State Perspectives on Health Care Reform: Oregon, Hawaii, Tennessee, and Rhode Island

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For the States, implementation of health care reform has been a difficult task. Although the section 1115 demonstrations remain the most effective way for States to expand coverage to uninsured populations and streamline the Medicaid process, the actual execution of reform plans by States has, at times, been arduous. Some implementation issues faced by States have been hard to address in that these are pioneer efforts by both the States and the Federal Government. Knowing how States have overcome identified problems and seeing the lessons learned thereby can provide insight into both the positive and negative aspects of the process of State health reform. This article is intended to give a voice to the States that were asked to share their knowledge and experiences with the State health care reform community.

HCFA's position must, however, be made clear. That position has always been to ensure the health and well-being of its beneficiaries. HCFA's goal is to ensure that the recipients will not experience serious problems in accessing services, and providers will not experience payment delays. What the eventual outcome of State reform efforts will be has yet to be determined. However, the four States whose perspectives are presented here give a good profile of each one's experience.



Oregon's Medicaid program underwent a major reform beginning February 1, 1994, with implementation of its section 1115 Medicaid demonstration project under the Oregon Health Plan (OHP). At that time, the program was expanded to cover persons with incomes below the Federal poverty level. To this end, the traditional package of benefits was exchanged for one based on a prioritized list of health services. Most clients began the process of enrolling in managed care, primarily prepaid health plans.

Beside the effect on new enrollees, these changes had an impact on Medicaid clients who were low-income pregnant women, young children, or Aid to Families with Dependent Children (AFDC) beneficiaries. Beginning in January 1995, the remaining Medicaid clients (aged, disabled, and children in substitute care) were brought under the demonstration, and the prioritized list was expanded to include mental health and chemical dependency services.

After evaluating the last few years of the planning process for the OHP, as well as the limited time of actual program operation, there is now a better perspective of successes and mistakes. There has been much learning and adjusting in the demonstration project. The health care providers and managed care plans have been partners in helping design the program and in making necessary changes. Overall, it was found there was need to be flexible. The demonstration had both expanded Medicaid and required fundamental changes to the basic program, each of which presented opportunities for chaos.

Oregon's Medicaid program changed in a number of ways under the demonstration, including: * An expansion of eligibility and simplification of its criteria and processes. * The use of a prioritized list of health services to determine the benefit package. * The aggressive movement of clients (and providers) into prepaid plans. * Payments to prepaid plans based on the estimated reasonable cost of providing the covered services to serve as a means to assure access and end cost-shifting due to Medicaid under-reimbursement.


The eligibility criteria and processes were designed to more closely resemble an insurance program than a social welfare program. A simple 1-month gross income test was required to prove income below the poverty level, no assets test was included, and eligibility was guaranteed for a 6-month period. Information sessions were held throughout the State for people to receive help in applying, and a toll free telephone number allowed interested people to request information and application packets. …