Charging Medicaid patients more causes problems

States looking to save money on Medicaid by adding or increasing premiums and implementing a copay structure may end up creating additional health and financial problems, according to results of an Oregon study.

“It’s kind of bad news in some ways,” lead researcher Bill Wright, a sociologist at Providence Health System Center for Outcomes Research and Education, tells State Health Watch. “If you look at the cost-share initiatives that Oregon implemented, there are consequences. Our findings send a message to state officials to look for other ways to save money such as drug plans and managed care because there are pretty stiff consequences when you use cost sharing.”

The Oregon study, funded by The Commonwealth Fund, is timely because many states and the federal government are looking at cost-sharing initiatives as a way to gain control over Medicaid costs. The study is based on actions taken in 2003 that increased premiums, reduced benefits, and implemented copays for a substantial portion of Oregon Health Plan (OHP) members. OHP also eliminated premium exemptions and instituted a six-month lockout policy for those who missed premium payments. In 2004, OHP rolled back some of the changes, eliminating copays and reintroducing some benefits.

“The survey findings so far suggest that even small changes to premiums, cost sharing, or benefit structures can have a dramatic effect on enrollment,” Mr. Wright says. “After the initial cost-sharing increases and benefit reductions, nearly two-thirds of individuals surveyed had lost their coverage, many as a direct result of the increased premiums and cost sharing. Those who left the program because of the premium and cost-sharing policies reported worse access to care, less primary care utilization, more emergency department utilization, and greater financial hardships than those who remained enrolled or left OHP for other reasons. Among those who left OHP and did not find other insurance, overall health status declined over the course of the study. The unemployed and those with very low incomes were hardest hit. All of these effects were evident 18 months after the initial policy changes. Analysis of gaps in coverage for those who left OHP suggest that the most severe impacts associated with loss of coverage may be reduced considerably if coverage is restored, or new coverage is found, within three to six months.”

State lawmakers said they hoped their plan to overhaul OHP in the face of a severe state financial crisis would permit them to maintain or even expand eligibility. They split OHP into two distinct benefit packages: OHP Plus and OHP Standard. OHP Plus was designed to serve the categorically eligible Medicaid population, including children, pregnant women, and parents receiving TANF, as well as the elderly and disabled. OHP Plus was spared benefit reductions and cost-sharing changes except for a $3 copayment for some services.

Those qualifying under the “expanded eligibility” of Oregon’s Section 1115 waiver were moved into OHP Standard, which covered poor adults not receiving TANF general assistance. It paired a slimmer benefits package with increased premiums and cost-sharing requirements, including:

1. a premium increase for couples, with new premiums ranging from $12 to $40 per month depending on income;
2. elimination of premium exemptions for the homeless, those with zero income, or those who experienced crime, domestic violence, natural disasters, or a death in the family;
3. more stringent administrative rules mandating a six-month lockout for missing a premium payment;
4. introduction of wide-ranging copayments for services and medications, ranging from $5 for an outpatient physician visit to $50 for a hospital emergency department visit and $250 for a hospital inpatient admission;
5. benefit reductions, including elimination of coverage for outpatient mental health and substance abuse benefits, durable medical equipment, dental, and vision.

Mr. Wright reports that the months after the initial program change were marked by a large decline in enrollment for OHP Standard. Slightly more than half of those surveyed who started out on OHP Standard remained continuously enrolled until the first survey six months later, compared with 87% of the OHP Plus group. Not only were OHP Standard members more likely to leave the plan, they also were less likely to find other coverage after they left. Some 28% of OHP Standard group members were without health insurance coverage for more than 12 of the 18-month study period, compared with 5% of OHP Plus members. Also, OHP Standard members were far more likely to be uninsured at the second survey (31%) than OHP members (9%).

All respondents who left OHP during the study were asked why they left. Mr. Wright says responses were collapsed into two categories — reasons related to the program redesign, which included not being able to afford the new premiums or copays, owing back premiums, or leaving because a benefit was lost, and other reasons, including income over the eligibility limit, finding other insurance, or paperwork problems.

Overall, 53% of those who left OHP Standard identified one or more reasons related to the program redesign when asked why they had lost coverage. Premium and cost-sharing reasons were much more important than benefit cuts as a reason for leaving OHP, suggesting, according to Mr. Wright, that affordability was the key driver of loss of coverage rather than the declining value of the benefit package. “Results suggest that the combination of higher premiums and cost-sharing increases was more important than any single policy change,” he says.

Reasons clear

Higher premiums and cost sharing were seen as particularly critical as a reason for leaving among the most economically vulnerable OHP members, according to the survey.

Among those who left OHP, the unemployed and those with extremely low incomes were far more likely to have done so for reasons related to increased premiums and cost sharing than their counterparts. Mr. Wright says this could reflect a combined effect of three specific policy changes: increased premiums, elimination of a zero-income exemption from premiums, and implementation of a six-month lockout for not paying premiums.

“Taken together,” he adds, “these three policy changes seem to have contributed to widespread loss of coverage among those with the fewest financial resources.”

The study used “unmet need” as its principal measure of access, defined as “needing health care but being unable to get it at some point in the past six months.” OHP Standard members who left the plan experienced significantly higher unmet need than those who remained continuously enrolled, if they experienced a coverage gap of more than three months.

“These results provide compelling evidence of the importance of insurance continuity in maintaining access to care,” the study said. “Short periods without insurance [three months or less] were not associated with increased unmet need, but coverage gaps of four months or more were. Moreover, unmet need was just as high among those who experienced a four-to-six-month coverage gap as it was for those with a much longer gap, suggesting that the negative impact of coverage loss on access to care occurs relatively early.”

To help assess the specific impact of policy changes on access to care, respondents who experienced unmet needs were asked why they had not been able to get care. Among those who remained continuously enrolled in OHP, 65% of those with unmet needs identified cost as the reason. Among those who left OHP, 89% of those with unmet needs reported cost as the reason.

Analysis of health care utilization took into account primary care visits and emergency department visits. Over the 18-month period, 86% of the OHP Standard members who were continuously enrolled had at least one primary care visit, but primary care utilization began to erode with coverage gaps of seven or more months. However, hospital emergency department utilization did not vary by coverage pattern. While loss of coverage itself was not associated with higher emergency department utilization, policy-related loss of coverage was. “When the reason that an individual left OHP is taken into consideration, it becomes clear that those who left due to the policy changes were significantly more likely to have used the hospital emergency department at least once during the study than those who left for other reasons,” the report concluded. “This again may suggest that those who left due to the policy changes represented a particularly vulnerable group of OHP members whose circumstances make emergency department use more likely.”

Actions reversed policy goal

Mr. Wright says the end result of increased premiums and cost-sharing paired with stringent administrative rules may have been to reverse one of the policy goals of an expanded Medicaid program—instead of the least needy members being transitioned into private insurance, the most needy were more likely to leave the system.

Increasing premiums and cost-sharing risks created a highly unstable, newly uninsured population with significant dependence on safety net providers and charity care in hospital emergency departments, according to Mr. Wright. Also, for those who leave, how long they remain uninsured is critical. Thus, negative access, utilization, and financial outcomes are minimal with very short coverage gaps, but all begin to appear with coverage gaps of three to six months.

Results suggest that access to care begins to erode and medical debt levels to rise after three months of uninsurance, while utilization of primary care starts to decline after six months without insurance. Coverage gaps of more than six months also were associated with declines in overall health for those who did not find other insurance.

“Given how quickly these impacts begin to take shape after coverage loss, there may be a need to re-examine use of a six-month lockout period like the one Oregon uses,” Mr. Wright notes. “If lockout periods are to be used, a much shorter lockout period may help to encourage payment of premiums without creating unmet need for care and damaging the financial situation of beneficiaries.”

Mr. Wright says attempts to redesign Medicaid systems must take into account the likely effects of redesign on individuals and systems. As policy-makers nationwide consider premium and cost sharing increases as a strategy for ensuring Medicaid solvency, he says, Oregon’s experience may hold important lessons on the potential impacts of such an approach.

Officials from many states have expressed interest in the findings, Mr. Wright tells State Health Watch, and Oregon officials are seriously considering some of the recommendations, such as not requiring premiums from lower income beneficiaries.

While his survey did not address the question of how much of an impact the changes had on uncompensated care, another researcher in his consortium has been looking into that issue.

Preliminary results from that study found a significant increase in uncompensated care in hospital emergency departments after implementation of the OHP cost sharing, Mr. Wright reports, and it appears to be associated with the 50,000 people who left the plan after the changes.

[Contact Mr. Wright at (503) 215-7184 or e-mail: bill.wright@providence.org.]