Booster Shot?: The Governor is Now Acting on His Own to Extend State Health Care Subsidies

Oct 1, 2007



Gov. Rod Blagojevich launched his second term by declaring the state has a "moral obligation" to ensure Illinoisans have access to affordable and comprehensive health care.

The time is now, his administration says, regardless of the state's compounding fiscal obligations and despite state lawmakers' hesitancy to take on a massive expansion of health care. Citing recently released U.S. Census Bureau numbers, the governor's office urges immediate action as fewer people were in poverty in 2006 than in 2005, but more people lacked health insurance.

"The numbers are going in the wrong direction," says Krista Donahue, chief of policy at the Illinois Department of Healthcare and Family Services, which manages the governor's health programs. "This issue is really hitting middle-income families. You don't have to be poor to be without health care these days. 

Families can go bankrupt paying medical bills."

The administration also cites a 2004 study by Harvard's law and medical schools showing that in 2001 nearly half of bankruptcies studied in five states were caused by medical problems. Most of the 1,771 people surveyed filed for bankruptcy because of medical bills — despite having health insurance.

But the Blagojevich Administration doesn't mention that the study also recommends drastically reforming the nation's health policy by following Canada's lead and enacting a single, public health insurance plan that replaces all private plans. "[States] need to take politically very difficult steps," says Dr. David Himmelstein, lead author of the study and associate professor of medicine at Harvard. "I think that there's nothing short of a public insurance program that replaces private insurance that can do it."

"Universal health care" in various forms is a hot-button issue debated by the nation's presidential candidates, but Democrats proposing a type of universal health care disagree about how to pay for it and whether to require businesses and individuals to carry it. 

Massachusetts, the first to enact such a mandate, serves as their only case study. The program started off with logistical problems in processing paperwork for all residents and determining which level of subsidy, if any, they qualify for, causing delays in coverage. Some Commonwealth residents are learning that so-called universal coverage doesn't guarantee that the cost of health insurance goes down.

Massachusetts' mandate also highlights the questions: How can the states and the feds define what's affordable for families? What is the government's responsibility in ensuring that all families, particularly those considered middle-income, can afford medical coverage?

Illinois takes the approach that in the absence of federal action, the state should help those middle-income families get access to comprehensive and affordable health care.

Blagojevich's first-term claim to fame, the All Kids health insurance program, gained a national spotlight last year for being one of the first states to offer health insurance to all children. The state's existing subsidy programs, KidCare and FamilyCare, already were available to uninsured children from low-income families, but the governor's new All Kids program extended state-sponsored health insurance to children regardless of income and citizenship status. The administration eventually folded KidCare and FamilyCare into the All Kids program.

Blagojevich introduced All Kids in 2005 with few details but still won legislative approval by members of both political parties. The program subsidizes such services as medical and dental appointments for all children, but families pay monthly premiums and co-payments based on income, with higher-income families paying near-market prices for other medical services. Some families with private insurance are eligible for a rebate from the state. 

About 1.38 million children are enrolled in All Kids, according to the Department of Healthcare and Family Services. Most of those children are helped through Medicaid matching dollars, while 176,000 children are helped through a state and federal partnership called the State Children's Health Insurance Program. But the majority of the state's tab is covered by estimated cost-savings, about $57 million a year, through requiring children to enroll in a type of primary care that emphasizes prevention and disease management. In its second year, more details have been worked out, but the effectiveness and cost of the program are still works in progress. 

After laying the groundwork with All Kids, Blagojevich announced his second-term priority: to insure all adults. State lawmakers stymied his proposal for a new program, so the governor trimmed his plan to expand existing programs at less cost to the state. But it still lacks legislative support and a continuous funding source. Blagojevich isn't letting that stop him, and his actions throughout this year's record overtime session show he'll do most anything to expand health care.

"I will do what I can, through executive authority, to take care of some of the most pressing needs that were left out of the budget," he said in an August statement shortly after the legislature approved a state budget without earmarking money for his health care plan.

To expand existing subsidy programs without legislative approval, Blagojevich will have to change some state rules. That means some initiatives will be subject to review by a state rulemaking committee made up of lawmakers from both political parties. And because lawmakers didn't fund the expansion, it's questionable how the state can pay for it in years to come.

The governor's original proposal gained support from labor and teachers' unions, Chicago ministers, small businesses and many grassroots organizations advocating for children or the elderly. 

But the plan never got off the ground after it was unveiled last spring. It bombed in the House because Blagojevich wanted to fund it by levying what has been called the largest tax increase in Illinois history. 

He also proposed a tax on businesses that employ more than 10 people but don't offer health benefits.

State Rep. Rosemary Mulligan, a Des Plaines Republican, said the plan to offer state-sponsored health insurance to adults initially had potential, but frustration swelled as lawmakers realized the governor wouldn't back down from the unpopular business taxes.

Blagojevich never gave up. As late as this summer, he used health care as his ultimatum for signing a much-delayed state budget. When the General Assembly again denied his health care initiatives in their final spending plan, Blagojevich announced he would cut spending and change state rules to implement a scaled-back health plan anyway.

"It was not a priority for many [law-makers] when they put together a budget," says Abby Ottenhoff, the governor's spokeswoman. "We will work within the budget that they did pass, set some new priorities and make sure that we can expand coverage to half a million more people. And in the long run we'll continue to make sure every person in Illinois can get health care."

Blagojevich used his veto pen to cut $470 million, according to the Center for Budget and Tax Accountability, more than enough to cover the estimated first-year costs of his health care expansion. The administration says the projects that lost funding weren't items the state could afford or didn't reflect the primary role of state government. The projects saved from the budget ax, however, included those sought by Democrats and Republicans serving on the legislative rulemaking panel. The Joint Committee on Administrative Rules is made up of six Democrats and six Republicans.

Mulligan is one Republican committee member whose district projects were spared from the cuts.

"He crafted a budget so that he left things in and out so people would have to beg or be beholden to him," she says. "He put everyone in JCAR in an ethical box, or an unethical box. How will people know we're voting for something because it's legitimate and we should be able to vote for it?"

Ottenhoff denies the governor's office had political motivations for saving those particular projects and says, "The governor also took into consideration who's been eager to support the right priorities." 

She adds that members of the rulemaking committee should consider that they enjoy state health benefits at the taxpayers' expense. "These are issues that JCAR should weigh on their merits. And some of the things we're doing, such as an expansion of FamilyCare, are things that JCAR has already considered and approved in the past, so we'd hope that they will look at the goals and what the benefits are for people who need health care."

The Joint Committee could have to review the agency's proposed parameters of the programs, the reimbursement rates for providers and the income guidelines for beneficiaries.

"The bottom line is, what are the rules going to be, and what is it going to cost? Where's he's coming up with the money?" asks Mulligan. She adds that she wants to avoid a repeat of All Kids. 

In that program, details didn't come out until late in the 2005 session. The committee approved the rules, and the administration implemented the first phase in July 2006.

Like All Kids, the governor's new health care expansion lacks a specific funding source. That means the General Assembly will have to decide each year how to shuffle general revenue in order to fund the state's priorities, whatever they may be.

"As the governor likes to say, any budget is really a moral document, and it outlines what the state's priorities are," Ottenhoff says. "And the funding follows those priorities." 

Mulligan says the lack of dedicated state funding essentially creates an "open-ended entitlement program" with an obligation to pay for the health benefits regardless of whether the state has enough general revenue that year.

"I think the question is, if he's expanding a program but there's no appropriation for it, can he just go ahead and do that?" Mulligan says. "They got away with it with All Kids, but some of this is new and it's quite expensive."

Blagojevich's plan aims to help about 500,000 people. The first portion announced last month would extend All Kids to 19- to 21-year-olds who have chronic illnesses. Otherwise, they are too old for All Kids but are unlikely to be able to afford the private insurance plans that cover pre-existing conditions. According to the administration, the All Kids expansion doesn't need review by the Joint Committee. It's expected to cost about $15 million in the first year.

One initiative that would need review by the rulemaking committee would expand a state-run program, FamilyCare, to assist families whose incomes are 400 percent of the federal poverty level. That's a family of four making about $82,600 a year, which is up from the 150 percent of the poverty level threshold. By administration estimates, the initiative could help about 147,000 people at a cost of $43 million to the state.

Expanding state-sponsored health care to middle-income adults is deemed irresponsible by opponents but necessary by supporters, such as Jim Duffett, executive director of the Illinois Campaign for Better Health Care, a nonprofit organization based in Champaign. The group advocated for Blagojevich's more aggressive original plan, but it's still on board with the scaled-back version. Duffett says the revised plan at least lays the framework for covering the uninsured at the same time it contains costs.

A family of four making about $82,000, he says, could still have trouble paying for a bare bones policy.

"If [you] end up netting $50,000 or $55,000, and you're paying $12,000, $13,000, $14,000 [a year] for health insurance, you can't do it. There's got to be some avenue to help them. At least this expansion on FamilyCare definitely gives people an opportunity to access health care."

Even if the Joint Committee objects to the income guidelines or any other part of the governor's health care expansion, the rules could still become law eventually. The process allows the committee to suspend the rules so the administration can gather more information, erase the problematic parts or take a different approach. Either way, the committee's decisions are rarely permanent, says Vicki Thomas, the panel's executive director.

"The whole point is to keep adoption at bay long enough that the problems can be worked out," she says.

Still, if any problems were to be ironed out and the expansion rolled out next year, the long-term outlook could complicate the decision-making process.

Blagojevich's determination to expand health care comes at a time when financial reports are raising concerns about the state's ongoing fiscal obligations, such as the increasing costs of Medicaid, public employee pensions and retirees' health care. 

Because the state's economic health affects the number of people seeking public assistance, recent data could give pause.

Edward Boss, chief economist for the state's Commission on Government Forecasting and Accountability, says the state economy showed signs of weakness in the first seven months of the year. Unemployment rates exceeded federal rates and the state's revenue from sales tax receipts slowed.

"We've seen [revenues] above expectations in [the] corporate and personal income tax, meaning employment's been all right," he says. "But when you start seeing the sales tax, which is more current, that's a worrisome problem."

This provides a warning when it comes to gauging the long-term impact of new programs, he says.

"When you look at the Illinois economy and you look at major new proposals that are being proposed, you have to look at an economy that is starting to show some deterioration."

But the time is now, according to the administration.

"There's a real opportunity now because more and more states are stepping up to the plate because the federal government is not addressing this important issue," says Donahue of the Illinois Department of Healthcare and Family Services. 

"The timing really is right with Massachusetts having done [its] statewide reform, and at least five other states are considering statewide reform. [And] each year the Census comes out with more and more numbers saying the numbers are going in the wrong direction. There is no other time." 

Like All Kids, the governor's new health care expansion lacks a specific funding source. That means the General Assembly will have to decide each year how to shuffle general revenue in order to fund the state's priorities, whatever they may be.

Illinois Issues, October 2007