Dirigo adjusts savings estimates for past year

Bangor Daily News
Posted July 25, 2008, at 12 a.m.

AUGUSTA, Maine -&nbsp After two days of tense hearings, the governing board of the Dirigo Health Agency voted Thursday to accept a figure of $149.8 million as the amount saved in Maine’ s health care system in 2007 that is attributable to Gov. John Baldacci’ s Dirigo Health reforms. The amount represents a decrease from the $190 million in savings claimed in June by the agency itself.

The figure will be a factor in establishing the “savings offset payment” — or SOP — that Maine insurance companies and their policyholders must pay to the agency to support the DirigoChoice subsidized health insurance program. The SOP was replaced during the last legislative session, in part with a new state tax on soft drinks, beer and wine, but that revenue source may be overturned in a ballot referendum in November.

In deliberations after this week’ s hearings, board members reduced the amount of measurable savings produced by Dirigo initiatives in hospital spending from the $147.9 million the agency claimed to $119.6 million. They reduced savings in free care provided by hospitals from $35.7 million to $23.6 million. They maintained savings claimed in insurance company administrative efficiencies at $6.6 million.

Karynlee Harrington, executive director of the Dirigo Health Agency, characterized the trial-like proceedings, now in their fourth year, as “highly contentious.” She said the agency spent upwards of $1 million to bring in statisticians, economists and expert witnesses from around the country to help measure, document and defend the savings.

It’ s money that could have been better spent on providing health care insurance to uninsured and underinsured Mainers, she said.

“I could have covered a lot of people for a million dollars,” Harrington said.

For 2006, the Dirigo agency claimed just $92 million in savings. For 2005, the figure was $100 million and for 2004, it was $136.8 million. Harrington said Thursday that this year the agency used a different method to calculate the savings, one that more accurately measures how Maine’s health care spending has been affected by the Dirigo initiatives.

The Maine State Chamber of Commerce was among the intervenors at the hearings trying to drive down the savings figure along with the Maine Association of Health Plans, Anthem Blue Cross and Blue Shield in Maine and the self-insured Maine Automobile Dealers Association.

Christine Ossenfort of the Maine State Chamber of Commerce said Thursday afternoon that the idea of capturing savings resulting from the Dirigo initiatives is “an idea worth pursuing” but cautioned that the calculation must be accurate to protect insured residents from paying more than they should to support subsidies for the uninsured.

Although the state originally intended the SOP to be paid out of insurance company profits, insurers have instead passed it on to policyholders in the cost of their monthly premiums.

“If savings are overstated, you truly are increasing health insurance costs for every person in the state,” Ossenfort said.

The contentious hearings and the board’ s vote are mile-markers along the convoluted path to establishing the final amount of the SOP. The next step is for the state’ s new insurance superintendent, Mila Kofman, to determine whether the Dirigo board’ s findings are accurate, which she will do through another round of hearings tentatively slated for early September. After that — as late as April 2009 — the Dirigo Health Agency board will establish the amount of the SOP, based on the value of paid insurance claims for 2007.

The SOP process allows the agency to tap the entire value of the savings or as much as 4 percent of paid medical claims, whichever is less. Four percent of paid claims for 2007 is estimated to be about $80 million.

The SOP established last year was $38.2 million, which equals 1.7 percent of paid medical claims for 2006. The previous year’ s was $34.3 million, or 1.8 percent of paid claims for 2005. The year before that, it was $43.7 million, or 2.4 percent of paid claims for 2004.

It’ s a payment — and an expensive process — that the agency and the governor sought to replace through legislation passed earlier this year that established, among other revenue streams, a sales tax on soft drinks and alcoholic beverages. The beverage tax, along with a fixed 1.8 percent tax on paid medical claims, is now the subject of a petition drive to put the new taxes before voters for a possible people’ s veto.

Dr. Robert McAfee, chairman of the Dirigo Health Agency board, on Thursday cautioned Maine voters to be thoughtful in their response to the ballot initiative. Though voters may object to the new taxes, he said, continuing with the SOP could easily prove more costly.

Based on paid claims, this year’ s SOP could be as high as $80 million, he noted, while revenues from the new taxes are expected to bring in about $57 million in the first year.

McAfee said the agency’ s new calculation method provides “a certain amount of validity and credibility” which the old method did not, and paints a more accurate picture of the public value of the Dirigo initiatives, including the DirgioChoice insurance program.

mhaskell@bangordailynews.net

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http://bangordailynews.com/2008/07/25/sports/dirigo-adjusts-savings-estimates-for-past-year/ printed on September 16, 2014