Everyone knows about the highs (more insured) and lows (higher costs) in the Massachusetts reform program, but there are other states that have their own reform plans, albeit much smaller. To create a health reform plan that will insure more Americans, improve quality, and lower health costs, Congress and policymakers must learn from successes and failures in state health reform programs.
One program they can learn from is the Healthy Indiana Plan (HIP), which is a Medicaid expansion program that is operating under a federal waiver that allows the state to cover the uninsured who don't qualify for Medicaid. Unlike the Massachusetts plan, which features an individual mandate that requires nearly all residents to have health insurance, Indiana's plan focuses instead on getting coverage to a needy population that isn't eligible for Medicaid.
Massachusetts has experienced growing pains as the individual mandate has brought previously uninsured people, many of whom had put off care, into insurance. But demanding nearly all buy health insurance has also allowed insurers to balance the costs of the more expensive members with healthier individuals who are paying into the system but not using many services.
In Indiana, HIP covered more than 35,000 previously uninsured individuals by the end of its first year. Many of these folks delayed medical care and preventive services before signing up for HIP.
Milliman recently released a review of the program's first year, which shows the dangers of health reform programs. One problem is anti-selection. Anti-selection relates to the highest-risk, most expensive people seeking healthcare care as soon as they get coverage, which brings higher health costs initially. The good news is that after these sicker people get the care they need their health costs decrease over the year—and healthier individuals come aboard within a few months.
Anyone creating a health reform plan must understand that the first year (especially the first few months) will bring in people with the most serious medical problems and who will require the most expensive medical care, says Rob Damler, FSA, MAAA, principal and consulting actuary at Milliman in Indianapolis.
Milliman compared Indiana's HIP population against the typical commercial population and found much higher inpatient services, ER visits, and pharmacy costs. Milliman discovered the HIP population was more likely to have chronic diseases, such as asthma, depression, and diabetes, than the typical commercial population. The first people to enroll in the program in the first few months had a higher morbidity rate.
Milliman's research found that inpatient, outpatient, pharmacy, and physician expenditures peaked around the second and third months and then decreased over the year. This shows that the sickest, previously uninsured Hoosiers jumped at the new offering and received care immediately. Those in better health waited until later in the year to join.
Milliman found that inpatient use decreased in the seventh to ninth months of enrollment, outpatient costs dropped after the third month, and pharmacy costs increased steadily in the first nine months.
Damler warns that any health reform plan should take into account anti-selection. He also suggests that an individual mandate, which is in place in Massachusetts and has been debated as part of federal health reform, would have brought a "broader cross-section" to HIP from the start. He suggests that any health reform plan would be "difficult to protect against anti-selection in insurance without the use of some type of mandates."
Damler says an individual mandate coupled with personal responsibility and spending "appropriate levels" at the initial periods are keys to health reform's success.
Mandates have been debated by federal lawmakers, but there has not been broad support for requiring health insurance for all Americans.
However, as the Milliman study shows, if you are going to bring the healthy into the health insurance pool, policymakers will need to find ways to woo them into the water. Without demanding they buy coverage, don't expect the healthy (especially the young and healthy) to dip their toes into the health insurance waters.