Sponsored by The Robert Wood Johnson Foundation's State Coverage Initiatives Program
Conducted by AcademyHealth

Q: By looking at New Mexico's program, I would assume that a 20 year-old and a 60 year-old (in the same federal poverty level) would pay the same amount out-of-pocket. Are you concerned about adverse selection? If so, how do you propose to deal with it? Can you put pre-existing conditions into the policy or do some sort of underwriting? If you can do those things, would that be legal under the waiver?

A: [Maruca] You are right, in our model a 60 year-old individual and a 25 year-old individual will pay the same share. We have discussed the issue of preexisting conditions; we have not made any decisions around it. That is something that we are going to have to look at. We have looked at this from an actuarial perspective and looking at our cost, it is based on that population that stretches from 21 to 64. Clearly, it will cost less to insure younger opposed to older individuals. We are going on average cost and the cost of the program will be the cost of covering everyone in the program within that spectrum.

Q: Hawaii is looking at things very similar to those that New Mexico mentioned. I am interested in your comments on the impact of the uninsured on employers and hospitals; you had hoped that there may be sources of funds there. Can you expand a little bit on that and how you plan to work with employers and hospitals?

A: [Maruca] Yes, there are a number of sources. We have programs right now within state government in our Department of Health and Department of Children, Youth and Families. In New Mexico, the Medicaid program falls under the Department of Human Services, but we also have a Department of Health and a Department of Youth and Families that provide health care for people that are not insured under Medicaid. And on our committees, we have involved people from Children, Youth and Families and the Department of Health. So, as we pick up some of these other populations under the waiver, we believe there will be state funds that are currently being spent on health care that would be transferred from those other departments to the Department of Human Services. Clearly that may be an issue, since any department that has money does not want to give up those funds. But we do have to approach this as how we take care of the state's population as a whole and what is the best for it as a whole.

Many counties also have funds that are provided from recipients through a county indigent fund and are used to take care of these people right now. Those counties may have to spend less or give those hospitals less money, but it is likely that the hospitals' bills will go down as a result of these efforts. We would like to see some of that money either transferred from the public hospital or from the county to the state so that it could also be matched and in a way become state money. That is going to be difficult to do, but that is part of our task. We do feel that there is money out there, right now, being spent on these individuals that will not have to be spent.

Q: In New Mexico, knowing that you have actuarial projections still to come in, what are your initial thoughts on the restrictions on benefit packages in your proposal, specifically your hospital and pharmacy benefits. What are you anticipating that you will propose?

A: [Maruca] In terms of hospital benefits, we will probably have to implement a maximum expenditure cap: a limit on what can be spent in a given year. We have looked at that, as well as copays on a sliding scale. The information that we are getting back, however, is really varied so I cannot answer that too specifically right now. We do think that we can create a program with copays that people will want to participate in. We want to keep the cost down as much as we can. We will have to make some tradeoffs in regards to what copays and premiums are versus the total cost of the program. That is part of the actuarial work that is still being done.

A: [Crawford] In Oregon, we will have higher levels of copays than New Mexico is considering, but our assessment at this point is that copays are not going to determine whether or not someone will participate in the program. We have spoken with the actuary about how to adjust for adverse selection which will come from the way that we structure our premiums. Basically we have not gotten any good answers. We are not certain that there is any good data on how to model for a low-income population. So, instead of trying to go through and restructure our costs and determine how our per member per month (pmpm) costs will change as a result of adverse selection, we will treat it as a management issue. We are proposing to go forward with a program that has some flexibility with the benefit package, enrollment cap and expansion populations. We will deal with adverse selection by exercising that management flexibility.

A: [Maruca] We certainly agree with Oregon that it is more important to keep premiums at $50 and $25; we think that is what will sell the program, not a $150 or $250 copay for a hospitalization or $10 or $15 for an outpatient visit. We think it will be the premiums that determine whether someone will participate or not.

Q: When Oregon developed its copays and tiers, did it use analytical studies on a continual basis to shape these policies? Also, did Oregon conduct modeling to see how these plans would work?

A: [Crawford] In terms of copays and cost sharing requirements, we started with a lot of data on the individuals that are currently covered under our expansion populations (under 100% FPL). We looked at where they were in the income strata, what diagnoses they had, and how those changed with respect to income. One thing that surprised us was where people with HIV and AIDS clustered in the income strata. We had assumed that they would cluster down around the lower end of our eligibility bracket, but in fact, they did not. Our cut off is 100% FPL and they were clustered right around 80-90 percent of poverty. We realized that we were probably working with a population that has the ability to work, but because they need health care coverage, they adjust their income so that they qualify for our program.

In the end, however, the copay negotiations were very much of a political process. It was a public process; the recommendation was made by a group that included advocates, legislators, providers, as well as representatives of providers, managed care plans, and insurers in the state. We came up with a series of recommendations that no one is fully supportive of, but that no one hated enough to fully walk away from the table.

A: [Maruca] In New Mexico, our process was very much open. We had advocates, providers, consumers, and managed care organizations at the table. When we looked at copays, there was an incredible amount of pressure not to have them or to set them at $2-$3. We did not think that was reasonable. Instead, we looked at the products currently on the market and tried to make our program similar to some of the commercial packages. If you look at the HIFA criteria, they seem to ask you to look at the standardized commercial plans out there. In this way, our model follows the programs that are out there, except that we have sliding copays based on percentage of poverty.

We also had some state legislators on our committee and I think that has turned out to be a very good move on our part to have them involved in moving it politically.

Q: In Rhode Island, as in many other states, we are moving to employer-based coverage through premium assistance programs or buy-ins. Is Oregon going to try and leverage the employer contribution to maximize your federal reimbursement?

A: [Crawford] Oregon is pretty certain that we cannot get match on the employer contribution, and we are not asking for that. But what we will be asking for match on is the state share of the cost to enroll someone in employer-based insurance.

Q: In New Mexico, you are doing almost a reverse buy-in. You also have a lot of small employers that don't offer coverage. One of the questions that came up in Idaho from a couple of insurance folks was the HIPAA requirement for coverage equivalency. If you have a small employer with 15 employees, six of them may qualify under your waiver for a Medicaid subsidy. Could that employer buy into this coverage model for the rest of the employees if they pay the full cost? How are you going to handle some of an employer's employees having coverage and others not?

A: [Maruca] That is something that we have to look at. Right now, you either qualify or you don't. We do not have a mechanism in our plan for the employer to buy in for employees that don't meet 200% of eligibility. I do think, though, that it will make employers think harder about their higher income employees and motivate them to try and find a better plan or some sort of coverage for them too.

Q: Where does the $50 figure for employers in New Mexico's plan come from? Is that just a plug figure or have you done some work with employers to try and figure out what the limit is for what you can get from them?

A: [Maruca] We went around the state and had open forums and talked to employers. $50 seemed to be an amount that they were willing to pay. We did not want to go too high that employers would not participate, but on the other hand, we did not want to go so low that we did not get as much as we could.

Q: In order to put these programs in place, there is a certain administrative cost. Do you have a sense at all of the cost offset versus your savings?

A: [Kitchens] I would say that Florida's return on investment is up to almost 10 to 1 for every dollar that it has spent. That would include both the prior authorization process and contracting for the rebate negotiations.

A: [Susman] In terms of counter-detailing programs, I think Merck/Medco has done one and they have seen about a 3-4% move from brand to generics, which is a fairly significant return. In terms of our cost, we will spend close $100,000 for the West Virginia share. Again, if we can save 1% among all states involved, that is worth $1 million and I think we will save more than that.

Q: Arkansas and other states are trying to follow your lead in figuring out ways to manage pharmaceuticals. We have several companies coming and offering to help us manage our drug benefit programs for "x" or "y" disease. You are showing results that are very enticing on the balance sheet. But are they providing an objective strategy for pharmaceutical management? Even if everything is equal, are they still routing patients to their own company's drugs?

A: [Kitchens] One of the basic components of Florida's program is that it is an unconditional guarantee. It is a $33 million, two-year deal and we use a third party to establish the study design and the outcomes and savings. At the end of our fiscal year, we will do a report. And say if the first year is worth $18 million and their savings only show $9 million, Pfizer will need to write us a check for the difference. Often, when I bring up the unconditional guarantee, the conversations with these companies stop.

Q: In Arkansas, we had a company come in and their informational materials happened not to include all of the generics. If our physicians group had not looked at that, it would have been a smooth sailing proposal since the cost issues looked so advantageous to the state. Has this been a problem and how do you organize your review teams so it does not happen?

A: [Kitchens] Florida reads and reviews any materials that come out. We are cognizant that this is something to watch out for. Good care is more important than promoting a particular product.