Official finds $43.7M in Dirigo savings

After analyzing reams of conflicting data, calculations and testimony, Maine’s insurance superintendent Al Iuppa Saturday night issued his decision on the future funding of DirigoChoice, the subsidized health insurance plan offered through a partnership between the state and Anthem Blue Cross and Blue Shield of Maine.

Iuppa’s decision was greeted with relief by state officials, but insurers and business interests said Sunday it’s too soon to celebrate.

Iuppa found that the various initiatives of the Dirigo Health Act have resulted in $43.7 million in savings within the state’s health care system over the past year.

That figure will be used by the Dirigo Health Agency to calculate a “savings offset payment” for the coming year – an assessment on insurance companies and other health care payers that the agency will use to help low-income Mainers afford the DirigoChoice coverage.

In a written statement, Gov. John Baldacci hailed the superintendent’s ruling.

“The Dirigo Health savings have been put under the microscope of the state’s leading law firms and actuaries,” the governor said. “They’ve been examined by experts across the country and put through arduous scrutiny. There is no doubt at all that the savings are real. We should all be confident in the results of this intensive process and the decision by Superintendent Iuppa.”

Reached for comment Sunday morning, the governor’s health chief Trish Riley was jubilant.

“This is $43.7 million in unassailable savings,” she said. “It shows that Dirigo is working. People can disagree, but with this almost auditlike level of scrutiny, I hope there won’t be any further challenges.”

Riley, who earlier this year estimated DirigoChoice would need about $50 million to subsidize low-income enrollees in the coming year, said Sunday that the plan “will work with whatever we’ve got.”

Some changes may need to be made to the plan’s structure, she said. “The point is to make the program work with what’s available [from savings],” Riley said.

Iuppa’s decision strikes a conservative middle ground between the $136.8 million in savings originally claimed by the Dirigo Health Agency board of directors – a figure the board later revised downward to $110.6 million – and the approximately $30 million that payers were willing to allow.

Still, on Sunday payers said it was possible the decision will be appealed.

In his decision announced at about 8 p.m. Saturday, Iuppa found savings of $33.7 million from hospitals’ voluntary reductions in per-patient spending. He identified $2.7 million saved through the expansion of health care coverage so providers lose less money providing free care. An additional $7.3 million is saved, he wrote, through adjusted Medicaid payments to hospitals and physicians.

During hearings held last week, insurers argued that health care savings are not reflected in the rates hospitals have been willing to pay for their services, and that insurers should not be assessed for savings they haven’t yet seen. Iuppa’s ruling states the burden is on both groups to pass savings on through lower rates.

“Measurable reductions in the overall cost of health care constitute recoverable savings,” Iuppa wrote. “It is the responsibility of [payers] and providers to negotiate in good faith to pass these savings through to consumers, whether or not they would do so in the absence of the Dirigo Act.”

Mark Ishkanian, communications director for Anthem, said it’s important to be sure the savings are accurately figured.

“We want to make sure that the savings achieved to date are truly there in the system, that consumers and employers can have confidence that they’re measurable and having the effect [the state] is saying they have,” he said.

Anthem actuaries will closely read Iuppa’s report, he said.

Ishkanian added that there should now be greater focus on Dirigo’s longer-term efforts to hold down health care spending, including the establishment of a statewide health plan and standardization of medical treatments.

Kristine Ossenfort, senior governmental affairs specialist with the Maine State Chamber of Commerce, said Sunday that the Chamber is pleased Iuppa has taken a more “realistic” view of Dirigo savings than that proposed by the Dirigo board.

But, she said, it is simplistic to think that insurers should just strike harder bargains with providers in order to recover those savings. State mandates that require regional provider networks give doctors and hospitals a negotiating edge, she noted, “especially if they’re the only game in town.”

Ossenfort would not rule out the possibility of a legal appeal of Iuppa’s decision, which may be made within 30 days.

Superintendent Iuppa’s decision may be read at the insurance bureau’s Web site: www.state.me.us/pfr/ins/insindex.htm.

The Dirigo Health Agency board will meet at 1 p.m. Thursday, Nov. 10, at 211 Water St. in Augusta to establish how much of the identified savings should be tapped for the DirigoChoice offset payment.