Michigan county taps three sources to fund health plan for working poor.

CHICAGO - Wayne County, Mich., this month began a health care program for the uninsured working poor that could be a model for other local governments seeking to cut health care costs and enhance their economies.

The program, which is known as Health Choice, has enough money to provide insurance for about 12,000 of the 150,000 uninsured working poor in the county, which includes Detroit, for one year. The cost is being shared equally among businesses, employees and hospitals.

Health Choice is an expansion of PlusCare, the county's health care program for the nonworking poor that began in 1988. Both programs provide services based on a health maintenance organization style of care in which primary care doctors are the focal point.

County officials said that Health-Choice and PlusCare set an example for national reform initiatives that seek to provide health care for people without adequate access to doctors or who can't afford insurance.

Michael Duggan, deputy county executive, said that because Health-Choice is new, the county does not have estimates on the potential savings of the program.

However, he said that "we know we have $100 million of uncompensated care in Wayne County. About 150,000 [working] people in the county are uninsured. What we are attempting to do is reduce that number."

Duggan said that HealthChoice also could help attract new businesses to the county.

"We can strengthen our employment base if we lower health care costs," Duggan said.

Health care typically consumes about 10% to 15% of county budgets nationwide.

Under HealthChoice, one-third of the premiums are paid by employers, another third by hospitals, which receive state, county, and federal funds to pay for indigent care, according to Patricia Kukula, director of Wayne County's patient care management system.

The total premium covering an individual in the program is $108 a month, meaning that an employee would pay $36 a month for health benefits.

Kukula said that the $4.5 million hospital portion for HealthChoice is derived from extra PlusCare funds. PlusCare is funded with $15.7 million of county funds and $7 million of state funds. The county and state funds are matched with $22 million of federal money, she said.

Kukula said that county officials are hopeful that HealthChoice one day will be funded entirely by the federal government.

Wayne County officials said that HealthChoice will help cut the cost of health care for the county, local businesses, and hospitals. They said that many poor people typically use high-cost emergency rooms for routine care, forcing hospitals to absorb the expenses or shift the costs to other patients.

Duggan said that HealthChoice also could help attract businesses to the county.

"We can strenthen our employment base if we lower health care costs." Duggan said.

Testifying before Congress on national health care reform in February, Wayne County executive Edward H. McNamara said that the county began Health Choice based on the success of PlusCare.

The implementation of PlusCare helped the county rein in health care costs, which contributed largely to the county's $135 million deficit in 1987.

"Wayne County has no deficit today, thanks in large part to [PlusCare]," McNamara said.

PlusCare has contributed to the financial health of hospitals in Wayne County, which have experienced a decline of about $100 million a year in their unreimbursed costs due to decreased emergency room visits, he said.

Thomas Goldenbogen, chief financial officer of Mercy Hospital in Detroit, which is involved in HealthChoice, said that the program may help the hospital reduce the amount of bad debts associated with treating the poor.

Under the program, Mercy's indigent care costs could drop by an estimated 33%, to $1.5 million a year, Goldenbogen said.

"It is encouraging because it is a way to reduce overall cost and take care of patients that are underinsured or uninsured," Goldenbogen said.

Participation in HealthChoice is limited to employees who earn less than $10 an hour, work at least 20 hours a week at a Wayne County business, and have not been covered by health insurance for at least a year. To participate in HealthChoice, a business must have at least five employees who qualify for the program.

People who receive Medicaid benefits are not eligible for the program.

Three local health care providers - Detroit Medical Center Care, A Total Health Choice, and Best Choice Alliance - are responsible for signing up small businesses and their employees into the Health-Choice program, which includes 41 hospitals and 2,750 doctors. Each provider is expected to enroll a minimum of 2,000 individuals in 1994.

Kukula said that a fourth provider could be added to the program in the near future.

Some rating agency officials said that if HealthChoice is successful, it could benefit Wayne County financially.

Steve Murphy, a director at Standard & Poor's Corp., said that it may take a while to determine the impact of the program on the county. If the program is successful in reducing use of emergency room care, there may be some direct savings to the county, he said.

David C. Pink, a senior analyst in the tax-based group at Fitch Investors Service, said that HealthChoice presents "no financial downside to the county."

HealthChoice "looks at achieving indigent care savings and extending it to a population that doesn't have coverage without any real financial obligation to the county," Pink said.

Health care policy analysts said that HealthChoice is a novel approach to improving people's access to medical care.

Mary Uyeda, director of the County Health Policy Project for the National Association of Counties, said that more and more counties are looking at new ways to decrease the cost of health care.

She said HealthChoice's strategy of distributing the cost of health care among employers, employees, and governments is innovative.

"That kind of cost sharing is a creative way to do what needs to be done without putting an inordinate burden on any one entity," Uyeda said.

Eric Banfield, adjunct policy analyst at the Heartland Institute, a Midwest think tank, agreed that the funding for HealthChoice is unique, but questioned whether the program will lead to cost savings for hospitals or the county.

"Basically it's a complex subsidy arrangement. It's rigged in a particular way to subsidize the poor with taxpayers' money," Banfield said.

Banfield said that the low cost for patients in HealthChoice could lead to overuse and higher overall costs for the program. If that occurs, Banfield said the higher costs would be shifted to users via service cutbacks, declines in quality, or incentives to drop coverage.

But providers involved in HealthChoice said that overuse will not be a long-term problem for the program.

Gary M. Francis, marketing manager for A Total Health Choice, one of the providers involved in HealthChoice, said that "initially, we anticipate that usage will be higher. As time passes, we believe access to quality preventive care will level out utilization."

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