DIRIGO 'AT A CROSSROADS'
BY SUSAN M. COVER
Staff Writer Kennebec Journal & Morning Sentinel 09/22/2008

AUGUSTA -- When Rick Hughes got laid off from work, he lost his health insurance.

Hughes, 48, a diabetic, said he turned to the state's Dirigo Choice health insurance for coverage.

He pays $400 a month and has a $2,500 deductible. Most importantly for him, he has prescription drug coverage.

"Even if you have to pay the full amount yourself, it's still fairly decent insurance at a reasonable cost," said Hughes, who runs his own graphic and Web design business in Augusta.

Yet, five years after Gov. John Baldacci signed the Dirigo bill into law, the program has not covered anywhere near the number of people anticipated. It was promoted as a program that would cover 136,000 uninsured Mainers by 2009.

To date, it covers about 18,000 people, 6,000 of whom are part of the state's Medicaid program.

Recently, the program borrowed $20 million from the state General Fund -- which must be repaid with interest -- because of a cash flow issue.

Supporters say those sorts of problems with the current funding system, and court challenges to it, have made it difficult to expand coverage to more people.

Critics say it's time to shut the program down and try something else.

And the five-year anniversary of the law's passage brings a ballot measure that asks voters to repeal a new funding source: taxes on beer, wine, soda and other flavored drinks.

"Certainly, the Dirigo Health Program was well intentioned," said Tarren Bragdon, executive director of the Maine Heritage Policy Center, a conservative think tank in Portland. "Everyone wanted to cover the uninsured. In practice, it's been an expensive failure."

Supporters say the law, by taking a three-pronged approach -- quality, access and affordability -- has made strides in supplying health coverage.

"Even though we're not making as much progress as we'd like, we're doing better than many other states," said Christopher St. John, executive director of the Maine Center for Economic Policy, a liberal group based in Augusta.

In particular, St. John and others say the lesser-known parts of the Dirigo law -- an emphasis on quality, limits on new hospital buildings and expenditures, and a state health plan to guide decisions -- have improved the system in Maine.

But rather than a drop in premium costs, supporters say the program has led to smaller cost increases. The rate of uninsured has dropped from the highest in New England to the second-lowest since the inception of Dirigo.

For Dana Connors, president of the Maine State Chamber of Commerce, Dirigo is "at a crossroads."

Connors served as a member of the Dirigo board for three years before stepping down because he felt increasingly uncomfortable on the board. The Chamber was involved in lawsuits to challenge Dirigo funding and started to offer its own insurance plan.

And now, Connors serves as treasurer for Fed Up With Taxes, the coalition working to repeal the beverage taxes that would help bolster Dirigo.

He thinks Dirigo should continue, but said it needs a major overhaul, including a change in the funding source.

"It was extremely well-intentioned," he said. "Its problem today is it has underperformed."

In the beginning...

When Gov. John Baldacci signed the Dirigo Health bill into law in June 2003, many hoped it would be the answer to providing affordable health insurance to the 136,000 people in Maine who didn't have it.

It was projected the goal would be met five years after enrollment began, in July 2004.

But today, the programs covers only 18,000 people. And of those, 6,000 are taking part in a Medicaid expansion to allow low-income Maine parents to get health coverage along with their children. The other 12,000 are a mix of small businesses and individuals who signed up for the program.

Enrollment in the program was capped a year ago because of a lack of funding. There's now a waiting list of 1,300 people.

All along, critics have said the program has attracted people who already had coverage but who wanted to switch to Dirigo because it offers subsidies for those who meet income guidelines.

Trish Riley, a health policy expert who joined the Baldacci administration to work on Dirigo, said a decision was made early on to allow even those who were covered to join if they wanted to.

While she acknowledges the program hasn't covered nearly the number promised, she said it has laid the foundation for change.

Riley said the process in which the state approves major building additions at hospitals has resulted in a 17 percent drop in costs, more hospitals are working together, and the rate of uninsured has gone from the highest in New England to second-lowest.

Also, physicians and hospitals now meet regularly to discuss best practices and address problems such as hospital-acquired infections.

"If we could resolve this funding fight and get reliable, sustainable funding ... it would allow us to get the focus and the energy back on the broader reforms," she said.

Funding woes

From the start, how to fund the program proved difficult.

Hours and hours of negotiations involving hospitals, insurance companies, business leaders and state officials resulted in a compromise: the savings-offset payment.

The premise is that, by providing health insurance to more people, hospitals and insurance companies would see a drop in the cost of providing care to those who don't have insurance. Also, hospitals agreed to voluntary limits on expenditures.

Each year, the savings would be calculated and the money would be returned to the Dirigo program. Employers and employees share the cost of insurance, but the state does provide funding on a sliding scale to those with low incomes.

Early on, the insurance companies and business groups sued the state over the savings offset payment, saying it exceeded any actual savings.

The state has spent more than $1 million defending the calculation in court.

"The concept of the savings offset payment, trying to tap into the savings in the system overall, made great sense in theory but proved to be very difficult to put into practice," said Debra Lipson, a senior researcher at Mathematica Policy Research Inc., in Washington, D.C.

Lipson, who studied Dirigo last year, said high costs made Dirigo unaffordable for some small businesses. Maine, like many states, is struggling with how to fund a system that provides universal access to health care.

"Maine really did try and lead the way, to say it's a matter of redistributing the money in the system," she said. "How do you redistribute the money without goring someone's ox?"

On Tuesday, Maine Superintendent of Insurance Mila Kaufman will announce whether she agrees with the most recent estimation that Dirigo reforms resulted in $140 million in savings.

Nevertheless, the lawsuits, uncertainty and cash flow issues of the savings-offset payment have led lawmakers to try to find a new source of funding.

Funding repeal effort

The bill to make changes to Dirigo funding, and to institute new measures to try to get younger people to buy health insurance, originally proposed an increase in the cigarette tax to replace the savings-offset payment.

But a handful of Senate Democrats didn't support the idea, which led the bill to be amended while under consideration in the House and Senate.

The final result was a new law that instituted new taxes on beer, wine, soda and some flavored drinks. The "sin tax" concept is that these products contribute to poor health, including the growing problem of obesity, and that their sales should help contribute to funding the cost of health care.

In addition to 11 cents on a liter of soda, 16 cents on a six pack and 7 cents on a bottle of wine, the law institutes a 1.8 percent fee on claims. That fee would replace what is now charged, which averages about 2 percent, Riley said.

Almost immediately, the Maine State Chamber of Commerce and the beverage industry lobby launched a people's veto effort to gather signatures to try to get voters to overturn the law.

In November, voters will be asked: "Do you want to reject the parts of a new law that change the method of funding Maine's Dirigo Health Program through charging health insurance companies a fixed fee on paid claims and adding taxes to malt liquor, wine, and soft drinks?"

If the measure passes, the system for funding the program will revert to the savings-offset payment, and the effort to get younger people to buy insurance will not be funded.

The future

Health policy expert Kenneth Thorpe of Emory University in Atlanta gives Maine credit for trying to address the national problem of providing affordable health care.

He said that, in his mind, Dirigo should be considered a success because it has slowed the growth of costs, provided coverage for a large group of people and reduced the amount of money hospitals have to pay each year to provide services to those who don't have insurance.

"The one good thing Maine has done is try," he said. "They have not waited for a national solution to this issue."

Closer to home, Joe Ditre, executive director of Consumers for Affordable Health Care in Augusta, said the complicated program has proven difficult to explain.

"It really is a policy success and a public relations failure," he said.

Ditre admits weaknesses such as making coverage voluntary instead of mandatory, and a lack of funding.

It also wasn't properly marketed from the start, he said.

Bragdon, who served on an early Dirigo committee, said the state should pursue other options, such as allowing Mainers to purchase health insurance from companies in other states and creating a regional health plan.

"We need to have lots of different strategies," he said. "We need to try lots of different things and have the courage to say we had good intentions, it just didn't work out. There's no shame in that."

Yet those who use Dirigo, such as Hughes, say it's given them a good option.

"Starting my own business, I don't make a huge amount of money," he said. "Without it, I don't know what I would have done, to be honest."

Susan Cover -- 620-7015

scover@centralmaine.com

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