Rep. Dick Woodbury of Yarmouth, an independent whose support of Democratic programs is considered critical given the close margins in the House, believes the state needs to phase out the subsidized insurance being offered under its Dirigo Health plan.
“What I thought it was going to be was a self-sustaining program once you got over the initial start-up period,” Woodbury said in an interview last week. “It’s not at all self sustaining and requires massive subsidies for a relatively small number of people.”
DirigoChoice – a state-subsidized Anthem-based insurance plan – was started with $53 million in one-time federal money. After a year in business, it now covers just over 9,000 people. To keep the program going in 2006, the state is going to assess a $43.7 million fee on insurance companies and the self-insured – assessments that will be repeated year after year.
“I don’t think it is financially sustainable the way it is right now,” said Woodbury, who is an economist with a doctorate degree from Harvard University and the co-chairman of the Taxation Committee – the only committee leadership position currently held by a non-Democrat.
Since Anthem offers a similar product, without the subsidies, Woodbury said, “There’s a way to sunset those subsidies or phase them out so everyone that’s in the Dirigo system just transitions into the market-based product.”
“Rather than pull the rug out arbitrarily, we could create a sunset that might be a year away, when the subsidy disappears,” Woodbury said. The state could then shift its focus from the Dirigo insurance program to fixing the Medicaid billing and payment system.
“We have more than 250,000 people on Medicaid,” he said, but “all our focus is on Dirigo” with just over 9,000 people enrolled.
The Dirigo insurance program was originally proposed as financially sustainable based on two funding sources. The state had hoped that as many as 15 percent of the enrollees would be Medicaid-eligible, and their employers would sign them up and pay part of the premium. With a two-to-one federal match of Medicaid expenditures on top of the employer-paid premium, these participants were expected to make Dirigo money. Instead only 1 percent of those enrolled were Medicaid-eligible in 2005.
The other idea was Dirigo would help insure some of the state’s 130,000 uninsured and therefore cut bad debt and charity care costs statewide. With just one-third to one-half of those enrolled having been previously uninsured, the bad debt and charity care savings for 2005 only amounted to $2.7 million. The other $41 million of the $43.7 million the bureau of insurance said was saved under Dirigo was attributed largely to voluntary spending caps at the state’s hospitals, but the entire amount is being assessed through the savings offset payment or fee.
“It is not the savings offset payment I had envisioned when this first passed,” said Woodbury. The bulk of savings is “a result of other stuff,” he said, and not generated by insuring the uninsured, which was the intent of the program.
Woodbury said Gov. John Baldacci could get rid of Dirigo insurance and still promote other aspects of his Dirigo Health legislation that called for controlling hospital costs and improving quality.
“The Dirigo initiative had a number of things going on – the insurance product, Quality Forum, the focus on certificate-of-need issues and facilities planning for the state. Those are all proceeding along in useful ways,” Woodbury said. “They have controversial aspects, but we all should be glad that those things are happening,” to bring the cost of healthcare down.
Baldacci, however, is sticking by Dirigo insurance and making it a hallmark of his re-election campaign.
In response to criticism from Republican Sen. Peter Mills, who is running for governor, Baldacci defended Dirigo last week and promoted a bill to block the insurance companies from passing on the saving offset assessment to their customers.
“Dirigo saves money. It didn’t cost money. That money belongs to the people,” Baldacci said. “We recognize it’s a startup. We’ll review it closely and make improvements like any other startup,” he said, but “we’re not going to go backwards.”
Mills outlined a “prescription to cure DirigoChoice”, calling Dirigo “a tiny and ineffectual program providing coverage to only 2,300 previously uninsured people. The product has become notorious because so many other Maine premium payers (650,000 of them) are now being taxed to benefit so few.”
Mills called for creating a voucher system that would go to income-qualified families, who would then go out and find their own insurance. He recommended a $14 million subsidy program, funded by state revenues, that would freeze enrollment at the 2005 level.
Mills also called for limiting enrollment in the voucher program to people who have been uninsured for six months or a year and who pass an asset test. He also called for allowing insurance carriers involved in the voucher program to impose a waiting period on pre-existing conditions for the previously uninsured, as is allowed now for non-subsidized care.
While Mills has been criticizing Dirigo since last year, Woodbury’s stand could raise some eyebrows in the House, where Democrats have only a one-vote lead over Republicans, with one Green Party member and three Unenrolled members, including him.
Woodbury believes he’s not alone.
“My gut reaction is the Republicans are unified in their belief that the current program is unsustainable and needs to be eliminated or changed and the Democrats are divided.
I think many Democrats realize that the program has become very expensive for a relatively small number of people and many are concerned.”
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