BCBSA Report Finds State Lawmakers' Health Agendas Derailed By Fiscal Crises And Rising Costs

7/10/2002

From: John Parker of the Blue Cross and Blue Shield Association, 202-626-4818, e-mail: john.parker@wro.bcbsa.com

WASHINGTON, July 10 -- Worsening fiscal crises and rising healthcare costs strongly influenced state legislative agendas around the country over the past six months, according to a new analysis by the Blue Cross and Blue Shield Association (BCBSA). The "State of the States: Mid-2002 Update" authored by BCBSA's Susan Laudicina, director of state services research, is the companion survey to the annual State Legislative Healthcare and Insurance Issues: 2001 Survey of Plans released earlier this year.

"Severe budget woes forced most legislators to retreat from their goal of extending coverage to uninsured residents and financial pressures also made dealing with double-digit increases in prescription drug costs even more critical," said Laudicina. "The fiscal crises and other concerns also resulted in less emphasis on health plan regulation for the first time in recent years."

To develop the mid-year "State of the States" report, BCBSA surveys each of the 43 independent BCBS Plans at the close of the state legislative sessions to assess the leading issues of the year. At the time of the survey's completion, all but 10 state legislatures had adjourned for the year.

The Budget Crisis and the Uninsured

As the fiscal health of states around the country deteriorates, the significant growth in health expenditures is increasingly unsustainable. Overall, Medicaid costs rose 11 percent nationwide last year. Many states reported that spending on prescription drugs alone increased by more than 20 percent. These sharply rising health costs, in tandem with lower revenues, are threatening past gains made by states in expanding access to care.

In contrast to last year, few states had the resources in 2002 to extend coverage to the uninsured. One exception is Maryland, which became the 31st state to create a medical high-risk pool to provide coverage to medically uninsurable residents.

Prescription Drug Costs and Access

During 2002, state officials set their sights on containing drug prices through such means as manufacturer rebates, purchasing pools and tighter regulation of drug formularies. Legislation was debated in 25 states and has been enacted in 12 to date.

Regulating Healthcare Plans

There was less emphasis on oversight of health plans during the 2002 session, compared to recent years. For example, health plan liability laws were introduced in only 13 states and none have been enacted to date. Even mandated benefit laws are not proliferating as in the past: 25 were enacted during the first half of this year, compared to 75 last year.

One reason for the decline in managed care regulation is that lawmakers have been distracted and overwhelmed by severe budget crises. Another reason is new priorities have emerged, such as the need to restructure and upgrade public health systems to counter the threat of terrorism.

"The number of new laws to regulate health plans may also be declining because legislators are now hearing the message that mandates and liability legislation would result in even higher healthcare costs for consumers," said Laudicina.

Prospects for State Legislation in 2003

According to BCBSA's Laudicina, the following developments are likely in 2003:

-- The budget crisis will worsen and could force some states to cap or freeze enrollment in their Medicaid or CHIP programs;

-- In spite of the difficulties, a few states will continue incremental efforts to make coverage more affordable for vulnerable populations;

-- The prescription drug cost spiral will continue, spurring lawmakers to embrace new initiatives to rein in inflation;

-- State cost-cutting efforts will make it difficult to maintain adequate payment levels for managed care plans that serve public beneficiaries; and,

-- Legislators will be wary of provider-backed proposals to weaken health plan networks of participating providers, which protect consumers from the high cost of care.

The Blue Cross and Blue Shield Association is comprised of 43 independent, locally operated Blue Cross and Blue Shield companies that collectively provide healthcare coverage for 84.4 million -- nearly 30 percent of all Americans. For more information on the Blue Cross and Blue Shield Association and its member companies, visit http://www.bcbs.com. For more information on Blue Cross and Blue Shield Association's policy positions and a copy of the complete "State of the States: Mid-2002 Update," visit http://www.BCBSHealthIssues.com.