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CCH® BENEFITS — 12/17/08

State Health Care Reform Update

From Spencer's Benefits Reports: For the last few years, states have been leading the way toward more comprehensive health care coverage to ensure that more people have or can obtain health insurance. Because of the potential impact of this ongoing activity on employer-provided health insurance benefits, Spencer's Benefits Reports provides regular updates about state health care reform.

As the economy worsens, states’ fiscal problems are fueled by boosts in enrollment in Medicaid and State Children’s Health Insurance Programs (SCHIP). For example, in Utah, Medicaid enrollment is expected to grow by nearly 20,000 beneficiaries, or by 13%, by the end of the fiscal year. The state is estimating that it will need $14 million in supplemental funding. The story is the same in Kentucky, where the state has been experiencing record high enrollment of 3,000 per month in Medicaid, while the state faces a projected $456 million revenue shortfall. Nevada has capped enrollment in SCHIP, and California is considering doing the same, due to a potential budget shortfall of more than $28 billion.

Because of these problems, states are asking for a reauthorization and expansion of SCHIP and a temporary increase in the federal share of the joint federal-state Medicaid program. In 2007, Congress twice passed expansions of SCHIP, but both bills were vetoed by President George W. Bush. Congress did extend the program, but it must be reauthorized before it expires on March 31.

The National Governors Association (NGA) sent a letter to congressional leaders in October emphasizing that additional Medicaid money would allow states to “continue services for those with the greatest need.” The NGA believes an additional $20 billion per year for two years in federal funds for Medicaid would help states through this crisis. President-elect Barack Obama has promised that he will sign an economic stimulus bill that could exceed $500 billion, and state governors intend to ask for about $176 billion of that—$40 billion of which would bolster Medicaid.

Arizona. The Centers for Medicare and Medicaid Services will encourage seniors enrolled in Medicare who reside in the state store their medical histories on Google or other commercial Web sites, as a part of a government effort to improve health care. This pilot program allows patients to easily share their medical histories, which could help them if they switch doctors, pick up prescriptions, or get care at an emergency room. Arizona was selected for this program because it has a diverse mix of seniors and a split of rural and urban areas. Also, the state has made advanced health information technology a priority. The state’s Health-e Connection has established a goal that all doctors, hospitals, and other health care providers convert all medical records to digital form by 2010. A Medicare spokesman estimated that the one-year pilot program, which starts in January, will cost approximately $2.5 million in administrative costs.

Colorado. A decline in smoking rates in Colorado has led to a decline in cigarette tax revenue that is used, in part, to fund the state’s health insurance programs. In 2004, the state increased the cigarette tax by 64 cents per pack, which generated $169.6 million in the first year, but is expected to drop to $135.5 million for fiscal year 2012, a 20% drop before accounting for inflation. Approximately 46% of the cigarette tax revenue is used to expand enrollment in public health insurance programs, such as Medicaid and SCHIP. According to state senator Betty Boyd, “If the money falls off, that’s good and bad news. If the funds aren’t there, you can’t provide services [and] less kids will get services.”

New Jersey. A federal judge has dismissed New Jersey’s lawsuit against the Bush Administration over the Aug. 17, 2007, guidelines that threatened to limit the number of children eligible for FamilyCare, the state’s SCHIP program. U.S. District Judge Joel Pisano ruled that there was no reason for the court to intervene because the Bush Administration had not yet enforced the changes it proposed in August 2007. The Bush changes called for limiting the program to children in families with incomes not in excess of 250% of the federal poverty level (FPL). New Jersey had sought to expand coverage for children with family incomes up to 300% of FPL. The judge also noted that Governor Jon Corzine may negotiate with the Centers for Medicare and Medicaid Services, which controls federal funding for the SCHIP, if the federal agency decides to enforce the changes in the waning days of Mr. Bush’s term.

Oregon. A state task force has presented Gov. Ted Kulongoski with a health care reform plan that would provide health care coverage for more than 100,000 uninsured children and 100,000 more low-income adults during the next two years. If the plan is followed, proponents believe that more than 600,000 Oregonians now without health insurance would be covered by the Oregon Health Plan within five years. The plan is projected to cost between $5 million and $7 million, but the state faces nearly a $1 billion projected loss in revenue for its 2009-2011 budget.

Tennessee. TennCare, the state’s expanded Medicaid program, has asked that the courts grant it a suspension of a 20-year-old lawsuit that prevents the state from annually reevaluating approximately 180,000 beneficiaries who might no longer be eligible for coverage. Gov. Phil Bredesen has requested that all state agencies reduce spending by 15%, and TennCare officials are looking to cut $1 billion from the program. If about half of the beneficiaries protected by the suit are found to be ineligible, nearly $200 million could be saved. However, state justice officials said the lawsuit “simply requires the state to be fair and accurate in deciding whether to cut off TennCare to disabled and elderly people.”

Washington. The state Health Care Authority said that it will begin limiting enrollment in the Basic Health Plan, which is the state’s subsidized health care program that currently covers 105,000 low-income residents. This measure will be conducted over the next seven months and is expected to reduce enrollment by 7,700 beneficiaries. This is expected to save at least $6.7 million during the current fiscal year.

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