Charting SustiNet’s course after federal reform

When it was introduced last year, the SustiNet health plan was envisioned as a way to achieve universal health care coverage for the state. That was before federal health care reform changed the landscape for state-level reform efforts, putting Connecticut and the rest of the country on a path toward near-universal coverage by 2014.

Now the board charged with developing SustiNet is nearing key decisions that will shape the health plan. The board is slated to make recommendations in the coming months to the legislature and governor, who will ultimately determine what SustiNet becomes.

But it remains to be seen exactly what role SustiNet plays, and how much attention it gets from a legislature and governor negotiating a budget deficit of between $3.4 billion and $3.7 billion.

SustiNet supporters say the plan can still play a key role in the state, serving as a public health insurance option that competes with commercial insurance plans.

Governor-elect Dan Malloy said Thursday that he is awaiting the board’s recommendations about exactly what role SustiNet will play and how it interacts with federal health reform. But he said SustiNet should have a role, and noted that he was an early supporter of the original SustiNet proposal.

“There’s nothing more important to the 14 percent of Connecticut’s population currently without health care than access to health care and access to a job,” he said. “I know that it’s first and foremost on their minds and therefore needs to be a high priority for me as governor.”

Juan Figueroa, president of the Universal Health Care Foundation of Connecticut, which created SustiNet, said Malloy’s election was a positive move for the prospects of state-level health care reform.

“Having said that, look, we’re all aware that the first thing that he has to deal with is the 3-plus-billion-dollar structural deficit, and as it should be, that’s going to be framing everything that gets done next legislative session,” Figueroa said.

But Figueroa and other SustiNet supporters say addressing health care reform is critical to, not a distraction from, improving the economy.

“The out-of-control spiraling health care costs that small businesses face is something that’s going to have to be dealt with if we expect to revive our economy and create jobs in those small businesses,” Figueroa said. “They’re interrelated.”

According to an analysis presented Thursday, nearly any option the SustiNet board is considering could save the state between $32 million and $427 million in one year once it is implemented, largely because the state could capture additional federal money.

“The state budget situation would improve,” said Stan Dorn, a senior fellow at the Urban Institute and a consultant to the SustiNet board who presented the analysis.

A key premise behind SustiNet is that having a large pool of insured people will give the health plan leverage to negotiate lower costs and other changes to the health care delivery system that could ultimately save money. The board has also worked on developing practices intended to cut health care spending, including the use of the patient-centered medical home concept, health information technology such as electronic medical records, and payment reform.

Dorn’s presentation included six options under consideration. The economic impact of any of them depends largely on how much SustiNet can affect health care spending, and the analysis looked at each option under two scenarios: a “pessimistic” version in which SustiNet produces no change in health care costs, and an “optimistic” one in which SustiNet slows the annual growth in health care spending by 1 percent.

According to the analysis, each option would cut the number of uninsured residents in the state by more than half, and all but one would save the state money.

The potential SustiNet models would likely lead some small employers to stop offering coverage to their workers, saving the businesses money. Dorn said most of the workers would instead be covered by SustiNet or through the health insurance exchange, the marketplace created by federal health reform for purchasing coverage that will begin in 2014. Under the federal health reform law, people earning below a certain income level will receive subsidies to purchase coverage on the exchange.

The different options vary in how expansive SustiNet would be.

The most basic would be to use SustiNet to cover only those already covered by state-administered health programs – state employees and retirees and people in Medicaid, HUSKY and other public health programs. Under federal health reform, more state residents would become eligible for Medicaid coverage, so the number of people covered in this scenario by 2017 would be more than are currently covered.

Three other coverage options add more groups to the SustiNet insurance pool.

One would expand SustiNet only to low-income adults who are not eligible for Medicaid, an estimated 56,000 people. For them, it would be an alternative to buying insurance through the exchange.

Getting coverage through SustiNet would cost those adults less than purchasing coverage on the exchange, even with the subsidies, Dorn said. The federal government would pay the costs of covering that group, saving the state between $47 million and $50 million, he said. And it would make the SustiNet coverage pool larger, giving it more leverage.

There are also downsides, Dorn said: Buying insurance through the exchanges would give people access to more plan options and larger networks of health care providers than participate in state-administered programs.

Another option would allow small firms, municipalities and nonprofits to buy coverage through SustiNet. And a fourth option would allow every individual and firm in the state to buy into SustiNet. Doing so would have little effect on savings to the state and for employers, according to the analysis.

The analysis also looked at two changes to the state’s HUSKY health plan, which covers close to 400,000 children and parents. Health care providers are paid less to treat HUSKY patients than those with commercial insurance, leading many health care providers not to accept HUSKY or to limit the number of HUSKY patients they see.

One option would be to raise the HUSKY payment rates to health providers to equal what commercial insurers, a 34.5 percent increase. Because the federal government reimburses the state for a portion of its Medicaid costs – and the bulk of HUSKY recipients are covered by Medicaid – the state would not pay the full cost of the additional spending.

But if SustiNet does not have an impact on health care spending – the pessimistic scenario – increasing HUSKY rates would ultimately cost the state money. If SustiNet can slow the growth of health care costs, raising HUSKY rates would cut into the savings SustiNet achieved, but still save money overall.

The analysis also looked at expanding HUSKY in 2012 and 2013 to adults who currently earn slightly too much money to qualify, allowing them to receive state coverage before federal health reform rolls out. Doing so would reduce the number of uninsured residents in the state by 59,000, according to the analysis, but would cost the state between $103 million and $150 million a year.

Several board members said the state must be more aggressive in cutting the growth of health care spending than the 1 percent projected in the analysis’ “optimistic” scenario.

“We don’t have a choice no matter what happens on anything else,” said Ellen Andrews, a board member and executive director of the Connecticut Health Policy Project. “We have got to reduce spending.”

The board will meet in executive session Dec. 2 for what co-chairman Kevin Lembo called “the embarrassing questions, break the dishes” session. They are then scheduled to meet in public Dec. 15.