June 19, 2019


The repeal of taxes on beer, wine and soda to fund the Dirigo Health program leaves lawmakers with the difficult task of keeping the controversial program afloat. They should focus their efforts on capturing savings and reducing costs, while not losing sight of the fact that Dirigo is more than a subsidized insurance program.

Although the insurance component of Dirigo gets the most attention, the program also includes a statewide health plan that emphasizes preventive measures to improve the health of Mainers, thereby reducing medical expenses. The Maine Quality Forum and Advisory Council on Health System Development aim to pinpoint why health care costs are rising and to improve quality by allowing people to compare the costs and outcomes of procedures at hospitals across the state.

Dirigo has been funded by a so-called savings offset payment. The SOP is a calculation of the health care savings resulting from Dirigo reforms, which included quality improvements and cost reductions. The savings are primarily used to extend health care policies to those without insurance.

This year, the Dirigo board said the SOP was $149.6 million; the superintendent of insurance reduced it to $48.7 million, still important savings.

From the beginning, the SOP has been challenged. The Maine State Chamber of Commerce, which sought to repeal the beverage taxes, filed additional legal challenges to the SOP during the recent referendum campaign. Although the payment has been upheld by the courts, calculating and defending the SOP costs the state between $3 million and $5 million a year.

That’s why lawmakers looked for new ways to fund Dirigo and settled on the tax on soda, beer and wine. In addition, a 1.8 percent surcharge was to be assessed on all insurance claims. The surcharge and beverage tax also were meant to pay for other health insurance reforms aimed at bringing more people, especially young people, into the market to encourage additional companies to sell health insurance in Maine and to reduce costs.

With the repeal of the taxes on Election Day, these reforms remain but the new funding source is gone and the SOP remains on shaky ground.

Gov. John Baldacci has said he will ask the Obama administration for a waiver to allow Medicaid funds to partially fund the program. Such a request has been turned down in the past.

Given that the state has diminished financial resources – lawmakers soon will begin to look for ways to trim at least $500 million from the budget – changes to Dirigo may be inevitable. Giving up the idea of using savings to pay for expanded insurance and other reforms should not be.

The first step, which is part of the Dirigo program, is to examine medical costs directly to bring them down. Requiring hospitals and medical practices, for example, to report all their capital expenditures, not just the quarter that require state approval, would open a new avenue for examining spending and priorities.

The coming legislative session will be dominated by cutting costs. When it comes to health care, Dirigo is part of the solution.

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