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Final Summary of Proceedings
of
the 2003 Spring Meeting
of
the Health Chairs Project

On June 6-8, 2003 28 chairs of state health committees and fiscal subcomittees dealing with health matters met in Washington, DC for the spring meeting of the Health Chairs Project. This continues a series of annual meetings designed to foster direct dialogue and seed relationships between state health committee chairs and national health policy leaders. In a variation on past meetings, which showcased federal agencies, this year's session also brought in leaders of major private organizations involved in health policy development, including national philanthropic organizations and interest groups. The co-convenors of this year's meeting were the Institutes of Medicine (IOM) and the Henry J. Kaiser Family Foundation.

The event was organized primarily around the IOM's recent report, Fostering Rapid Advances in Health Care (the "Rapid Report"), which proposes that states provide the leadership and venue for demonstrations in a number of areas, "as a way to initiate a 'building block' approach to health system change."

This special issue of the Health Chairs Bulletin summarizes key presentations and discussions over the three-day program.

Janet Corrigan, Director, IOM Board on Health Care Services, welcomed the Chairs to a day at the IOM. The IOM is a 501(c )3, not part of the federal government but a unique entity chartered to conduct studies, advise the federal government and convene expert panels. Recent IOM activities include reports on quality and safety, and a continuing series on access and delivery systems.

The Rapid Report has a strong message for state governments: The federal government is looking for state-level leadership to reform the health care delivery system. The report originated from a conversation with Department of Health and Human Services (DHHS) Secretary Tommy Thompson, who requested a portfolio of demonstration projects that could inform broader reform initiatives. The committee evolved into a bottom-up strategy of health care reform.

Several themes run through the projects:

1) Strong state leadership, public and private partnerships, regulatory and financing flexibility, and collaboration between the federal government and states.

2) Population as well as individual health: health behavior as well as delivery system change; more inclusive and equitable care.

3) Building a 21^st century health information technology sector.

The Rapid Report committee recommended demonstrations in five areas: chronic care; improved primary care; access to affordable coverage; modern information technology; and new approaches to the medical malpractice crisis.

[See slides]

The Rapid Report recommended federal funding of three to five state health insurance (HI) demonstrations. States would be challenged to propose comprehensive strategies to cover all of their residents. DHHS could issue an RFP to states, laying out options to test: (1) tax credits for purchasing coverage; (2) expanded eligibility for public programs; and (3) a combination of the two.

The committee recommend a 10-year funding commitment, so that the demonstrations would have a long enough time to be fully tested. The goal would be nearly universal coverage designed for "right care at the right time." The state demos would aim to reduce waste and inefficiency through science-based design, authorization of payments, reduced transaction costs and public-private partnerships. Example: electronic enrollment in which a clearinghouse would pool information in a single electronic resource that all could use to check for coverage, identify who was not covered, and help people through an electronic application process.

According to Dr. Davis, states that want to move that ambitious recommendation forward should "give the word" to Washington that they are interested in this proposal and push for federal funding of three to five demonstrations. What states can do now: maintain coverage for the insured; enroll eligible children; establish electronic clearinghouses to streamline enrollment in public programs; expand coverage to parents of SCHIP children; use SCHIP and Medicaid to leverage employer-sponsored coverage; create mechanisms for small employer coverage and individual coverage; and use expansions to leverage quality improvement.

Dr. Davis reviewed innovations in Minnesota, Georgia, New York, New Jersey and Rhode Island. New York's experiment with stop-loss for small firms was described in more detail during the Q&A in response to chairs' interest.

[See slides]

Dr. Lambrew emphasized problems and small incremental steps that could increase coverage for four groups: young adults, people approaching retirement, people with high costs or risks, and people without access to job-based coverage. She presented details of current thinking and estimates of costs for such things as: extending SCHIP to young adults; changing the definition of "dependent" for parents to make coverage more available for non-student young adults; extending various programs to make transitional coverage more available for people losing jobs or moving between jobs; and creating more continuity between private and public programs by pooling funds in various ways.

During the question and answer [speakers' comments italicized] period, chairs asked about the following issues:

• Medicaid waiver authority, cost neutrality, HIFA waivers and the implications of current changes. Can cost-neutrality be determined across Medicare and Medicaid together?
• The interaction of insurance and public programs: How can Medicaid be made more like insurance and less like a "gold card." Populations above and below the poverty level have different needs. The insurance model has worked in SCHIP.
• There is a high cost to not insuring and to switching coverage. There is waste and inefficiency as a result of lack of coordination in care. The IOM report released June 17 addresses the cost of not having insurance to individuals and communities.
• Are uninsured workers not offered, or not taking up coverage? Results are not in. Many may not be offered even though they are in offering firms-part time workers or new hires. High dependent coverage costs may be an emerging issue.
• What can the private sector do? Will pulling people from the insurance pool into other programs leave higher premiums for those remaining? How do we move towards more universal coverage without adding to public programs? Different approaches may apply to different groups of uninsured. There seems to be a consensus on public programs for the youngest, oldest and sickest. How best to cover those in the middle is the focus of the political debate.
• Are very low-price and low-benefit policies really insurance? First-dollar coverage for prevention and primary care for the very low income is desirable. Lack of prenatal care is most troubling.
• Can states go it alone? Hawaii did, but it has no neighboring states and its action predated ERISA. Canada started in individual provinces. States with a high underlying level of insurance (MN, RI) have the best chance because there is less of a gap for other payers to fill. To make coverage expansions stable in the long run, you have to have federal resources because of states' different tax bases. The IOM committee did a 'back of the envelope' estimate and suggests that demonstrations in three to five states for ten years would cost about $50 billion in new federal funds to the states.
• What model from around the world would you adopt? Whatever works. We can't import anything wholesale, we'll have to make our own.

Gilmartin views Merck's primary role as a company to discover new medicines, and promotes three principles: (1) Health care is not a commodity. There are wide variations in quality, and increasing quality reduces cost. (2) Drive competition and reduce costs with appropriate use of generics and formularies. Utilization review programs and looking for overlaps improve quality. (3) Engage with health care debate to close the gap for the uninsured. Merck believes the state level is very important.

Chairs asked Gilmartin to comment on the following issues:

• AMA code of conduct and guidelines for prescribing
• Constituents having problems with high cost of drugs and wide variation in cost for drugs that do the same thing. Can formularies be part of making the pharmaceutical marketplace a price competitive environment?
• Price controlling preferred drug lists. Pharmacy benefit management is preferable because it is sensitive to individuals' health differences.

Gilmartin was also asked about his view of carve-out groups; reasons for lower prices in other countries; states joining together in purchasing groups; Merck's past opposition to a Medicare prescription drug benefit; role of pharmaceutical companies in disease management; and patent extensions versus generic drugs.

Two top priorities for AARP are (1) opposing lump-sum allotment in Medicaid and (2) Medicare drug coverage. The group is also worked hard for state fiscal relief. Other AARP health initiatives include prevention continuum, including voluntary programs: 10,000 step program to get people moving, peer support in physical activities, intergenerational outreach in community service, work with state attorneys general on elder abuse. In long-term care AARP is active on nursing home quality and safety at the state level and home- and community-based care.

AARP has replaced volunteers with state-level professional staff. Chairs suggested that AARP could educate its members as consumers to demand quality and safety improvements such as computerized order entry and encourage members to purchase long-term care insurance. There was discussion about differences between consumer and producer lobbying activities and relationships with legislators.

[See Diane Rowland's slides]

[See Vern Smith's slides]

The presentations stressed the importance of dually eligible (Medicaid and Medicare) enrollees such as the elderly and disabled in the Medicaid program. Pharmaceutical costs continue to be a cost driver, with hospital costs-especially for outpatient services--emerging as a factor as well. Medicaid growth remains high and states are trying all possible strategies.

During the question and answer period, chairs raised the following issues:

• How to distinguish between cost cutting and cost-effective changes [versus making politically expedient choices.] There is no one best approach due to state-to-state differences. Every cut has consequences because Medicaid already pays only for necessary care. For example, loss of adult dental-often the first to get cut-affects employability of welfare-to-work populations and results in emergency room visits for dental care. Studies show that reduced access to pharmaceuticals in an ambulatory setting results in greater institutionalization of fragile populations.
• Alternatives to managed care: Are there any effective experiences in managed care for the adult disabled? Are there any new ideas for public-private partnerships and new delivery methods? How about primary care case management (PCCM) as something administratively leaner than HMOs? States are trying to create more coordinated delivery systems with such things as disease management and care management. But coordinated care will be more costly if unmet needs are filled. HIFA is encouraging states to strike out in new directions. PCCM is effective in some states-TX,AR, MA, NC.
• TennCare has been a success in that it has lowered uninsurance in Tennessee. But financing is an issue, especially when the economy falls, and no other state has used this model.
• Other issues raised include the use of consolidated data bases and implications for HIPAA privacy; risks of Medicaid buy-ins; cost shifting from Medicaid to providers and thus other payers, and the interaction of Medicaid and the Indian Health Service.

Diane Rowland, Moderator; Joy Johnson Wilson, NCSL; Matt Salo, National Governors' Association; Becky Schipp, Majority Staff Senate Finance Committee; Kate Kirchgraber, Minority Staff, Senate Finance Committee; Patrick Morrisey, Majority Staff House Energy and Commerce Committee; Bridgett Taylor, Minority Staff House Energy and Commerce Committee.

The round table discussed the National Governors' Association's efforts to develop a proposal, the importance of changes in the treatment of dual eligibles, the interaction of Medicaid policy and funding for the uninsured, and the implications of budget neutrality for states. Congressional staffers indicated that Medicaid was in the limelight because it had overtaken Medicare in cost, but that Congress was inclined to blame states for these increases and wanted to reduce intergovernmental transfers (IGT), disproportionate share hospital (DSH) payments and Medicaid maximization efforts. Discretion through waivers - now 25% of Medicaid spending --may undermine Congress' confidence in Medicaid. One debate now is about the economic stimulus effect of Medicaid spending and how to handle economic downturns. The prescription drug benefit may interact with Medicaid, depending on how it is structured. There is disagreement about what flexibility means.

Chairs responded by underscoring the importance of long term care and the disabled in Medicaid spending. These services and groups are inherently costly, leading to high cost to government at the same time they create high costs and impacts for individuals. Government has less control where there are the most cost increases, due to medical advances. People in many categories are living twice as long as they did 35 years ago when Medicaid was created. Several chairs noted they wished they had more discretion to keep people with assets from divesting to obtain Medicaid long-term care services.

[See slides]

About half of all people in the country have a chronic illness. Chronic illnesses usually plague us more than a year, interfere with what we do on a daily basis, and require constant care that costs a lot to the system. Most important for legislators, they cost so much. Nationally, we spend about $1 trillion a year, 75% for chronic illness care! If we could improve the care for people with chronic illness we could rapidly decrease costs and improve care.

The chronic care model calls for:

• A strong community base with programs within the community to support the patient's needs, and information to empower the community.
• Health care systems that set chronic care as a priority, and make a long-term commitment to developing models for chronic care.
• Patients or consumers who are informed and active care team members, able to manage their own care, and plan for preventive and proactive care.
• Health care providers who build proactive interventions (reminder postcards for eye, and feet check for example) into the care plan.
• Treatment decisions supported by state-of-the-art evidence, raising flags if care is not good quality. This requires an information system, including patient registry, to monitor whether patients being treated in a timely and appropriate manner.

The model is now being implemented in about 700 federally funded clinics, with some powerful results.

During the question and answer period, chairs raised the following issues:

• Payment structures often don't support doing the right thing. What does the model do for that? "Rewarding results" is an attempt to study rewards and disincentives, including non-financial factors. Capitating certain parts of the model makes great sense. Different incentives may work, even recognition and nonmonetary prizes for implementing parts of the system.
• The model makes sense, but what can legislators do to make it happen?
  Small demonstration can catalyze actions, such as creating registries. This can be relatively inexpensive. Awards and prizes recognize excellence in outpatient settings and generate competition and interest. Legislators can convene people to design this kind of system, getting them out of the silos to develop new systems of care.
• How do you motivate individuals to take continuing responsibility for their own health? Link knowledge to outcomes, not only for clinicians but patients, choosing an outcome that is important to the person involved. Community and personal networks-which the patient encounters day in and day out-- support change. For example, restaurants with heart- friendly diet items marked and grocery stores with sections for low-fat, low carbohydrate foods make it easier to live a healthy diet day in and day out, and link public health and health care.
• What are the institutional and legal barriers to the use of this model? How can we continue to influence providers? Once patients "age out" of public funding (for example, children with disabilities), doctors are not proactive in following up even if patients have chronic disease. Technical and human factors inhibit sharing information. Medical records systems don't talk together well and changes must be consistent with HIPAA privacy. A bigger issue: health plans and hospitals are often competitors, not cooperators.
• Other questions: Who integrates the chronic care model? How can legislators influence the medical professions and associations, and what is RWJF doing? What are medical schools doing to move this along?
• Chairs described successes in their states in using recognition as an incentive, in promoting the model in mental health delivery, and in convening competitors to solve problems.

[See slides]

The medium was the message in Dr. Coye's presentation, which she gave via videoconference from the West Coast. Understanding trends can help policy-makers make sense of an avalanche of change. Three that Coye identified: 24/7 access to health care driven by devices to monitor and communicate with patients in the home; new quality requirements shift care "upstream" to an earlier stage; and new technologies such as minimally invasive surgery that will lead to difficult choices for funders.

Coye concluded with three slides outlining steps that state agencies could take to prepare and policy options to manage rapid change.

During the question and answer period, chairs raised the following issues:

• Do certificate of need (CON) boards create barriers to technology? Traditional CON is not equipped to do so. On the other hand, there needs to be some kind of public agency that understands costs/benefits, especially for expensive and rapidly outdated technology, or costs could go through the roof. Without an early warning system and process traditional CON may not do this, but we have to make better health care investments.
• How do you deal with new technologies with high potential benefits and [known] long-term risks, such as total body scans?
  First, better post-market tracking in the future will improve our ability to collect information and follow consequences of new technologies. There is also a role for public education about risks as well as benefits, from a neutral source.
• Chairs discussed current actions in their states, including zero-interest loans and grants to providers for certain technologies in Massachusetts and a cutting-edge program using videophone to manage some high-risk, chronically ill populations in Iowa.

Broder asked the chairs to discuss their concerns. Several commented about the interconnected nature of problems they confront and the need for systemic change. Chairs spoke about:

• Rapidly escalating Medicaid costs and revenue shortfalls. Changes require federal waivers with unpredictable results.
• The federal focus has been on limiting expansion populations, but that isn't where the cost increases are coming from. States are experiencing big cost increases for the elderly and disabled, people who can't be taken off the program. There are no effective cost controls for these groups.
• [In a state with a high level of uninsured,] cutting Medicaid eligibility and payments results in a cost shift and private premiums rise. Because of the connection between Medicaid, the uninsured and the insured, many states use Medicaid as a springboard for innovative approaches to cover the uninsured. No amount of flexibility can compensate for the loss of a generous federal financial match.

• Underlying medical inflation is driving costs for all payers. Medicaid gets attention because legislatures pay for it, but it is getting serious for business, too, affecting their constituents. Government program cost shifting in the name of budget control can push the private financing system into collapse.
• People don't understand the cost of health care, they think drugs cost $5, and complain when co-pays rise. Managed care, with first dollar coverage, insulates people from incentives to change and they over-utilize the system. Medical savings accounts are a step in the right direction.
• Tracking hospital data led one state to identify a large number of medical errors and $135 million in additional costs as a result of the errors. This information may be used to challenge the health professions. Change in how they provide care are needed to complement public policy changes.
• Job lock is alive and well in families with chronically ill members. Non-insuring companies segment the market and leave a sicker pool for other employers to cover.

• Health care is a political issue. There is no consensus on an approach to solving the problem. Health is not the most important issue in every district. In some, education is more important as costs have been accelerating even more rapidly there.
• [A Midwestern state which is] grass-roots in ideology and perspective accepts health care for everyone as a principle, but with caveats and conditions. There has to be consumer accountability and responsibility. People don't mind taxes for legitimate, accountable government services, but strongly prefer public-private models to reach the objectives. Quality improvement and stringent discipline in measuring the effect of activities vs. their cost are needed.
• [A poor state with an older population] has focused on prevention for its public employees to address obesity. Businesses are coming to the table as they understand how the cost of the uninsured is affecting them.

• Although there is agreement on a need for more consumer responsibility, when budgets are tight prevention and health education are cut, while reimbursement for the most expensive care survives. Government funding creates these perverse incentives in the system.
• A chair from New England expressed concern that health care would be offered as a free good to voters, then turn into an unfunded mandate to states as happened with education for children with developmental disabilities.
• A legislator from a state with low levels of uninsured said that federal programs should give states options and allow demonstrations. States are unique in populations and needs, and even within a state consensus is hard to reach. States should accept the money and the opportunity to experiment [through proposed Medicaid block grants], rather than looking to a federal solution.

[See Slides]

We are trying to build an evidence base for many decisions legislators must make: 'how do we close the gap? What is the best value for what we spend?' Health care decisions depend on resources, values, and evidence. Evidence reduces uncertainty. The research is particularly important because the population is aging and new technologies are coming on line. Without evidence, patients and professionals may have unreasonable expectations.

Clancy invited the chairs to tell the agency what information they needed for policy.

Policymakers need evidence when they face decisions such as what to fund and where to locate services. They need to understand how volume relates to improved outcomes. Individuals want more information to help them choose among options. Many studies only show that services benefit some and not others; it often takes larger studies to predict who will benefit.

A slide on the roles of government in health care quality (purchaser; provider; assure access; monitor quality; regulate markets; inform health decision-makers; support knowledge acquisition, development of technologies, and workforce; and convene stakeholders) led to a lively discussion as chairs asked how to bring the quality assessment down to the state level. Health chairs asked:

• What content areas are covered? Does AHRQ deal with mental health?
• What are the data on the cost effects of medical errors?
  AHRQ has a huge portfolio on this, invites case studies and seeks to bring doctors together on the web to learn from one another.
• What legislation is there about medical records and information system issues? What are the efforts to develop national standards for a paperless system?
• Chairs asked whether studies had yielded evidence on some practices they were proposing or seeking to limit: Preferred drug lists; therapeutic class limitations; direct-to-consumer advertising; providing consumers value information such as comparisons among brands within a class-for example, Claritin vs. Benadryl; therapeutic impact of differential pricing. A relatively short list of drugs is driving costs, and AHRQ has some studies that states may want to use.
• Chairs asked about evidence on issues that their constituents are concerned about: hormone replacement therapy, overuse of antibiotics in animal feed; relationship of mercury and autism; serotonin and ADHD; communication problems with foreign-born medical doctors.
• What can state legislators do to influence the health care system in our state to use results of studies in their clinical practice? Is this information being built into medical school curricula and training? It isn't always a knowledge problem; the Duke incident, for example, was a system problem. We underestimate how important it is to know what does NOT work...How local does information need to be? How much regional difference is there?
• I would like to continue the dialogue; states have important roles to play. It is a challenge to get input from potential audiences. How can we get the information to you in a way that is most useful? NCSL and AHRQ should work on this together.

Some points made in the discussion:

• The Supreme Court decision and Maine law are part of a larger debate about drug laws and payments for drugs.
• The pharmaceutical industry has three priorities: 1) intellectual property rights, exclusivity of discoveries and products; 2) market access; and 3) avoiding price regulation. Price is the bottom of the hierarchy of values. Manufacturers can forgo access in a small market if they have intellectual property, and simply withdraw from the market. Foreign governments can withdraw intellectual property if the industry does that, through compulsory licensing. That is not an option in Maine.
• AARP wants to bring down consumer drug prices and assure that subsidies allow people to get drugs if they need them. It wants shopping based on quality, effect and price, including responsible cost containment.

The chairs discussed a range of options on pharmaceutical purchasing, seeking to distinguish among them in terms of market friendliness. They discussed what options were within a state's scope and which might require federal action or waivers. An important legal and policy distinction is between actions related to Medicaid populations alone-in which case states act as purchasers-and ones like Maine's that sweep in larger portions of the state.

[See slides]

Caps are the center of the argument. Other proposals address greater transparency and patient safety. A proportionate sliding scale is an alternative to one-size-fits-all caps. New long-term approaches are needed to address problems of legal performance and health system safety. Proposed state experiments: (1) no-fault administrative compensation; or (2) provider-groups systems implemented through private contract and dispute resolution.

Chairs raised the following issues and described proposals and projects in their states:

• Strategies states could use to encourage feedback on provider performance: creating a state web site, using a national database. In an extended discussion of the difficult politics of this issue, several commented that they were having trouble determining whether there was in fact a crisis. Insurance commissioners were sometimes helpful, sometimes not.
• Emergency room doctors and obstetrician/gynecologists get hit hardest because of bad outcomes that are not their fault. Most cases are thrown out but some do hit. On the other hand, no fault removes a basic right of a citizen. Our right of seeking redress is a unique, special, basic right. We shouldn't get stampeded into taking away this basic right under the constitution-the right of the poorest person to take on the richest person.
• Chairs discussed whether individuals or systems were the cause of errors. According to one, "We are discussing outrageous amounts of medical errors in a highly licensed and regulated system. Why are we licensing bad docs? Why not take the license away if we find they are bad?" Several chairs countered with an emphasis on safety improvement and error reduction: Rising rates are only a small part of the problem. Patient safety needs to be our primary focus. In the current system three fourths of the money goes to insurance companies and lawyers for plaintiffs and defendants - a quarter each. Our main emphasis is to improve the system and eliminate medical errors...There are system-level issues, such as how we design and license hospitals. From the Seattle conference [on safety], the take-away is that if people can't be more comfortable about finding and reporting errors, patient safety will be hard to fix.
• Sen. Charles Scott, WY presented a proposal for a medical errors commission with exclusive remedy, with a focus upon patient safety and preventability. This will, in many cases, require a state constitutional amendment because most constitutions prohibit banning certain types of claims. Thus, worker's comp is generally a constitutional amendment. [Copies of the proposal were distributed, or may be obtained from Sen. Scott]. Medical error is largely a system problem. There is not an adequate feedback loop, so systems are not getting fixed. The plan abolishes the current liability system in order to discuss problems in a free climate.

The health chairs shared additional information that they thought would be of interest to others.

• Sen. Richard Moore distributed a proposal for designing a vision of the future of Massachusetts's health system. The project included developing a plan and presenting it for further comment through a web site. Hearings will be held in the fall to build consensus and support. The plan provides for an administrator and lays out implementation of the objectives through 2015, with changes as problems and issues related to new technology come to the fore. It creates a framework for making budget decisions, and establishes guidance for setting priorities for the state while trying to improve patient outcome and satisfaction and improving overall health. The role for the commission is spelled out in an appendix to the plan. All stakeholders are represented so the process is collaborative. The state only has a convening role, setting benchmarks of progress.

Other chairs discussed the relationship of this process to prior health planning activities. Wyoming has also created a commission to create an ongoing health vision.

• Several chairs reported on prescription drug program successes. One state was counseling individuals about potentials for saving money through therapeutic substitution within classes of drugs, especially for people paying out of pocket, with support from its pharmacy school and pharmacists. The recommendations could be run by the patient's doctor, who then either explains reasons for not substituting or supports the proposed change (about 90%). Another state contracts with a college to do this. The contractor also helps people apply for free drug programs by companies, signs them up for the state drug program, and walks them through the possible interactions of drugs. In a third state, the area agency on aging programs help individuals through the maze of drug company Rx assistance programs
• Other accomplishments and concerns include: Alzheimer's training for caregivers; health behaviors and successes and set-backs on issues like obesity, end of life care, and smoking. One chair offered a list of concerns that ranged broadly: oncology/radiology issues; vaccination safety; patient data privacy; community-based delivery of mental health and long-term care services; professional licensing; expanding scope of prescribing authority.

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