approving an individual mandate for coverage and a broader strategy to decrease the number of uninsured. And Illinois moved forward with its All Kids initiative to provide access to health insurance for all children.

States’ ability to sustain their programs depends largely on the constituency base that they build, and in measuring and demonstrating the ongoing success and impact of these initiatives.

“Getting from where we are now to where we want to be will depend on many things, including the nation’s economic situation and garnering political support to address the issue of the uninsured,” Ms. Burton concluded. “2006 will be a year of elections for many state governors. The election results may be a barometer, reflecting how the country will fare with respect to coverage. Looking onward to 2006, it is almost impossible to predict where roads will lead us. Some say it will get worse before it gets better.”

[Information on earlier reports and analyses is in previous issues of State Health Watch. Contact Ms. Burton at (202) 292-6733. The report is available from AcademyHealth on-line at]