State health plan at risk - Critics say 'bad math' in Locke proposal could doom program


OLYMPIA, WA 2/4/03-- Gov. Gary Locke's proposal to cut 60,000 people off a state health plan for the poor has proved one of the most contentious issues in legislative negotiations.

But the fine print in Locke's budget recommendation could mean the program would take a deeper cut -- leaving some critics questioning whether it could even survive Locke's proposals. The situation is so serious it has state health officials rethinking the core function of the Basic Health Plan.

A relatively obscure provision in Locke's proposal assumes health carriers providing Basic Health Plan coverage would agree to 2004 contracts offering raises based on the Seattle consumer price index -- a gauge of inflation expected to run about 2.5 percent.

It is a fraction of the increases health plans usually get for that relatively cheap program.

"It's bad math," said Nick Federici, a lobbyist with the American Lung Association of Washington, which backed a successful 2001 ballot measure to expand enrollment in the BHP. "There's no reflection to reality to that number. Health care has never -- and will never -- grow at that slow of rate."

Locke's budget officials acknowledge the cap is drastic, but say it's a needed tool for reining in skyrocketing health care costs. "We just put a limit on how much the state is willing to contribute," said Marty Brown, Locke's budget director.

And Brown said virtually no other state contractors -- nor state workers -- received raises in Locke's budget proposal.

But Karen Merrikin, health policy director for Group Health Cooperative, calls Locke's proposal "ludicrous."

"That's an equation that's bound to cause failure of that program," Merrikin said. "The combination of cutting off the (60,000) childless adults and capping the rate of increase is just devastating."

Group Health is one of eight carriers who provide managed care for 135,000 low-income Washingtonians who enroll in the Basic Health Plan because they don't have health insurance through their work or privately, but don't qualify for Medicaid. Washingtonians earning no more than twice the federal poverty level, about $36,200 annual for a family of four, qualify.

Some state health officials and social service lobbyists share Merrikin's fear that if lawmakers agree to Locke's proposal when they write the budget this spring, some health plans will refuse to bid anywhere near Locke's proposed cap -- meaning the BHP may have to cut thousands more clients off the plan.

"If these people lose their coverage it affects everybody else, too," Merrikin said.

Inadequate funding would leave taxpayers to pick up more of the costs through subsidies for indigent care, Merrikin said. And health carriers would have to make up losses there by increasing premiums for the rest of their customers, she said.

The proposal has the state Health Care Authority, which administers the BHP, worried, too. The agency is now exploring drastic cuts to the program, including possibly scaling it back to so-call "catastrophic coverage" with a limited amount of preventive care.

"Given the situation we're in and the possibility that a number of people could wind up without health care, we want to look at some alternatives that might provide more health care to people and still be a worthwhile product," said Dave Wasser, spokesman for the Health Care Authority, which administers the Basic Health Plan, or BHP.

Locke's budget would cut 60,000 childless adults off the plan and eliminate some services, such as dental and vision care. His office says those cuts would save $328 million over two years.

He saved another $10 million by holding inflation increases down to about 2.5 percent, rather than the more than 10 percent projected, said Ree Sailors, his health policy adviser.

Although Locke's inflation proposal is unusual, the Basic Health Plan has always been vulnerable to budget trends. It's not an entitlement, like Medicaid.

"Ever since the BHP was created, we've always had to manage the enrollments within the dollars available," Sailors said.

Sailors acknowledged that some health plans might simply opt against bidding on the plan at such a low increase.

But "for us, it's a matter of changing the basis of competition among the plans. And so those plans who do manage care the best are more likely to do better," Sailors said.

Rep. Helen Sommers, D-Seattle, the House's lead budget negotiator, said it's too early to predict whether lawmakers will accept Locke's proposal.

"What he's pointing out is health care costs are increasing so much faster than our revenue," she said. "He's used various ways to rein in the costs."

"He's taken a very important step. Whether we choose to employ the same tools I can't tell yet."

For each of the past five years, the Legislature and governor have budgeted inflationary increases for Basic Health Plan contractors of 8 to 10 percent.

Once the contracts were signed, carriers actually got raises of from nearly 9 percent to more than 11 percent.

Those years, when the actual increase surpassed the funding allocated in the state budget, the Health Carrier Authority made up the difference by enrolling fewer people or adjusting premiums.

But there may be a much larger discrepancy for calendar year 2004 plans if state lawmakers accept Locke's inflation proposal.

Actuaries with the Health Care Authority predicted that carriers would need increases of about 10.6 percent to provide care in 2004, the agency said.

If health plans refuse to settle for instead for a CPI-based increase the Health Care Authority will have a few choices:

It could slim down the services provided in the Basic Health Plan. But the plan is already considered very modest. It offers limited prescription drug coverage and no vision or dental care.

The authority could pass those costs along to the Basic Health Plan clients in increased premiums or co-payments. "Not a great idea for something that's designed for people with low income," Wasser said.

Clients are charged $10 co-payments for office visits and $100 for hospitalization. Premiums vary depending on income, and clients' coverage choices.

Or the authority could cut deeper into enrollment.

If the Legislature's budget assumes the CPI-based inflation as Locke proposed, the Health Care Authority predicts it could have to cut an additional 5,000 people off the Basic Health Plan to make up the difference. (That assumes the CPI runs at about 2.5 percent as expected, and that carriers will insist on pay increases of nearly 11 percent, as Health Care Authority actuaries' predict.)

Or the Health Care Authority could dramatically change the purpose and structure of the Basic Health Plan. Officials there are exploring the possibility of scaling it back drastically, to so-called "catastrophic" coverage, plus limited routine care.

"Catastrophic with a twist of preventive," Wasser said. Such a plan may mandate that once clients max out their limited preventive care coverage, they would be responsible for the rest -- barring a health emergency. Clients with substantial health care costs in one year, perhaps $2,500 or more, would likely be eligible for the "catastrophic" care.

"We don't know if that's an option we would offer, or (if) we would modify the benefit so that's what Basic Health would look like," said Wasser, who added that such a plan could be available as early as next year.

P-I reporter Angela Galloway can be reached at 360-943-3990 or


In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. [Ref.]

Back to Current Edition Citizen Review Archive LINKS Search This Site