David Flanagan - Independent for Governor of Maine

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Maine Can't Wait for Affordable Quality Healthcare

Healthcare costs in Maine are out of control. That's what I've heard from people all over Maine. From the single mom working in a Sanford manufacturing plant who told me there's no way she can afford to pay for health insurance for her family, yet she earns just too much to be covered by Medicaid. To the janitor in Scarborough with three jobs – one just to pay his healthcare premiums. To the business manager in the St. John Valley concerned about providing adequate coverage for his employees. Maine people are worried about how they will pay for healthcare in the future. And rightfully so.

This year we will spend an estimated $5.5 billion on healthcare. That's up from $4.7 billion in 1999.¹ Relentless increases far higher than the rate of inflation are undermining our family budgets, our competitive position, and our government finances. The time has come for Maine to act. With input from doctors, consumers, business managers, hospital administrators, insurers, academics and other concerned citizens, I have developed a comprehensive strategy to make healthcare more affordable for Mainers. Most importantly, I'm setting a goal of holding the rate of health insurance premium increases below 10% in 2003 and beyond – Maine families and the businesses that employ them cannot afford one more year of 20 or 30% inflation. No other candidate in this race is offering such a specific goal – or the tactical steps we have to take – in order to achieve the objective of more affordable healthcare for Maine families

Maine's healthcare system is in crisis. Stunning premium increases for employer-sponsored plans are eroding the paychecks of families and eating into the competitiveness of our businesses. Similar increases for state, local and school system employees are driving up taxes and college tuitions. These spiraling costs should not surprise us. Maine has neither a State plan for healthcare, nor the discipline of a competitive market, nor a regulatory system with meaningful controls on expenditures. It's a prescription for cost overruns that will eventually rob us of healthcare access and quality, jobs and businesses, and the funding needed for other government services.

With a more affordable healthcare system, we can begin to realize real economic and social gains for Maine families. We can improve access and quality for disadvantaged Mainers, and make real progress in health insurance coverage for the working poor – too many of whom lack an adequate level of protection against the financial ravages an illness can inflict on a family.

This healthcare crisis has been a long time coming, as Medicaid spending, prescription drug costs, insurance costs, medical supply costs, investments in new technology and healthcare facilities, eroding competition, and other factors have combined to form a "perfect storm" of uncontrolled costs. Maine has spent at least seven years studying the problem – the Maine Health Care Reform Commission in 1995, the Year 2000 Blue Ribbon Commission on Health Care and now the Health Care System and Health Security Board study ordered by the legislature in 2001. These studies have produced reams of valuable information – some of which I've used to create this plan. Now the time has come to move beyond studies to actions that will start bringing healthcare costs under control.

What do we get from the other candidates running for governor? More pledges to form more commissions to come up with more plans. We can't afford to wait for Washington to act to improve its long record of gridlock on healthcare financing. Maine's Medicaid expenses currently stand at $452 million – about 17% of our state's general fund.³ This is projected to increase in the coming years. This fact, combined with the urgency of our $600 million projected budget shortfall and relentless double-digit medical inflation compel action here at home now. No other candidate has experience in dealing with spiraling healthcare costs for large numbers of employees. And no other candidate has managed to bring an expensive commodity like electricity, that had costs escalating much faster than the rate of inflation, back under control.

Health care costs are a complex problem because there is no single cause for their rapid explosion. And when analyzing these costs, it is important to remember that the price tag includes many benefits to society and to the quality of individual lives. The principal causes for health care inflation can be identified, as follows:

	Rising costs of prescription drugs, medical supplies, and new technologies,
	Rising provider costs due to decreasing competition and investments in new facilities,
	General inflation,
	Increased demand for services resulting from our aging population and little or no direct incentive for insured consumers to worry about the cost of treatments, procedures or drugs,
	Litigation,
	Fraud and abuse,
	Inadequate numbers of trained health care professionals, and
	Maine's rural and sprawling population requiring more medical facilities to ensure reasonable access.

A recent study by PriceWaterhouseCoopers analyzed the forces driving healthcare cost increases and found that increased consumer demand, drugs, medical devices, and other medical advances are behind nearly half the increases on the national level. The other half is driven largely by litigation, mandates, and rising provider expenses. The study points out that for some of the drivers, such as drugs and medical advances, current spending may be offset by future savings in reduced other medical services.⁷

(source: Price Waterhouse Coopers)

The problem is not only costs, but also who pays for them. Rising costs are made worse by inadequate reimbursement by the federal government for Medicare and Medicaid expenses. The sad reality is Maine is near the bottom of the barrel in federal reimbursement for health care costs incurred by Medicare and Medicaid recipients, approximately 88¢ for each dollar of Medicare service provided and 80¢ for each dollar of Medicaid service provided.⁸ Maine receives less money per Medicare beneficiary than almost every other state, ranking 49^th in a comparison of states done by the Henry J. Kaiser Family Foundation. ⁹ Given that Medicare and Medicaid recipients account for nearly 50% of all healthcare expenditures in Maine¹⁰, the losses are staggering, reaching $154 million in 1999.¹¹ These costs have been passed on to privately insured and uninsured consumers and do not include $108 million that Maine hospitals provided in charity or posted as bad debt.¹²

Any plan to deal with this crisis must deal with all of these factors simultaneously if we are ever going to contain healthcare costs.

I'll take a common sense approach to containing healthcare costs. We know that the unique nature of the healthcare industry renders it immune to many of the market forces that naturally constrain costs for other businesses, so my approach combines market and regulatory forces. This is a complex problem, and it requires thoughtful solutions. But in a crisis, you have to act fast, so my first step as governor will be to appoint a Director of Health Care Management who will be tasked from Day One of my administration to implement the Affordable Healthcare Now Action Plan:

1) Establish the Affordable Healthcare Agency – The mission of the Affordable Healthcare Agency will be to assure quality, accessible healthcare at a price we can afford. It will work to reduce the number of people without insurance by means of innovative public/private sector initiatives. The agency will set goals for healthcare cost containment and monitor the success of insurers and providers in meeting those targets.

The Affordable Healthcare Agency will improve the efficiency and effectiveness of State government health planning and data collection activities by consolidating such programs as the Maine Health Care Performance Council and the Maine Health Data Organization under one roof, reporting directly to the Governor. To ensure that all stakeholders are involved in planning and setting targets, the agency will be assisted in its efforts by a commission comprised of consumers, insurers, providers and employers. Some of the functions of the agency will include:

	Information – Provide consumers, employers, health insurance companies and healthcare providers with a single source of vital, state and nationwide information on costs, treatment protocols and regulations. Good information is the foundation for achieving quality healthcare.
	Budgeting – Create an annual state health budget with annual targets for the percent increase in prices expected for specific sectors of the industry, such as drugs, hospitals, insurance, and nursing homes and monitor each sectors' success in meeting its targets.
	Best Care – Work with providers to establish professionally accepted guidelines on establishing best care practices that are directed towards the most medically and cost-effective methods of diagnosis and treatment for specific illnesses. Over-utilization of services – recommending procedures that are not prescribed in accordance with evidence-based medicine, under-utilization of services – failure to comply with clinical guidelines, particularly for the treatment of chronic illnesses, and avoidable errors – failure to use technology and other means to support effective delivery of care, all impact the quality of care a patient receives as well the cost of that care. Such protocols should also reduce the incidence of malpractice claims as generally accepted practices are standardized and defined.
	Efficiency – Coordinate health care planning activities within State government.
	Healthcare Access – Increase access to insurance coverage by working to secure a federal waiver that would allow Medicaid funds to be used to subsidize the purchase of private health insurance for uninsured individuals.
	Fighting for Maine – Work in Washington to correct Maine's shameful treatment at the hands of the Federal government in Medicare and Medicaid reimbursement. Maine gets the short end of the stick year after year, and we need to advocate more forcefully to rectify the situation.

2) Impose a Year-Long Moratorium on New Capital Spending – Recently, Maine hospitals have been on a spending spree - building new facilities and investing in major new pieces of equipment. During the last 5 years, the Department of Human Services has approved over $215 million in capital costs related to new construction, renovation and the delivery of new services. These projects are estimated to cost consumers an extra $6 million per year in new operating costs.¹³ And while some of this construction is necessary to ensure that Maine people have access to up-to-date facilities and equipment, it is not at all clear that we will be better served by all this new construction. In fact, data from other states shows that facilities that do relatively few complicated surgical procedures often have poorer results at a higher cost.¹⁴

Maine needs to take a breather from the capital-spending spree in hospital construction, which has contributed significantly to the acceleration of health care costs in Maine in recent years. We are spending as if we live in a dream world with no constraints, and Maine's working people are paying for the delusion.

We will use the time provided by the moratorium to update the criteria for evaluating projects, review alternatives to new construction, develop the framework for a yearly, overall statewide capital spending budget based on economic growth, and build a State plan for health care priorities. During the moratorium, exceptions will only be made for projects being undertaken to address true emergencies, such as patient or worker safety, or those entirely paid for by charitable gifts.

Use Free Market Principles to Contain Costs Where Possible – To the maximum extent possible, we should try to control health care cost increases through the discipline of markets and the choice of individual consumers. Health care consumers must be well-informed, healthcare providers and insurers need to play on a competitive field, and regulations need to be reasonable.

Health care costs are a huge force in the Maine economy, - amounting to $4.7 billion or 14% of our GDP in 1999. ¹⁵
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The Affordable Healthcare Agency will regularly publish – and make readily available – data concerning the costs and charges for each Maine hospital and for physicians, whenever possible. The data should also include their records of performance and outcomes to help insurers and consumers better match healthcare costs with quality results.
The state should encourage employers and insurers to structure health insurance plans that provide incentives for employees to shop carefully for their health care needs, looking at both quality of care and cost.
All existing and proposed laws and regulations concerning health care should be subjected to a rigorous cost/benefit analysis, to determine whether the benefits of a mandate outweigh the cost contributing to the escalating price of health care.
Prior to 1993 there were 9 insurance carriers that offered individual indemnity plans to Maine consumers, today there is only one company writing new contracts. Similarly, 7 carriers have offered individual HMO contracts in Maine in the past, but today there are only 3 who will write a new contract. The Affordable Healthcare Agency will work with the Bureau of Insurance to review the impact of laws and regulations on competition and develop ways to increase the number of carriers willing to offer coverage in Maine.
As part of every effort to achieve more affordable healthcare, the Agency will monitor outcomes of providers and institutions to make sure that quality is not lost in the name of cost reduction.
While some mergers may hold benefits for consumers, reduced competition due to the large numbers of mergers in the healthcare industry and have the effect of pushing prices up. Before the Attorney General and the Department of Human Services approve any more mergers, they should conduct a rigorous analysis to demonstrate the cost effectiveness of each proposed merger.

4) Use the Purchasing Power of the State to Achieve Reforms & Savings – State and local governments are enormous consumers of health care, subsidizing all or a portion of health care costs for Medicaid recipients, State, University, school system and municipal employees and retirees and their families – a total of nearly $1 billion in 2002.¹⁶

As an example, healthcare costs for State employees have been rising annually during the last 15 years. Since 1987, the monthly rate charged for an individual covered by the State employee's health insurance plan skyrocketed from $81 to $456. Total premium expenses are expected to $164 million this year of which $143 million will be paid by the State and the balance by employees and their dependents.¹⁷ The State must exercise its economic bargaining power to deal with this massive crisis.

	Maine should use the bargaining power of State purchased health services, combined with any local government or private employers who wish to join, to set policy guidelines with insurers and providers that will institute best care practices and improved care management. We also need to develop new payment structures that reward providers for improved quality, rather than simply reimbursing them based on the volume of the services they provide.
	Maine government falls short of realizing the savings that can be achieved through cooperation in purchasing insurance collectively. The state should test the market to find out the scale of savings that might be available at varying levels of joint purchasing, and make the information available to local governments and other public entities.
	Costs of medical equipment and supplies have soared during recent year, contributing to overall increases in healthcare inflation. I have heard from people within the healthcare system that a hospital stretcher can cost as much as $17,000 and a hospital bed, $40,000. The Affordable Health Agency will work closely with Maine hospitals to establish a multi-state purchasing coalition to negotiate more reasonable prices and specifications for medical equipment and supplies.

5) Use the Regulatory Power of the State - As a veteran of an industry heavily regulated by the State, I know well the pitfalls of regulation and the well-intentioned, though often ill-conceived interference in the economy that it brings. But there are circumstances where markets cannot or do not function efficiently, and in those instances, there can be a legitimate role for regulation.

	Right now the Certificate of Need (CON) process is little more than a sham. This has led to healthcare providers overbuilding, with the resulting costs being passed on to consumers. The state should have a tougher CON process that promotes better utilization of existing healthcare facilities, and is based on a plan, developed by the Affordable Healthcare Agency, for what our hospital capital spending priorities should be, how much we want to spend per year overall on new buildings and new high tech equipment on a statewide basis, and where to locate it to provide the optimum benefit to Maine people.
	As part of a comprehensive healthcare plan for Maine, we should establish an annual statewide capital spending budget, and use a reformed CON process to make decisions on allocation of resources in accordance with clear, outcome based, non-political criteria.
	The State needs to develop performance or outcome based regulations, leaving it to licensed healthcare providers to use their expertise and experience to implement the State's requirements. By using Performance Based Regulation instead of the thousands and thousands of pages of regulations governing hospital construction, nursing homes and providers, we can reduce costs related to excessive specifications for equipment and procedures, encourage innovation, and allow for pragmatic approaches to meeting the State's requirements for high quality services.
	The federal Health Insurance Portability and Accountability Act of 1996 requires standardized insurance forms to reduce administrative costs. Maine needs to go beyond the federal requirements and implement common administrative procedures that will address such issues as how payments are made and utilization of services. We should recognize that reducing administrative costs is no magic bullet, but can help reduce both overhead and frustration.

6) Improve Public Health - Maine has much to be proud of in the public health arena. We rank in the top 10 states in terms of child well being, a composite measure that takes into account birth-weight, infant mortality and child death rates.¹⁸ Maine leads the nation in childhood immunizations and low rates of teenage pregnancy. ¹⁹ But at the same time, we have the 7^th highest percentage of population age 65 and over,²⁰ the group that, as a whole, requires more healthcare services than any other. Cancer, diabetes, and lung disease account for 70% of the healthcare problems in Maine. In fact, we have the third highest cancer rate in the nation.²¹ We have plenty of room for improvement.

The Maine Health Access Foundation has been capitalized with $82 million as a result of legislation governing the sale of Blue Cross to Anthem. The State also expects to receive approximately $50 million dollars per year in Funds for a Healthy Maine as part of the Federal tobacco settlement. Money from both of these funds should be used only for healthcare and only for programs that provide significant benefits to Maine citizens, especially those who are uninsured or under-served.

	Programs that will improve the general health of Maine's population, especially those that address problems such as diabetes, obesity, lung disease and poor dental health among low income and uninsured residents, should be targeted for funding. Wherever possible, the State should seek to leverage money from these two funds with Federal money such as Medicaid.
	Moreover, as our population ages, we should be developing programs to expand home health, hospice care and related services to allow our elderly to stay in their own homes for as long as possible. This doesn't just make good financial sense – it's good medicine and far more compassionate.
	Veterans all over the country are having an increasingly difficult time in getting timely medical services. The Affordable Healthcare Agency should work with the Veterans Administration to improve services for Maine's veterans.
	Maine does not have a well-developed public health infrastructure, and these steps, together with increased training of health care professionals, would be an important initiative in this area.

7) Increase the number of health care professionals - It is important to ensure that there are adequate numbers of health care professionals in Maine. The Maine Hospital Association reports that 9.4% of the RN positions in Maine's hospitals are unfilled and 18.6% of the RN positions in long-term care facilities are also unfilled.²² The statistics for CNA positions are similar. These vacancies have adversely impacted care. Maine also has a severe shortage of dentists making it difficult for people to receive adequate dental dare, especially in the rural areas of the state.

	The State, working with healthcare providers, should undertake a steady expansion of training programs for nurses, pharmacists, technicians, nursing home staff, and other health care professions through the University system, the technical colleges and private institutions with a goal of having 25% more health care professionals in training by 2008.
	Programs to attract and retain dentists and other health care professionals to practice in Maine, specifically targeting rural areas and low-income populations should be strengthened.

8) Ensure that reasonably priced drugs are available to all those who need them - Over the last 10 years we have seen major breakthroughs in the introduction of amazing new drugs that help us deal with diseases like cancer, multiple sclerosis, and high blood pressure. These drugs are saving lives and improving the quality of life for thousands of Maine people. But at the same time, costs have skyrocketed forcing many to use their life savings to pay for their medications or go without. Healthy Maine Prescriptions and Maine's Low-Cost Drugs for the Elderly and Disabled programs provide relief to 114,000 individuals.²³

	Maine should continue to promote participation in the Healthy Maine Prescriptions Program and look at expanding the program once issues under considerations by the Federal court have been decided
	The Affordable Healthcare Agency will work in Washington to advocate for inclusion of prescription drugs as a benefit under the Medicare program.

9) Ensure that the State is ready if price regulation becomes unavoidable - We must hold down increases in healthcare costs and insurance premiums. Competition is preferable to regulation and we must do everything in our power to allow competition to work. However, if the competitive measures adopted by the State fail to significantly reduce runaway medical inflation, and voluntary cooperation and collaboration between payers and providers do not achieve the cost containment goals we have set out, then rather than wait for our whole system to collapse of its own weight as we pour more and more of our total income into health care, price regulation will be unavoidable.

The Affordable Health Agency will set voluntary targets for cost increases for each of the major health sectors – hospitals, long term care, pharmaceuticals, and other relevant groups. Then the Agency will track cost increases in each sector to see if they meet the targets. If a sector doesn't meet the targets, the Agency will hold public hearings, identify the reasons why, and prepare legislation and actions that can be taken to ensure that the targets are met in the future.

If, after two years, the health industry is unable to achieve voluntary cost control targets, then I will recommend setting up a formal price regulatory system similar to the Public Utilities Commission.

I am absolutely serious about bringing health costs under control. It is a major reason our state budgets are facing huge deficits. It is a major reason school budgets are going up. It is a major reason businesses are struggling. I pledge to you that I will get it done.

10) Work towards a long term solution. I believe strongly that everyone should have access to medical care. The problem is how we will pay for it.Health care financing is a critical long term question that must be resolved. Indeed, the United States is the only nation in the world that relies primarily on employers to finance the cost of healthcare. And this system is not working for a growing number of Americans. In fact, it's broken.

This problem is not unique to Maine. It's a national crisis that can't be resolved fully at the state level. Ultimately, Congress must agree on a national solution for financing healthcare. Many are pointing to a single payer system as the answer. But they are often unclear about how this would actually work.

I am convinced that no financing system can be successful unless and until we tackle the overwhelming problem of cost containment. After we get costs under control, we should explore all our options. However, in considering any kind of single payer system, we should bear in mind the most recent study, done in 1995 by the Maine Health Care Reform Commission, that estimated a state single payer universal care system would have required personal income taxes to be tripled to 10.5%. Corporate taxes would have more than doubled with a new 5% payroll tax and an increase in the corporate tax rate of 14.25%; taxes on tobacco and alcohol would have doubled; and the sales tax would have increased by 1%.²⁴ With 7 years of escalation in health care costs, a single payer system would result in even higher tax increases now than those estimated in 1995. Maine would be severely disadvantaged by such tax increases. A new Legislative study of this issue may produce new information on this issue.

In any event, Maine has a responsibility to advocate for affordable healthcare access in Washington. Along with my Director of Health Care Management, I plan to work personally with the National Governors Association, and other groups to re-kindle the healthcare financing debate in Washington and obtain a federal solution to this serious problem facing our nation.

The proposals I have outlined here constitute a comprehensive approach to health care reform in Maine. I believe action along these lines is urgently needed to prevent further stories like the one I heard from a lobsterman in Friendship who told me that he'd just given up on paying his insurance premiums and was taking his chances. I well understand there are no easy answers to this problem and that if simple solutions would work they would have been adopted long ago. But the problem is so huge and so important, we have to start working on it now. I welcome additional input and recommendations that will further strengthen our initiatives to contain health care costs, and in turn, promote access to quality, affordable health care for all Maine citizens.

Other healthcare issues, including mental health and long term care, are so complex that they warrant their own separate plans, which I will address as the campaign progresses.

¹ Year 2000 Blue Ribbon Commission on Health Care, "The Cost of Health Care in Maine, November, 2000, p. 5.

² Year 2000 Blue Ribbon Commission on Health Care, "The Cost of Health Care in Maine, November, 2000, p. 8.

³ Maine Department of Administrative and Financial Services, Bureau of the Budget

⁴ Maine Department of Administrative and Financial Services, Bureau of the Budget

⁵ PriceWaterhouseCoopers, "The Factors Fueling Rising Healthcare Costs", April, 2002, p.6.

⁶ Maine Bureau of Insurance

⁷ PriceWaterhouseCoopers, "The Factors Fueling Rising Healthcare Costs", April, 2002

⁸ Maine Hospital Association, "Maine's Medicare Payment Shortfall", July, 2001, and preliminary findings by MHA on Maine's Medicaid Payment Shortfall

⁹ The Henry J. Kaiser Family Foundation, State Health Facts Online, Medicare Spending per Beneficiary, FY 2000, http://statehealthfacts.kff.org

¹⁰Year 2000 Blue Ribbon Commission on Health Care, "The Cost of Health Care in Maine, November, 2000, p. 13.

¹¹Maine Hospital Association, "Maine's Medicare Payment Shortfall", July, 2001, and preliminary findings by MHA on Maine's Medicaid Payment Shortfall

¹² Maine Hospital Association, "Quick Facts About Maine Hospitals", www.themha.org

¹³ Based on date from the Maine Department of Human Services, Certificate of Need Unit

¹⁴ See Maine Health Data Organization website, www.healthweb.state.me.us for information on costs. See Pennsylvania Health Care Cost Containment Council website, www.phc4.org for information on costs and quality.

¹⁵ Year 2000 Blue Ribbon Commission on Health Care, "The Cost of Health Care in Maine, November, 2000, p. 2.

¹⁶ Estimate compiled from data supplied by Maine Bureau of the Budget, Maine Office of Employee Health and Benefits, Maine Municipal Association, the cities of Bangor and Portland, the University of Maine System, the Maine Technical College System, and Maine Education Association.

¹⁷ Maine Department of Administrative and Financial Services, Office of Employee Health and Benefits

¹⁸ Maine Development Foundation, "Measures of Growth 2002", p. 15.

¹⁹ Year 2000 Blue Ribbon Commission on Health Care, "The Cost of Health Care in Maine, November, 2000, p. 5.

²⁰ U.S. Census Bureau, Census 2000-PHC-T-13, Population and Ranking Tables of the Older Population for the United States, States, Puerto Rico, Places of 100,000 or More and Counties

²¹ Year 2000 Blue Ribbon Commission on Health Care, "The Cost of Health Care in Maine, November, 2000, p. 5 and 17.

²² Maine Hospital Association, "Maine's Healthcare Workforce", September, 2001.

²³ Maine Department of Human Services

²⁴ Maine Health Care Reform Commission, "Recommendations for Health System Reform", November, 1995, p. iv.

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Paid for and authorized by Flanagan for Governor, James Caron, Treasurer, PO Box 888, Augusta, ME, 04332