• WisBusiness

Monday, March 21, 2011

Good intentions, unrealistic expectations

By Dennis G. Smith
Over time, the state of Wisconsin has found itself wading deeper and deeper into the business of providing health insurance for our citizens. The downturn in the state’s economy has resulted in a record number of enrollees in the state’s BadgerCare suite of products – products that are meant to provide a safety net for low income families around the state to ensure they receive quality affordable health care as they work to improve their personal financial situation and obtain private insurance.

The underlying reason behind this rapid expansion over the last several years is commendable. However, the economic assumptions supporting the recent creation of the BadgerCare Plus Basic program were woefully unrealistic.

With a waiver from the Bush Administration, the state created the BadgerCare Plus Core Plan, a program for childless adults with an income of less than $21,780 for individuals, or $27,214 for a couple. This program was funded with a combination of federal and state funds through the state’s Medicaid program. When the Core Plan was created, the state was given the green light to begin enrolling Wisconsinites as long as the cost of providing these services remained fiscally neutral to the federal government. Put simply, the federal dollars available for this program were capped.

Last October, the Doyle Administration realized that they were at the tipping point of the federal cap and was forced to freeze enrollment resulting in the creation of a waiting list. To date, the waiting list for the Core Plan has more than 82,000 people signed up.

With federal funding fully utilized, the legislature and Governor Doyle created an alternative plan for the people on the waiting list – the BadgerCare Plus Basic Plan. To create this government run, private insurance option, the state exempted this insurance plan from the benefit mandates imposed on private insurance policies. Since there was no state funding available for the Basic Plan, the cost of the benefits needed to be fully covered by the premiums paid for by the members who choose to enroll in this plan.

Currently, a Basic Plan member pays a premium of $130 per month plus copayments for services. Enrollment in the Basic Plan has grown from 1,675 in July 2010, to current enrollment of 5,902 members. In return, as the plan’s name suggests, the Basic Plan provides more modest benefits compared to the Core Plan.

In just nine short months since this government run insurance plan was launched, spending on the Basic Plan has exceeded premium collections by more than $1 million, and this deficit does not include the traditional three month lag in medical claims that have yet to be processed and paid to providers for services that have already been provided.

Knowing that this program could not maintain short or long term solvency, the previous Administration began relying on a short term federal grant to plug the hole. They also tried to prolong the inevitable by moving more than 500 Basic Plan members to the state’s Medicaid plan, despite the fact that federal funding for that program had already been maxed-out.

So, where does that leave a state already facing an estimated $3.6 billion deficit over the next two years? Currently, the non-partisan Legislative Audit Bureau (LAB) is conducting an audit on the Basic Plan. The LAB audit is expected to be released later this spring and will contain a detailed program analysis with likely recommendations for program improvements.

As we wait for the audit results, it is clear that we must take the difficult steps to stop enrolling new members in the Basic Plan. When the State Legislature approved this program, it was clear that no state tax dollars could be used. In addition, if the Basic Plan is to remain at all viable for current enrollees, premiums will also need to be doubled, if not tripled.

Due to these actions, we will assist individuals on the waiting list and current Basic Plan participants who decide to leave the plan in finding alternative health coverage that may be available to these members through private coverage, the state’s high risk pools or COBRA policies.

While doing this, we must also take a moment to learn from the lessons of both the CORE and Basic plans. The intentions were good, but the design flaws in these plans made them predictably unsustainable from the onset.

Currently, there are more than 780,000 nondisabled children and adults who receive health insurance coverage from a variety of Wisconsin’s Public Insurance Programs, including BadgerCare Plus Standard, BadgerCare Plus Benchmark, BadgerCare Plus Core and BadgerCare Plus Basic. Among these various plans, participants at lower income levels are paying more for less coverage than others at higher incomes for more generous coverage, raising legitimate issues of fairness. Moreover, we should consider how our government health programs compare to private sector coverage that insures the majority of Wisconsinites.

It is troubling when public programs are created before the costs of promises are appropriately and accurately assessed. It is easy to create programs, expand eligibility, and add services if the cost can be pushed out into the future or shifted to someone else. The Core and Basic plans are certainly not the only examples of good intentions that created unrealistic expectations. The road to the new federal Patient Protection and Affordable Care Act (PPACA) is paved with similar unsustainable promises.

While we must take the difficult action of freezing enrollment and raising premiums in the Basic Plan now, this outcome was unfortunately predetermined from the very beginning of the program we inherited.

-- Smith is secretary of the Wisconsin Department of Health Services.


Comments: 4

At September 13, 2011 at 11:42 PM, Blogger Boyd J said...

These unrealistic expectations are what make the health care debate so difficult, anyway. All sides want to get the most out of the resolution, which is simply impossible. Compromises have to be made.

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