There is an old Yankee expression: “If it ain’t broke, don’t fix it.” A corollary might be: “If it is broke, fix it right.” There’s not much doubt that the health care system in the state of Maine is broken, especially for the 140,000 people who have no health insurance. What remains to be seen is whether the state’s bold new plan to provide affordable health insurance, which goes into effect late this summer, is the fix Maine’s citizens are counting on–and other states are looking for.

“Legislatures in other states are looking to Maine and saying, ‘Gee, is this a workable model?'” says Richard Cauchi, senior policy specialist for the National Conference of State Legislatures.

Maine’s model is called Dirigo Health, named after the state’s Latin motto, which translates as “I lead.” What Dirigo Health is leading with is $53 million, seed money state leaders hope will grow into a health system that will provide affordable insurance coverage, relieve hospitals of the burden of charity care, and, in future years, pay for itself through cost savings.

Dirigo Health architect Trish Riley calls
the plan “comprehensive” and “elegant.”

Supporters say Dirigo Health will work because it addresses the root problems of the system, including wastefulness, rising costs, and small businesses that don’t provide insurance. All the major players–health care providers, insurance company representatives, small-business leaders, and advocates for the uninsured–were involved in the design. The result is a plan that Dirigo architect Trish Riley describes as “comprehensive.”

“We wanted to build on what we had to get something better,” says Riley, who heads the state’s Office of Health Policy and Finance. “A state representative here called it ‘elegant,’ and I think it is, because it assumes what the unintended consequences will be and cuts them off at the pass.”

But as the launch, which could take place around Labor Day, draws near, skepticism is mounting. “There’s no definition as to what the plan is right now,” says House Minority Leader Joseph Bruno, a Republican who represents the town of Raymond in the Sebago Lake region. Bruno originally supported the plan but now says he has too many unanswered questions. “All that we know is that it’s going to be expensive.”

Taking the lead on cost, coverage

There are familiar elements in the health care conundrum Dirigo Health tries to solve–namely, rising costs and out-of-reach coverage. Currently, about 10.8 percent of Maine’s 1.3 million residents are uninsured. That’s the highest percentage of any New England state but still below the national average of 14.7 percent. (The uninsured rate in Massachusetts is about 9 percent.) Then there are the underinsured–thousands of Maine residents who barely hang on to emergency insurance plans with deductibles running into thousands of dollars.

The Mainers least likely to have insurance are employed, but earning less than twice the federal poverty level, according to a 2002 survey by the Edmund S. Muskie School of Public Service at the University of Southern Maine in Portland. The study also found that 27 percent of the state’s self-employed and 31 percent of those working for businesses with 10 or fewer employees lack insurance.

All the major players were involved in the design.

Health care costs are on the rise everywhere, but particularly in Maine, which can hardly afford it: The state ranks 36th in per-capita income. Health care costs have increased at an average of 9.7 percent annually over the past two decades, compared with 9 percent nationally, according to the Maine Economic Growth Council, a nonpartisan planning agency whose members are appointed by the governor and by legislative leaders. As of 2002, the state’s emergency-room use was 43 percent above the national average. Mainers also suffer high rates of “preventable” diseases such as heart disease and stroke. It doesn’t help that nearly a quarter of Mainers smoke–the highest percentage of any New England state.

Dirigo was born of Gov. John Baldacci’s campaign promise to address the state’s health care woes. After he took office in January 2003, the Democrat initiated extensive negotiations with health care providers and the insurance industry to develop the plan, which was approved by the Legislature last June. The state plans to enroll 31,000 residents in the program’s first year and sign up the remaining uninsured by 2009. Dirigo calls for the state to:

  • Contract with a private insurance company to create a policy for the state’s uninsured that will carry the Dirigo name;
  • Subsidize the cost of Dirigo insurance for low-income residents;
  • Offer businesses with fewer than 50 employees an opportunity to purchase Dirigo;
  • Expand eligibility for the state’s Medicaid program, which provides free health care to the state’s poorest residents; and
  • Monitor residents’ access to health care, ensure quality, and keep costs down.

The idea behind Dirigo is to gather up the state’s uninsured so that they can qualify for a “group” rate on health coverage. The state will call on private insurance carriers to bid on the chance to provide coverage under the Dirigo Health brand, introducing a new competitor to the state’s private insurance market.

Competition and market leverage are vital to correcting the imbalances of Maine’s health care marketplace, state leaders say. In the report Dirigo Health: Health Reform in Maine, published by the state last year, “monopolistic” insurance and hospital markets, which “diminish the capacity of purchasers to negotiate lower prices,” are blamed for individuals and small businesses getting priced out of health care coverage. The report points out that 31 of the state’s 39 hospitals belong to or are affiliated with the state’s four largest hospital systems.

Meanwhile, one insurance company–Anthem Blue Cross Blue Shield–provides 87 percent of the state’s individual insurance plans. Anthem also holds 49 percent of the small-group market, with Aetna carrying another 30 percent. Anthem, an Indiana-based health-benefits company whose subsidiaries operate under license from the national Blue Cross Blue Shield Association in nine states, became the state’s major insurance player three years ago, when it bought the financially struggling Maine Blue Cross Blue Shield carrier.

Competition is something Anthem welcomes in Maine, says company spokesman Bill Cohen. “We’d like to see more to come,” he says. “We believe a good, strong competitive marketplace is a good way to build a good market.”

Self-employed sculptor Christopher Strassner, 36, who lives in the southern coastal city of Saco, is one Anthem customer who’d like to see more alternatives. “I buy into Anthem right now because there’s no other options,” says Strassner, taking a break at his shop in nearby Biddeford. “Some level of competition is necessary.”

Strassner has insurance thanks to his wife, who works for an architecture firm in Portland. As long as he covers the company portion of his insurance, he gets the employee group rate. Even with this arrangement, he pays more than $500 a month for health coverage. He hopes he can get a better deal from Dirigo, but won’t be sold until he sees the rates for himself. “Once it’s here and I can see what it’s going to do for me, then we’ll see.”

State leaders hope Dirigo will appeal to the likes of Strassner. The estimated price of a Dirigo plan with a $1,750 deductible is $260 per month for an individual or $779 per month for parents with children. Plus, many will be eligible for discounts and lower deductibles, depending on their ability to pay. The state will subsidize plans for those who earn too much to qualify for free care but not enough to afford insurance–those earning up to three times the federal poverty level. Individuals who make up to $27,930 per year and families of four that earn up to $56,550 will qualify for assistance. The amount of the subsidy will be determined on a sliding scale according to income.

Under the Dirigo plan, more residents will also qualify for MaineCare, the state’s Medicaid program, with the limit for individuals raised from the federal poverty line ($9,310) to 125 percent of poverty ($11,638) and for a family of four from 150 percent of poverty ($28,275) to 200 percent ($37,700).

An offer they can’t refuse?

Starting with Hawaii in the 1970s, many states have tried with mixed success to insure more residents. As of yet, no state has achieved universal coverage. (See “Many attempts, no successes“) Indeed, Maine’s approach is to provide universal access to affordable insurance rather than to mandate universal coverage.

One key group targeted for Dirigo coverage consists of businesses and municipalities with fewer than 50 employees–fully 90 percent of Maine businesses. To qualify, employees must work at least 20 hours a week and their employers will have to cover 60 percent of the total premium.

Employers predict failure if premiums are too high.

“We’re going to put out a health care policy that, essentially, they find so attractive that they want to buy it,” says Senate Majority Leader Sharon Treat, a Kennebec County Democrat.

Susan Lakari is one small-business owner who hopes Dirigo will offer her a better deal. As co-owner of Material Objects, a clothing boutique on Congress Street in Portland, Lakari had to switch insurance plans because of rising rates, and she still feels that she’s paying a lot–nearly $500 a month for one adult and two children.

“We’ll definitely be looking at Dirigo and seeing what they come up with,” says Lakari.

House Minority Leader Joseph Bruno (far right):
“I think it’s going to fall on its face.”

Joyce Pepin, 57, will also be looking at Dirigo, but from a vantage point of greater desperation. Pepin’s 55-year-old husband owns his own business, providing traffic-controllers (flag men) to construction sites. The couple recently dropped their insurance coverage because they couldn’t afford payments approaching $6,000 a year.

“I don’t think there’s anything out there for the small-business man who really can’t afford it. We toughed it out for a few years and then we couldn’t do it anymore,” says Pepin, who works at a general store in the York County town of Lyman. “I’m interested in finding out more about the program. We are kind of looking forward to signing up, knock on wood.”

But business leaders say Dirigo won’t be successful if the premiums are too high. “Much will depend on whether or not small businesses buy the Dirigo Health Insurance product once it is offered,” according to an e-mail statement from the state’s Chamber of Commerce. “Once again, the affordability of the product is likely to affect whether or not small employers purchase the coverage.”

Fuzzy math

Whether small businesses will be able to afford Dirigo Health coverage is one question. Whether the state of Maine can afford it is another. Riley says the budget for Dirigo insurance and expanded Medicaid coverage will total roughly $90 million the first year. To cover this, the state will put up $53 million in “seed” money; most of that funding will come from the federal relief package passed by Congress to reduce state budget deficits. Federal funds will also defray much of the MaineCare expansion, since Maine’s Medicaid reimbursement rate is roughly 60 percent (compared with 50 percent in Massachusetts). Beyond the first year, Dirigo Health is supposed to start supporting itself with premiums paid by customers and with savings generated by a more efficient health care system.

Here’s how it’s supposed to work. Insurance carriers are slated to pay a tax of up to 4 percent on premium revenues. In theory, if more people are covered by health insurance, that will reduce the estimated annual $275 million in free care and bad debt that providers now pass along to insurers. The tax on insurance carriers will direct some of those savings to Dirigo. But this tax only kicks in if the projected savings materialize, as determined by the Dirigo Health Agency and the Governor’s Office of Health Policy and Finance. State leaders are still working out the details of how these savings will be determined.

If Dirigo fails to enroll enough Mainers to relieve the cost of bad debt and charity care, and insurance companies do not save money, state leaders plan to examine why Dirigo was not attractive enough to sustain itself and then redesign the program.

Savings are also supposed to come from restraint in hospital spending. The state has asked hospitals to voluntarily cap cost increases at 3.5 percent per year, and operating margins at 3 percent, as part of a “cooling-off” period. Hospital officials have agreed to work toward this goal as a sign of good faith in the Dirigo initiative, but the degree to which they can stick to the voluntary caps will inform later policy. The state has also strengthened its Certificate of Need program, which requires health care providers to demonstrate a legitimate need before purchasing high-cost technology or building new facilities.

“The way this whole thing works is to say, ‘There’s a whole lot of money in the health care system that could be used more efficiently, and it’s being wasted,'” says Sen. Treat, a Dirigo backer.

The idea that Dirigo Health could pay for itself out of the savings it generates has some experts scratching their heads, with one calling it “delusional.”

“No one should think that providing coverage is going to be self-financing, because it’s not,” says Christopher Conover of Duke University’s Terry Sanford Institute of Public Policy. “Someone is still going to have to come up with the money. It’s just a matter of whose pocket it will come out of.”

“I think it’s going to fall on its face the way it’s designed right now,” says Rep. Bruno, a Dirigo supporter turned critic. “I think they are optimistic in the savings and they underestimate the cost.”

If you sell it, will they buy?

Asked what she hopes people around the country will say about her program five years from now, Dirigo architect Trish Riley says, “Five years is a long time, but I hope that they will say we found a really innovative, effective way to deliver affordable health care that’s sustainable over time, and that it’s statewide and robust and doing great.”

But even Riley admits there may be some pitfalls along the way. “It will depend on whether people sign up for it, whether it’s affordable, and whether we can deliver on our promises,” she says.

In a voluntary system, one that doesn’t require employers or individuals to buy health care coverage, what’s affordable is all in the eye of the beholder. “The problem is, if I’m not paying anything now, I can say the reason I’m not doing it is because it’s too expensive,” says Howard Berliner, a professor of health policy at the Milano Graduate School of Management and Urban Policy at New School University, in New York. “You can say you’ve made it cheaper, but it’s still too much for me.”

‘A lot of people just don’t want to spend the money.’

While working for New Jersey’s health department, Berliner conducted a survey asking if people would buy health insurance offered at a 50 percent subsidy. He was surprised to discover how few were interested. “A lot of people, they just don’t want to spend the money,” he says. Especially if they know they can buy coverage when they really need it. Some critics point to Maine’s “guaranteed issue” provision, which requires carriers to cover all applicants, regardless of health status. They say this rule discourages people from buying insurance when they’re healthy.

Restaurant owner Troy Dickhaut
doesn’t have, or think about, insurance.

“For people who don’t have a lot of money, often they don’t buy insurance because they know that if something really serious happens, they can still get insurance,” said Betsy Chapman, chairman of the Maine Public Policy Institute, a free-market-oriented think tank. “What we would like to do is see a task force created to review all of the mandates and repeal some of them.”

Still, there is evidence of demand for Dirigo. As of March, the plan had a waiting list of more than 300, and the state’s Office of Health Policy and Finance reports receiving between 10 and 15 inquiries a day concerning Dirigo, from both individuals and small businesses.

Whether Dirigo Health will be attractive to the likes of Troy Dickhaut, however, remains to be seen. Dickhaut, who is in his 20s, is owner of Little Lad’s, a vegan restaurant in Portland. He had health insurance when he was a teacher, but doesn’t have it now–and doesn’t give it much thought.

“I never used it when I had it,” he says. Asked how much health insurance would have to cost to pique his interest, he pauses to think, then says, “Twenty dollars a month.”

Rebecca Griffin is a writer living in Medford.