Dirigo claims $190M in ’07 savings

The Dirigo Health Agency announced Monday that it saved the Maine health care system $190.2 million during 2007, the fourth year of Gov. John Baldacci’s multifaceted Dirigo Health initiatives. The figure represents a significant increase over previous years.

The agency faces stiff opposition from Maine insurance companies, businesses and health care policyholders who will have to pay the agency an as-yet-undetermined portion of the calculated savings to fund its operating expenses and subsidies for low-income enrollees in the state’s embattled DirigoChoice insurance program.

According to agency executive director Karynlee Harrington, this year’s $190.2 million figure reflects savings in three general areas: lower per-patient hospital costs resulting from hospitals voluntarily holding down cost increases in accordance with Dirigo guidelines; a reduction in the amount of free care provided by hospitals because more Mainers have health care coverage through Dirigo or MaineCare, the state’s Medicaid program; and a $6.6 million policyholder reimbursement from one insurance company that failed to meet the Dirigo initiative’s requirement that at least 78 percent of every small-group premium dollar be spent to pay health care providers.

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 Monday that this year the agency used a different method to calculate the savings, one that employs “multistate, multivarient” data to determine how Maine’s health care spending has been affected by the Dirigo initiatives. The new method resulted in the higher and more accurate savings calculation, she said.

In the complex process laid out by the 2003 law that created the Dirigo Health Agency, the agency board must now review additional – often conflicting – health spending information from insurers, providers and other sources and come up with its own savings calculation. In previous years, the board’s calculation has been significantly lower than the agency’s.

Arguments and supporting documentation from all sources will then be presented to the state’s superintendent of insurance at a formal adjudicatory hearing, scheduled for July 22 and 23. Superintendent Mila Kofman, recently appointed to replace acting superintendent Eric Cioppa, must then rule on the allowable savings and determine a portion of those savings to be returned to the Dirigo Health Agency in the form of the “savings offset payment” – or SOP – from insurers. The SOP cannot equal more than 4 percent of total paid insurance claims for the year. Last year’s SOP was $32.8 million.

The convoluted process has resulted in two lawsuits against the agency to date and has generated significant negative response from some business groups and consumers, whose monthly premiums have increased to compensate insurance companies for their loss of profit.

In the recently concluded legislative session, lawmakers approved a tax increase on beer, wine and soft drinks to partially replace the contentious savings offset payment in funding the Dirigo Health Agency and the DirigoChoice insurance program. That tax increase is now the subject of a so-called “people’s veto” campaign aimed at placing the issue on the November ballot.

According to a press release issued Monday by the advocacy organization Consumers for Affordable Health Care, the “Fed Up With Taxes” political action committee is funded exclusively by the beverage and hospitality industry and the self-insured Maine Automobile Dealers Association. The consumer group, a consistent defender of the DirigoChoice program, said a report filed Monday with the State Ethics Commission showed that about half of the nearly $200,000 raised so far has been paid to a California-based company that is paying people to collect signatures for the tax veto petition.

DirigoChoice covers about 18,000 Mainers, including employees of small businesses, the self-employed and individuals not part of an insured group. Critics say the subsidized program has proved expensive, unsustainable and ineffective in its goals of decreasing the number of uninsured Mainers, stimulating competition and holding down the cost of health care in Maine.

mhaskell@bangordailynews.net

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