A monthly publication that provides analysis of important health care issues under consideration by the legislature, executive branch, and professional associations.

Written by Peter Pratt, Ph.D., Vice President and Senior Consultant for Health Care Policy, Jeff Williams, Senior Consultant, and Lisa D. Baragar, Consultant for Health Policy.

An Interview with Sen. Dale Shugars about Health Policy — January

January 1997

An Interview with Sen. Dale Shugars about Health Policy

by Peter Pratt and Jeff Williams

Setting up a framework to convert nonprofit health care organizations, especially hospitals, to for‐​profit status is the top priority of the Michigan Senate’s Committee on Health Policy and Senior Citizens, according to its chair, Sen. Dale Shugars (R‑Portage). In a talk last week with Public Sector Consultants, Senator Shugars looked back over the last legislative session and ahead to the new one.

1995 – 96 Session

Senator Shugars characterizes his first two years as the upper chamber’s health policy chair as “a great learning experience for me, the committee, and the Senate.” He says the committee’s public hearings helped him to better understand health care issues from the perspective of providers, consumers, and health systems. Reports from eight task forces — convened in 1995 on such topics as managed care, long‐​term care, health data and consumer information, and rural health care — form the basis of his thinking on health care. “While the committee didn’t always follow the recommendations of the task forces, their work was the foundation for ours.”

As chair, the senator is very pleased that the committee’s work was not dominated by any one member’s personal agenda. Instead, the members, as a group, listened to citizens and experts at several public hearings around the state, gathering information and seeking perspective, before fashioning legislation. Senator Shugars believes most health policy issues to be nonpartisan and strives to focus the debate on the best practices for Michigan’s health care system. He isn’t concerned that the new partisan division of the legislature will adversely affect health policy issues. “John Jamian [formerly the chair of the House Health Policy Committee] and I got along very well, and I hope the same is true of my new counterpart [a Democrat] in the House in this new session.” Senator Shugars also does not see term limits to be an obstacle to policy development in health care.

Something that does concern the senator is the complexity of the health care system. For example, because such laws as the Employee Retirement Income Security Act (ERISA) remove segments of the health care system from state legislative oversight, state lawmakers cannot affect major segments of health policy. Moreover, he says, many providers and consumers lack knowledge about overall health care financing issues, and one consequence is that there is the potential that any state policy change will have unintended consequences.

Patient Bill of Rights

Looking back on his first two years as chair, Senator Shugars is proudest of legislation that promises treatment choice (the Dignified Death Act) and assurance of coverage (the Patient Bill of Rights).

He reports that the 12 hours of public hearings about the Patient Bill of Rights changed some of his initial thinking about the package, by shedding light on some potential problems. For example, the hearings helped to convince him that excluding preexisting conditions was necessary to ensure that healthy people do not wait until they become ill before purchasing health insurance.

The senator does, however, believe that the final compromise on the bill of rights legislation fell short in one respect — it doesn’t meet the needs of the uninsured and uninsurable. Although Blue Cross and Blue Shield of Michigan is required to offer policies to everyone, the senator maintains that there is little awareness of this among the uninsured and uninsurable. Uninsured working people may need tax incentives — either for themselves or their employer — to enable them to purchase health care coverage. Although he is a proponent of medical savings accounts, Senator Shugars acknowledges that they may not help the uninsured.

Tobacco and Minors

Most disappointing to Senator Shugars was the defeat of last session’s SB 730, which would have changed possession and use of tobacco products by minors from a criminal misdemeanor to a civil infraction. The stalemate between the anti‐​tobacco coalition and the tobacco companies frustrated the chairman. Supporters of the measure argued that current law makes prosecuting attorneys reluctant to prosecute, and judges reluctant to find guilty, a minor who smokes or chews tobacco, because it means establishing a criminal record for that minor; this reluctance, says Senator Shugars, makes the current law ineffective in curtailing minors’ tobacco use. Opponents of the measure argued that the bill did not go far enough, especially in failing to repeal state law preempting local ordinances against minor possession of tobacco; the senator believes that local ordinances will be ineffective as well — minors simply will go elsewhere to get what they want. He believes that learning the long‐​term effects of smoking are not an adequate disincentive for teenagers: 50 years is forever to a teen. “Teens need to know that when they make a bad decision, there will be short‐​term consequences,” says Shugars, and he is considering a measure to deem minors caught with tobacco ineligible for a driver’s license until they are aged 18.

Priorities in the New Session

The Senate Health Policy Committee’s top priority during the 1997 – 98 session will be to develop state policy on the purchase/​merger of for‐​profit and nonprofit health care entities, especially hospitals. Regulations on such conversions may include requiring public hearings on each sale/​merger, public disclosure of terms of agreement, and a community‐​benefits assessment. The senator also wants to explore levying a conversion fee for privatization, believing that some portion of a sale’s proceeds should go back to the state and local community in return for the entity’s prior tax‐​exempt status. Conversion fee revenue might be used to subsidize health insurance premiums or tax incentives for working uninsured or uninsurable Michigan residents.

In addition to holding three meetings around the state on the entity‐​conversion issue, the committee also plans to conduct a special public hearing in the next few months to review the privatization of the Accident Fund, with the objective of identifying lessons learned that can assist the committee in making policy on hospital privatization.

Other issues likely to come before the committee are pain management, scope‐​of‐​practice considerations (such as permitting advance‐​practice nurses to write prescriptions), practice of interstate medicine, voluntary reporting of consumer‐​oriented information, managed‐​care oversight, confidentiality, and long‐​term care, but the senator indicates that legislation on some or all of these matters may not be necessary. When asked about the Medicaid program’s request for proposals on managed care and request for ideas on behavioral services, the senator said he prefers that the legislature assume a watchdog role, monitoring the processes but not necessarily enacting further laws.

Senator Shugars does not expect a strong push to reform or repeal the state’s certificate of need (CON) program. He notes that it would be very tough politically to change the CON program and adds that there really is no strong force behind eliminating it. Grassroots support for changes also seems unlikely, as most Michigan residents know little about the CON program and do not understand its role in the health care system.

Leadership by Example

Senator Shugars is energetic and excited about the coming legislative session. As a believer that citizens have a responsibility to help themselves stay healthy — by eating right, exercising, and avoiding risky behaviors such as smoking — the senator proudly points out that he finished his first marathon last fall; he says that as a health policy leader, he should set an example by living a healthy lifestyle.

Copyright © 1997

An Interview with Rep. Joseph Palamara — February

February 1997

An Interview with Rep. Joseph Palamara

by Lisa D. Baragar

With winter break, the governor’s state of the state address, and the executive budget presentation out of the way, Michigan legislators are moving into high gear and beginning to tackle today’s most pertinent health care issues, including for‐​profit hospital acquisitions, the Youth Tobacco Act, and a wealth of children’s and seniors’ issues.

Leading the way on these matters in the Michigan House of Representatives is Rep. Joseph Palamara (D‑Wyandotte), the new chair of the House Health Policy Committee. Public Sector Consultants recently spoke with Representative Palamara, who reflected on his seven‐​term tenure as a committee member and spoke about his expectations as committee chair.

Cooperation is the Key

Representative Palamara characterizes his fourteen years as a member of the House Health Policy Committee as enjoyable: He likes the challenge of dealing with many complex health issues and working with others who share the common goal of improving the state’s health care system. “The thing that impresses me most about the committee,” he says, “is the high level of cooperation. There are very few issues that have passed on a straight party‐​line vote.”

As chair, the representative is dedicated to fostering continued bipartisanship. He wants members to resolve differences they have on matters before they enter the committee room rather than after, and he believes that members are willing to listen to each other’s ideas and discuss them fairly.

He is confident that the fact that his Senate counterpart is a Republican will not impede this goal: Representative Palamara describes Dale Sugars, who chairs the Senate Committee on Health Policy and Senior Citizens, and the members of the Senate committee as intelligent, hardworking people with agendas similar to his own. “The fact that [in the Senate] three members are Republicans and two are Democrats makes no difference to me,” he adds. “The bottom line is that we all will work together.”

So far, the greatest challenge Representative Palamara has faced since accepting his chairmanship is keeping up with the number of calls and letters he receives from constituents and others concerned about health policy. “Quite frankly,” he confided, “the volume is overwhelming.”

Patient Bill of Rights

Before becoming health policy chair, Representative Palamara worked with other legislators to pass last session’s Patient Bill of Rights. The passage of House Bills 5570 – 74, introduced by his predecessor as chair, John Jamian, was one of his proudest moments as a legislator. He says “[The initiative] called for a lot of hard work and a lot of input from many different people.” Among the package’s many important provisions are requirements for extensive disclosure of health plan provider information to the public; limits, or in some cases, prohibitions on preexisting‐​condition exclusions; and guarantees of timely action on patient grievances. “I believe we made a real difference when we passed those bills.”

Hosptial Conversion

Despite his commitment to bipartisanship, Representative Palamara concedes that there may be some issues on which not all committee members will agree. One is not‐​for‐​profit to for‐​profit hospital conversions.

To date, four bills addressing this topic have been introduced in the Senate. Senate Bills 149 – 50 (introduced by Senator Schwarz) require the Michigan Department of Consumer and Industry Services and, in certain circumstances, the attorney general (AG) to approve all hospital acquisitions. Another, SB 158 (introduced by Senator Shugars), requires similar approval from the Michigan Department of Community Health (MDCH) and the AG; Senator Shugars also has introduced a fourth bill (SB 156), which requires hospitals to report the community benefits they provide, so that policymakers can determine whether services have been lost as the result of a change in ownership.

Although the House Health Policy Committee will not deal with these bills until they are passed by the Senate, Representative Palamara believes that members must begin to prepare to take them up. “The issue will require a lot of discussion,” he says. “Even if we do not prevent hospital conversions, we need to have proper oversight and disclosure in place in order to provide the most protection possible for communities.” He adds that such measures properly should protect providers and physicians as well as patients.

Medicaid Managed Care

One of Representative Palamara’s first moves as health policy chair was to appoint a subcommittee that will focus on Medicaid managed‐​care issues. The nine‐​member Medicaid Managed‐​Care Subcommittee, co‐​chaired by Reps. Sharon Gire (D‑Clinton Township) and Raymond Murphy (D‑Detroit) already have begun hearings — in Detroit, Flint, and Ann Arbor — to gather public testimony on the transition of Medicaid recipients into the managed‐ care system. In appointing the group, Representative Palamara said “This is one of the hottest health policy initiatives in the country, and we want to take a closer look at the concept, to ensure that the quality of care is not compromised while we save money.”

Public focus has been on Medicaid managed care since last year, when the MDCH announced that it would put out a request for proposals (RFP) to fully capitate Medicaid managed care in five southeastern Michigan counties: Washtenaw, Macomb, Genessee, Wayne, and Oakland . The RFP was released in November, and bids are due March 3. The state expects to award the first contracts in July and begin implementation in October.

Representative Palamara is very confident that the MDCH will work with the subcommittee in exploring the pros and cons of the plan. He also is certain that the subcommittee will have a great deal of input on the governor’s proposed MDCH budget — 65 percent of which is allocated to the Medical Services Administration (the state’s Medicaid agency).

Other Issues

The representative believes that prohibiting managed‐​care organizations from inserting “gag clauses” into their contracts with physicians (such provisions preclude physicians from telling patients about certain treatment options) also will be taken up by the legislature this year.

Representative Palamara thinks that the Youth Tobacco Act likely will come under consideration as well. “Tobacco use by minors is one issue that extends outside of the health care industry; it involves retail shop owners and kids,” he notes. He does not expect that legislation prohibiting the sale of tobacco products to minors will eliminate use, but he is optimistic that a revised policy will at least discourage it.

The End is in Sight

Representative Palamara believes that term limits make it even more important for policymakers to deal now with such issues as hospital conversions, Medicaid managed care, and youth tobacco use: “Legislators who take office after term limits [go into effect] may have priorities different from those of us in office now; they also may not have the experience that current members do in dealing with these issues.” He points out that twelve of the committee’s seventeen members are serving their last term in the House — he is one of them.

Despite the fact that his career as a Michigan representative is coming to a close, Palamara is excited about this legislative session. Although there are many competing interests in health care, he believes he has kept his focus on the concerns most important to him. “Years ago my dad told me, ‘If you don’t have your health, you don’t have anything.’ This will be the guiding light of the committee while I am chair.”

Copyright © 1997

Hospital Conversions: Nonprofit to For‐​Profit — March

March 1997

Hospital Conversions:  Nonprofit to For‐Profit

by Lisa D. Baragar

The pending purchase of Michigan Capital Healthcare (a not‐​for‐​profit [NFP] Lansing entity) by Columbia/​HCA (a large, for‐​profit [FP] entity based in Tennessee) has elevated the issue of such acquisitions on Michigan policymakers’ agenda.

Despite some concern about having for‐​profit hospitals in Michigan at all, policymakers have introduced legislation only to regulate hospital acquisitions/​conversions — not prohibit them. Lawmakers seem to agree that “profit” is not necessarily a dirty word: As Nancy McKeague, vice president of health and human resources for the Michigan Chamber of Commerce, contends, “Tax status is less important than sound organization, fiscal integrity, and dedication to the customer — especially if the customer is a patient.”

Pending Legislation

To address fears that hospital conversions will compromise community health care, charity care, and the value of hospital assets, Senators Schwarz and Shugars and Representative Palamara have introduced legislation to give the state a watchdog role over hospital acquisitions and NFP conversions.

Senator Schwarz’s bills (SBs 149 – 50) require potential purchasers of NFP hospitals to obtain approval from the Department of Consumer and Industry Services (MDCIS) and the attorney general (AG). Senator Shugars’s bill (SB 158) is similar to SBs 149 – 50 but requires involvement of the Department of Community Health (MDCH) instead of the MDCIS. All three Senate bills apply to all hospital acquisitions, whether FP or NFP. Representative Palamara’s bill (HB 4500) requires only AG approval and pertains only to the transfer of charitable health facility assets to a FP entity.

A Closer Look

Although they deal with the same issue, the two chambers’ bills take a somewhat different approach. First, SBs 149 – 50 and 158 pertain only to hospital sales but apply to both FP and NFP acquiring entities. HB 4500 pertains only to the conversion of NFP facilities to FP status, but includes nursing homes and other facilities as well as hospitals.

Second, the Senate bills stipulate criteria for state approval of hospital acquisitions. The House bill only suggests that the AG follow certain criteria and permits imposition of any conditions s/​he deems appropriate.

The Senate bills require department officials to base their approval/​disapproval on whether (1) there are sufficient safeguards to assure access by the affected community to affordable health care; (2) the acquiring entity commits to providing indigent care and promoting improved health care in the community; (3) providers are permitted to own or invest in the acquiring entity; and (4) there are safeguards to avoid investor conflict of interest in patient referrals. The bills also require the AG to follow certain criteria in deciding whether to approve/​disapprove a NFP sale. Most important, the AG must ensure that (1) board members, key executives, legal counsel, and others avoid conflict of interest; (2) the NFP hospital receives a fair price for its assets; (3) sale proceeds will be used for charitable purposes consistent with both the NFP hospital’s original purpose and to promote community health; and (4) proceeds will be controlled as charitable funds independent of the acquirer, and a charitable corporation established to hold the sale proceeds will be representative of the affected community.

The House suggests that the AG make certain that the agreement is fair to the NFP entity and ascertain that assets of the acquired entity are sold at a fair price. Unlike the Senate bills, the House bill does not stipulate how charitable funds shall be controlled, and this is a point of contention with some observers.

A third important difference between the chambers’ bills relates to the terms and conditions of a sale. The Senate bills apply when (1) ownership or control of a hospital changes by 20 percent or more or (2) the acquirer has a 50 percent or greater interest in the ownership or control of the hospital. The House bill specifies that a NFP acquisition requires consent of the AG if the transaction involves the sale of a “material amount of the charitable assets of the health facility.”

The Senate bills also stipulate that an application to acquire a NFP hospital is public information and subject to the state Freedom of Information Act; the House bill does not.

A fourth difference is that the Senate bills include some enforcement mechanisms: They allow the authorizing department to rescind an acquisition approval or refuse to renew an acquired hospital’s license if the purchaser has not met the legislation’s standards.

Both chambers’ bills require a public hearing on every acquisition, to determine whether a potential purchaser likely will meet the legislation’s provisions.

She Says, He Says

Many who are following the NFP hospital‐​conversion issue believe that the bills are a good start, but they want to see the differences among the bills resolved and some flaws corrected.

For example, Laura Redoutey, the Michigan Health and Hospital Association’s group vice president for advocacy, argues that there is no need for the state to review sales of NFP hospitals to other NFP entities, as required by the Senate bills. “This kind of regulation is already done by the [Federal Trade Commission],” she explains.

Larry Horwitz, executive vice president of the Economic Alliance for Michigan, argues that some hospital sale regulation is needed, and he suggests that the Senate bills are fair because they address all hospital acquisitions. He does point out that a flaw in the Senate bills is that they give regulatory authority to both a department and the AG but provide no way for the two agencies to resolve disagreement on an acquisition. He also believes legislators must decide whether they want the MDCIS (an agency concerned with licensing) or the MDCH (the agency most concerned with quality and availability of health care) to oversee hospital acquisitions.

Proponents of the Senate bills maintain that regardless of which department gets the nod to act as regulator, it is important that both the AG and an nonelected official be involved in the oversight. “The AG is an elected official in a highly visible position who might make a decision based on politics,” argued Sen. Dale Shugars at a recent hearing on the bills. He suggests that because department employees are not elected, they may be more objective in approving/​disapproving hospital acquisitions. Senator Dianne Byrum countered, however, that the AG already oversees NFP status: “The AG needs to have an overarching role [in hospital acquisitions]; it is critical that he be involved in the process.”

There also is concern about the Senate bills’ permitting providers to invest in or own an acquiring entity; although the legislation stipulates that acquisitions must include safeguards to avoid investor conflict of interest in patient referrals, some are skeptical about the effectiveness of such safeguards. “The last I checked,” commented Connie Green from the Ann Arbor chapter of the League of Women Voters, “physicians are health care providers and they make referrals.”


The consensus seems to be that there is need for some regulation of hospital acquisitions. “The best way to change the health care system is to let market evolution take place — but certainly there is a role for public input and the government,” notes Horwitz.

Policymakers are moving slowly but steadily in addressing the matter. Sources close to the process confide that although the issue is important to legislators, it likely will be a year before a regulatory measure is passed.

Copyright © 1997

Community Benefits of Michigan Hospitals — April

April 1997

Community Benefits of Michigan Hospitals

by Lisa D. Baragar

At the heart of the policy debate concerning the conversion of hospitals from not‐​for‐​profit (NFP) to for‐​profit (FP) entities is the issue of community benefits. In particular, Michigan policymakers are concerned that if such conversions take place, communities will lose access to important health‐​related services that, while of significant value to those who use them, may not necessarily be good for the hospital’s financial bottom line (e.g., health care for the uninsured, hospital burn units, and smoking cessation classes).

Although there is concern that hospital conversions will result in diminished services, hospitals currently are not required to report the ones they provide. The likely result is that policymakers will find it difficult to determine whether the sale of a NFP hospital to a FP entity will have a positive, negative, or negligible effect on the community in which the sale takes place.

The pending acquisition of Michigan Capital Healthcare (a NFP Lansing entity) by Columbia/​HCA (a large, for‐​profit entity based in Nashville, Tennessee) has prompted state Senator Dale Shugars to introduce legislation (SB 156) requiring hospitals to include a community‐​benefits report along with their application for license renewal. Even though most people involved in the community benefits debate agree that hospitals should report regularly such information, they also recognize that there are many problems with such a requirement.

Pending Legislation

Senate Bill 156 stems from a provision in Senator Shugars’s SB 158 — a bill that requires Michigan Department of Community Health (MDCH) and Attorney General (AG) approval of all hospital acquisitions. The provision stipulates that the MDCH shall not renew a hospital’s license to operate if, after it is acquired by either a FP or NFP entity, it does not fulfill its commitment to the affected community.

The bill requires hospitals to (1) describe their mission and the community in which they operate, (2) commit to serve that community, and (3) in conjunction with local officials, develop and implement a plan to fulfill the commitment. Hospitals must submit this information along with their application for license renewal (hospitals renew their licenses every three years). The bill allows the MDCH to promulgate administrative rules to implement the requirements in the bill, and the department likely will make the reporting requirements more specific.

At Issue: Reporting Requirements

Although most health professionals agree that hospitals should report the community benefits they provide, there is some disagreement as to what the reporting requirements should be. In particular, explains Dennis Litos, Chief Executive Officer of Michigan Capital Healthcare, “The major point of contention concerning community benefits reporting is that there is not a common definition of what a community benefit is.”

There are two schools of thought when it comes to defining this term. One school advocates for a narrow definition: Community benefits are charity care (care that hospitals provide with no expectation of reimbursement) and related services for the poor and underserved. Care provided below cost — such as under Medicaid or Medicare — also may be considered a community benefit.

The second school supports a broader definition of the term — one that includes the above definition as well as services to the greater community, such as training of physicians and other health professionals, research, community health assessments, and smoking cessation and other community education programs. The financial value of these community benefits is often difficult to quantify.

In addition to disagreement on how to define community benefits, there are differing opinions on whether the hospital reporting requirements should be mandatory. “Should Michigan take a look at community benefits? Absolutely,” states Laura Redoutey, the Michigan Health and Hospital Association’s group vice president for advocacy. “Should [the reports] be mandated? We don’t think so.” In fact, the MHA currently is spearheading a voluntary effort in which its member hospitals and health systems will complete comprehensive community benefits reports.

Community Benefits in Michigan

Although it does not appear that SB 156 will move out of committee soon, the debate over the definition of community benefits continues. David Corteville, Vice President of the Michigan Integrated Delivery Network (an affiliate of the Voluntary Hospital Association), suggests that a true community benefit is a service that promotes improved health status in a community. “[Also, policymakers should] ask whether the activity likely would be discontinued if the decision were made on a purely financial basis,” he adds.

This language is similar to that proposed by the MHA. “We define community benefit as a planned, organized, and measurable commitment to the improvement of health status, access to health care, and prudent use of health care resources in a designated area,” states Redoutey.

Redoutey, Litos, and Corteville agree that a uniform definition should encompass more than just charity care and services for the poor and underserved. Their viewpoints diverge, however, when it comes to dealing with community benefits particular to for‐​profit hospitals. “The main difference between a definition supported by a NFP hospital and a FP hospital,” explains Litos, “is that the FP likely will suggest that the tax base it provides is a community benefit.” Corteville does not believe that the payment of taxes is a community benefit. “I pay taxes … everybody pays taxes. Does this mean that we are providing a service above and beyond the call to duty or that the health status of a community is being improved? If not, then revenue from taxes should not be included in the definition.”

Other States’ Laws

So far, the debate over the provisions in SB 156 has been surprisingly limited. This could be because the bill is fairly innocuous, especially when compared to community benefits laws in other states.

Utah requires NFP hospitals to establish annually that their total gift to the community exceeds the property tax liability they would incur as a for‐​profit. This state has adopted a narrow definition of community benefits, which includes charity care and other services to the indigent. Utah’s law also requires hospitals to conduct annual community needs assessments.

Texas requires NFP hospitals to allocate specific portions of their patient revenue for community benefit activities, and California requires hospitals to complete annual community benefits reports. Michigan’s SB 156 most closely resemble’s New York’s law, which requires hospitals to submit community benefits reports every three years. Both California and New York have broad definitions of community benefits.


Regardless of how stringent the final language in SB 156 may be — if the bill is passed — the MDCH will have to promulgate the appropriate administrative rules, and hospital administrators will have to determine the best methodology for collecting the required information. According to Litos, “It will take a few years before hospitals are able to [provide accurate accounts of the services they offer] … there will need to be a period of refinement.”

Most health policymakers agree that the discussion of community benefits is long overdue. Health system administrators are acknowledging that reporting their hospitals’ community benefits signifies accountability to communities. Litos, Redoutey, and Corteville agree that the reports will provide a close look at how health systems operate and how they use their resources to create healthier communities.

Copyright © 1997

SE Michigan Medicaid Managed‐​Care Plans Announced — May

May 1997

SE Michigan Medicaid Managed‐​Care Plans Announced

by Lisa D. Baragar

The State of Michigan recently announced that 13 qualified health plans (QHPs) will deliver comprehensive health services under capitated, managed‐​care arrangements to Medicaid populations in Wayne, Oakland, Macomb, Genesee, and Washtenaw counties. The QHPs currently are undergoing readiness reviews, to assure that they can meet the conditions of their contract with the state, including on‐​site evaluations and validation of their bid information.

Health Professionals, Department Review Disciplinary Process — June

June 1997

Health Professionals, Department Review Disciplinary Process

by Lisa D. Baragar

Throughout the past twenty years, the Michigan Legislature repeatedly has addressed the issue of health professional discipline. Between 1975 and 1996, at least six special ad hoc committees were established to study and make recommendations concerning the disciplinary process. The most recent committee was appointed in 1989 by the Speaker of the House; it determined that the major problem with the process was inefficiency.

The committee’s findings resulted in adoption of Public Acts 79, 80, and 87 of 1993, which streamlined the process. The changes included (1) reorganization of the Michigan Department of Consumer and Industry Services (MDCIS) (formerly the Department of Commerce) and the 15 health professional boards, (2) imposition of deadlines for completing allegation review and discipline, and (3) creation of the Health Professional Recovery Program.

According to the MDCIS’s October 1996 Report to the Legislature on Health Professional Disciplinary Reform, in April 1994 — the year implementation of the reforms began — inefficiency was so rampant that the department faced a backlog of almost 1,100 disciplinary cases. By October 1996, however, only 70 of those cases remained.

This article reviews the major health professional disciplinary reforms adopted in 1993 and examines the MDCIS’s report to the legislature concerning the success and failure of those reforms.

Reorganization: MDCIS and Health Professional Boards

The first set of reforms called for the reorganization of the department and health professional licensing boards. To streamline the complaint process, three new divisions were created and charged with issuing professional licenses, reviewing and processing allegations of wrongdoing and misconduct against health professionals, and conducting field investigations of those allegations. In addition, the MDCIS opened a new investigation branch and bolstered its staff by 33 percent.

Meanwhile, the legislature added public members to each of the health professional licensing boards and transferred responsibility for conducting disciplinary hearings and imposing sanctions from the boards themselves to five‐​member disciplinary subcommittees.

The MDCIS report contends that the departmental and board reforms were instrumental in eliminating the complaint backlog and speeding up complaint processing. Although most health professionals agree with the department’s assertion, some believe that placing the boards’ disciplinary powers in the hands of subcommittees was a mistake.

Donald Kuiper, M.D., chair of the Michigan State Medical Society’s Committee on Licensure and Discipline, states, “In general, the disciplinary process is working smoothly, but there are ups and downs to the reforms.”

Kuiper argues that the subcommittees reach uniform decisions concerning judgement and discipline more frequently and quickly than did the boards because the subcommittees (1) deal exclusively with reviewing cases and recommending corrective actions (as opposed to the boards, which also must deal with licensure and other issues) and (2) are smaller than the boards. On the other hand, Kuiper explains that the full boards, because of their more diverse membership, were more likely to render a fair decision. “The full boards — ranging in size from nine to 23 members — have greater public, professional and geographic representation,” he points out. The subcommittees, however, consist of only three health professionals and two public members. “This lack of diversity may shortchange the process.”

Dennis Paradis, executive director of the Michigan Association of Physicians and Surgeons, suggests, however, that health professionals are more concerned that the reforms did not give them the opportunity to present their case directly to the boards. “Cases are prepared and presented by attorneys. This surprises many [health professionals] who may believe that they should have an opportunity to explain the reasons for their actions to their peers.”

Imposition of Deadlines

In addition to reorganizing the department and boards, the reforms included the imposition of time lines to ensure that complaints are resolved as quickly as possible. In particular, the law allows the department and boards only one year after the start of an investigation to resolve a complaint and take disciplinary action.

To ensure compliance with the one‐​year time frame, the legislature developed internal deadlines for the department. For example, the legislature gave field investigators 68 calendar days to complete their work.

In its report, the MDCIS argues that the internal time frames are too constraining and should be eliminated, but the one‐​year time frame for total completion of the disciplinary process should be maintained.

Larry Wagenknecht, executive director of the Michigan Pharmacists Association, believes that the internal time lines are a good idea, but he notes, “When dealing with people and state government, there are many variables that make it difficult to meet such deadlines; it makes sense to say that a person has only so many days to complete an investigation, but internal time limits should be guidelines only — not the law.”

Another important time frame that the MDCIS believes the legislature should adopt is a statute of limitations on how long a person has — from the time that s/​he is aware of the wrongdoing — to file an allegation against a health professional.

Robert Ulieru, director of the MDCIS Health Regulatory Division, points out that currently there is no statute of limitations for complaints against health professionals — although there are some limits in tort law relating to medical malpractice. The department argues that a three‐​year statute should be imposed. “Is three years appropriate?” asks Ulieru. “That’s a good question. But we know that there should be a limit, and if people wait too long to file their complaints, then no one will remember anything.”

Health Professional Recovery Program

Meanwhile, Ulieru suggests that the most successful disciplinary reform was the creation of the Health Professional Disciplinary Program.

The legislature created a committee in the MDCIS and charged it with establishing and administering a “nondisciplinary, treatment‐​oriented program for impaired health professionals.” One health professional and two public members — including one with expertise in treating addiction — comprise the committee; the department director serves as an ex officio member. Health professionals who suffer from mental illness or addiction can be accepted into the program if they (1) acknowledge their impairment, (2) voluntarily agree to participate in an approved treatment plan, and (3) agree either to stop practicing or limit their practice (based on the committee’s decision). If an individual agrees to participate, s/​he possibly may avoid the disciplinary process.

The MDCIS report states that, between July 1995 and June 1996, the recovery program had 577 contacts that resulted in 293 monitoring agreements (e.g., working under the supervision of another health professional or a department official). The remainder were either under evaluation for the program; did not participate because they were subject to disciplinary action or not impaired; or failed to comply with the program’s terms and were referred back to the department for disciplinary action.

Given its success, many health professionals view the program favorably. Wagenknecht explains, “[The bill that created the program] was the key piece that led to pharmacists’ support of the entire regulatory reform package.” He notes that prior to the adoption of the program, if a health professional had an addiction or mental health problem, his/​her licensing board had no option but to rescind or suspend his/​her license.

Kuiper states, “This program … acknowledges that, like people in any profession, health professionals need help and time for


Most health professionals agree that the disciplinary process works better now than it did three years ago, but they also acknowledge that there is room for further improvement. “It took a long time for the 1993 reforms to take shape,” suggests Kuiper, “and it will take more time to work the rest of the bugs out of the process.”

Copyright © 1997

Reflections on the FY 1997 – 98 Community Health Budget — July

July 1997

Reflections on the FY 1997 – 98 Community Health Budget

by Lisa D. Baragar

Health professionals and policymakers are heaving a collective sigh of relief now that the budget season has come to a close. House Bill 4306 — making appropriations to the Michigan Department of Community Health (MDCH) for FY 1997 – 98, which begins October 1 — awaits the governor’s signature, and those most concerned with its passage are assessing it. “Generally, we’re pretty happy with the FY 1998 Community Health budget,” states Christine Shearer, chief of state government affairs for the Michigan State Medical Society (MSMS). Susan Garcia, deputy director of the Michigan Association of Health Plans (MAHP), shares this opinion and adds, “I was impressed by the level of bipartisanship that occurred and the work done in committees to reach a good compromise.”

The fruit of policymakers’ efforts on behalf of community health totals $7.2 billion (23 percent of all state funds and an increase over the current year of 6.4 percent); the portion coming from the state general fund is $2.5 billion (29 percent of all state general funds and a 1.5 percent increase over the current year figure). As passed by the legislature, the appropriation exceeds the governor’s proposed MDCH budget by approximately 3 percent in both total and general fund monies.

Despite the cooperation and agreement involved in passing HB 4306, it was not all smooth sailing; there was considerable controversy along the way. This article examines some of the more contentious issues: Medicaid managed care (MMC), the Healthy Michigan Fund (HMF), and Governor Engler’s proposed closure of three mental health facilities.

Medicaid Managed‐​Care

One of the major influences on both the current and upcoming community health budgets is the state’s move to enroll all Medicaid recipients in capitated managed care. State officials adopted this strategy in 1996 after estimating that it could generate multimillion‐​dollar savings and improve recipient health care. The MDCH estimates that at current cost and caseload growth rates, the price of providing health care to Medicaid recipients will equal 30 percent of the state’s total annual appropriations by the year 2000 (at $4.6 billion, it currently equals 15 percent). “Policymakers had to [opt for managed care],” says Dennis Paradis, executive director of the Michigan Association of Osteopathic Physicians. “Medicaid has been eating the budget alive.” State officials argue that reducing costs by moving to MMC is preferable to cutting benefits or limiting eligibility.

The initiative began with the current year (FY 1996 – 97) budget, which authorized the move to MMC first in five southeast Michigan counties and then the balance of the state.

The FY 1997 – 98 budget, Ms. Garcia believes, takes another step forward by requiring that health plans deemed qualified (through the state bid process) to provide capitated MMC engage in certain activities, among them providing continual care, obtaining independent performance evaluation, and reporting certain data to the state; she points out that these provisions are the same as those currently in place for Michigan HMOs. The new budget bill also prohibits the state from imposing mandatory MMC enrollment unless at least two qualified health plans provide the services in each geographic region; this guarantees that enrollees have a choice.

There also are provisions that lock recipients into a qualified health plan for six months but allow them to change health plans for any reason within the initial 30 days of enrollment. Ms. Shearer reports that the MSMS supports this measure and also the provision that allows the state to contract for provision of capitated Medicaid managed care with provider‐​sponsored organizations (public or private providers or groups of affiliated providers organized to deliver a spectrum of health care services under contract to purchasers) and other networks. “Before,” she explains, “the state was permitted to contract only with licensed health maintenance organizations [HMOs].”

Although the state medical society generally is satisfied with HB 4306, Ms. Shearer notes that one disappointing aspect of the bill is that it does not increase the rates at which physicians are reimbursed for providing care to Medicaid recipients. She points out that policymakers have not raised Michigan’s reimbursement rates — the 10th lowest in the nation — since 1991. She maintains that “Physicians are due for an increase.”

Ms. Garcia says that the state association of health plans also believes that the budget falls short in some areas, particularly on the issue of Medicaid enrollment brokers. “Last year the state mandated that HMOs end direct marketing to recipients … and promised that a new ‘enrollment broker’ process would replace direct marketing on July 1.” She points out that the new process will not be in place until October, and this means that right now HMOs are losing money because they are not permitted to market to new Medicaid recipients in the hope of replacing those who leave the HMOs — for one reason or another — at a rate of 3 percent a month.

The MAHP is working with legislators and the MDCH to amend the current budget, to give HMOs that already are qualified to provide MMC services a temporary 5 percent increase in their capitated rate; the purpose is to offset partially HMOs losses until the enrollment broker process is in place.

Healthy Michigan Fund

Also at issue in resolving the FY 1997 – 98 MDCH budget was restoration of full funding to the Healthy Michigan Fund. According to Geralyn Lasher, communications administrator for the MDCH, one of the original purposes of the HMF was to stop people from smoking, and because the fund’s appropriations stem entirely from tobacco tax revenue, “if people stop smoking, the HMF loses revenue; this is the way it is supposed to be.”

The current budget allocates $34.8 million for the HMF. For 1997 – 98, however, the administration had projected that tobacco tax revenue would decline (due to the decrease in tobacco use) and recommended that only $33.3 million be appropriated. This spawned a wave of protest from anti‐​tobacco groups and eventually resulted in the HMF being funded at the full amount.

Mr. Paradis commented that the state osteopathic association had been “surprised that the governor’s recommendation included a reduction of the HMF funds and is delighted that the legislature chose to replace them.”

Mental Health Facilities

One of Governor Engler’s budget recommendations was the closure of three Michigan psychiatric hospitals — the Detroit Psychiatric Institute, Clinton Valley (in Pontiac), and Pheasant Ridge (in Kalamazoo). He and the MDCH believe the facilities to be over staffed and underutilized; for example, at Pheasant Ridge, the most extreme case, there is an employee/​patient ratio of 36:0 — the facility has no patients. The closure was agreed to in spirit by the legislature, and the 1997 – 98 budget includes no state general funds for the institutions; however, in a move seen by some as motivated by partisan politics, the allocations for federal and local funds for the hospitals have been left intact. This means that if the governor wishes the facilities to close, he will have to veto the federal and local allocations; indications are that he will do so.

Ms. Lasher, speaking for the MDCH, explains that “If the governor does not veto the provisions, local community mental health boards will have to foot the bill — $67 million — [for the state General Fund portion] to keep the facilities open.”

Such a veto will increase public awareness, acrimony, and possibly litigation concerning the closures (two organizations already have filed suit to stop state employees at the facilities from being laid off). Many observers, including Mr. Paradis, consider the debate over the closure of the facilities to be political in nature. “Still, we think the administration is doing the right thing,” he says.


Health professionals and observers seem to be of the opinion that by and large, the MDCH budget addresses most of their concerns. The collective viewpoint probably best is summed up by Ms. Garcia’s statement that “… this year’s budget and policy reflect a positive direction for the state.” About everyone is happy that the budget season is over: One person commented, “I think it’s time for a vacation.”

Copyright © 1997

Federal Children’s Health Care Initiative — August

August 1997

Federal Children’s Health Care Initiative

by Lisa D. Baragar

Children’s health watchdogs consider the child‐​related care provisions in Public Law 105 – 33 of 1997 — the federal Budget Reconciliation Act — a “pleasant surprise.” What started last spring as a $16 billion proposal to extend health insurance to many of the nation’s 10 million uninsured children (aged 18 and under) ballooned this summer into a $24 billion jackpot that will be distributed over five years.

Of the $24 billion, $3.8 billion is earmarked to bolster Medicaid benefits for uninsured and/​or low‐​income children. In particular, the money will go toward expanding coverage from month to month to year‐​round, augmenting benefits for the disabled, and guaranteeing presumptive eligibility (e.g., if a child is eligible for the Women, Infants, and Children [WIC] food program, s/​he is presumed eligible for Medicaid). The remaining $20.2 billion will be distributed through block grants, thereby allowing each state to decide how to extend health insurance benefits to needy kids.

State officials are pleased that the federal government is giving them flexibility, and children’s advocates are happy that Congress and the president have made such a substantial commitment to children. Still, Sharon Claytor Peters, president and chief executive officer of Michigan’s Children, warns against being overly optimistic: “The success of the federal program in Michigan will be dictated by … the course of action the state chooses to adopt.”

Michigan’s Share

Paul Shaheen, executive director of the Michigan Council for Maternal and Child Health explains that although Michigan — compared to other states — has a relatively low number of uninsured children, there is substantial need for the additional federal funding: “There are many children who are uninsured and many who have some coverage but are underserved.”

The children to whom Shaheen refers stand to benefit greatly from the federal initiative. Over the next five years, Michigan will receive a total of $467.3 million ($92 million annually from 1998 to 2000, $104.7 million in 2001, and $86.5 million in 2002) to expand health care coverage for this population. But the pot is even larger, because Michigan must contribute matching funds — roughly 32.5 percent of the federal amount — regardless of how services are expanded; in 1998, for example, the state match to the federal government’s $92 million will be $44.3 million, generating a $136.3 million program. It is as yet unclear whether the legislature will have to appropriate new money for the state match.

Before the state can begin using the funds, it must develop a spending strategy. The terms of the federal budget agreement specify that state officials have only two alternatives for expanding children’s health care: (1) a new children’s health insurance program or (2) broadened Medicaid eligibility criteria and services.

New Insurance Program

Although Michigan officials are pleased that they have been granted the flexibility to devise a new health insurance program, they point out that there are some strings attached: The federal budget agreement specifies that they must select one of three options.

  • Provide to uninsured children the same benefits offered in one of the following benchmark plans: (1) Blue Cross and Blue Shield’s preferred provider organization plan (this plan is offered to federal employees); (2) any state‐​government employee health plan; or (3) a plan offered by the health maintenance organization in the state that has the largest commercial enrollment.
  • Create a benefits package that actuarially is equivalent to and modeled on one of the three benchmark plans cited; the new package may include any array of benefits as long the value equals that of the benchmark plan’s benefits. If the latter provides prescription drug, hearing, vision, and mental health benefits, the new plan must also but at only 75 percent of the value provided under the benchmark plan.
  • Develop a unique benefits package — one not based, in terms of value or benefits, on a benchmark plan. This option requires a federal waiver.

The advantage in creating a new health insurance program is that states can design a benefits package that meets the specific needs of their uninsured and low‐​income children. Despite this, many state officials consider this alternative overly complex and are looking instead at expanding Medicaid as the way to use their federal block grant funds.

Expanding Medicaid

In addition to, or instead of, creating a new health insurance plan, the federal budget agreement allows states to expand their Medicaid programs. Again, states have alternatives.

  • Broaden their Medicaid eligibility criteria.
  • Broaden their Medicaid coverage.

In Michigan, Medicaid eligibility currently is granted to infants (newborns to one year) in families earning below 185 percent the federal poverty level (FPL) and to children aged one through 15 in families earning below 150 percent. (In 1997, the poverty level was $16,050 for a family of four.) Under the federal budget agreement, Michigan could extend the FPL eligibility amount by up to 50 percentage points, making the ceiling 235 percent for families of infants and 200 percent for families of the older children. The state also could use its federal funds for such initiatives as a new Medicaid program that would fund nurses in schools or more comprehensive oral care.

State officials are exploring their options, but Michigan children’s advocates have some firm ideas about how the funding should be used. Shaheen points out that developing and implementing a new health insurance program will require much in the way of time and resources. Given the fact that Michigan can — but is not required to — begin drawing its federal children’s health money on October 1, 1997, he contends that expanding Medicaid eligibility and services is the more expedient and cost‐​conscious alternative, because the delivery mechanisms and necessary bureaucracy already are in place.

Peters agrees and suggests that because Michigan already does a relatively good job of providing health coverage to many needy children, it makes sense to expand existing Medicaid benefits and make others eligible to receive them. For example, the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program — which focuses on early disease detection and prevention — could be expanded to cover children from the moment they are born instead of at one month old.

Still, Peters is open to the idea of a new insurance program for indigent children. She suggests that if the state chooses this alternative, the benchmark plan on which it is modeled should be the state employees’ plan.

Outreach is Key

Regardless of how Michigan officials choose to expand health care for needy children, both Shaheen and Peters believe that success depends on adequate outreach.

Shaheen contends that the state has failed to adequately inform parents that their children are eligible for certain Medicaid benefits, and as a result, many children needlessly go without. He fears that without the proper focus on outreach, the situation will continue.

Peters adds, “The question should be ‘How can everyone — including the state — help ensure that a child receives care as early as possible?’ The answer is outreach.”

The budget agreement does allow some funds for outreach, but combined spending on direct services, administration, and outreach is limited to 10 percent. Shaheen notes, “We don’t know if this is a hindrance or an incentive.”


Michigan officials are reviewing the federal budget agreement and exploring their options for expanding health care benefits for uninsured and low‐​income children. Policymakers say that a decision likely will not be made right away.

Peters and Shaheen want to see a plan be implemented as soon as possible but not so soon that their organizations and others like them are excluded from the decision‐​making process. “We hope the state will welcome partners, to make sure that kids get the care they need,” says Shaheen. Peters adds “We want the best for children — that’s why we’re here.”

Copyright © 1997

Maximus: Michigan’s Medicaid Enrollment Broker — September

September 1997

MAXIMUS: Michigan’s Medicaid Enrollment Broker

by Lisa D. Baragar, Consultant for Public Policy

Michigan policymakers hope that recent shifts to capitated Medicaid managed care (MMC) will not only generate multimillion dollar savings but also improve the quality of health that the state’s indigent population receives. The state took one step toward this goal by selecting MAXIMUS as its Medicaid enrollment broker.

MAXIMUS, founded in 1975, is a Virginia‐​based firm that provides program management and consulting services to government health and human services agencies in the United States; almost all its clients are federal, state, or local government. In addition to Michigan, MAXIMUS has a presence in California, Vermont, Texas, and Connecticut and is slated to begin operation in New York.

The company’s nationwide services extend beyond enrollment brokering, which involves enrolling Medicaid clients in appropriate health plans. In other states, MAXIMUS provides such services as child support enforcement, disability determination, health care systems planning, and more. “The company’s services are intended to make government operations more efficient and cost effective while improving the quality of programs for beneficiaries,” explains Janice Ruff, Project Manager for MAXIMUS in Michigan.

On September 2, MAXIMUS, under the name Michigan Enrolls, began enrolling Medicaid recipients from Wayne, Oakland, Genesee, Washtenaw, and Macomb counties in qualified health plans — plans awarded bids to provide health care under the new capitated MMC plan known as the Comprehensive Health Care Program (CHCP). In November or December, the enrollment broker will begin enrolling children with disabilities who receive benefits through the Children’s Special Health Care Services program. Finally, next March or April MAXIMUS will begin enrolling CHCP clients throughout Michigan, as the program is scheduled for statewide implementation in early 1998.

To keep receiving Medicaid benefits, recipients who now obtain health care through fee‐​for‐​service and other health insurance carriers must make the switch to capitated managed care. Even those currently enrolled in a MMC plan must re‐​enroll through MAXIMUS. Eventually, as MMC expands statewide, every Medicaid recipient in Michigan will have had contact with the new enrollment broker.

Although some Michigan citizens are concerned that the existence of an enrollment broker only will confuse those whom it is meant to serve, others, such as Susan Garcia, deputy director of the Michigan Association of Health Plans, argue, “Absent from the enrollment process remaining with the health plans, MAXIMUS appears to be a viable alternative.”

Why an Enrollment Broker?

According to Carol Isaacs, director of health legislation and policy development for the Michigan Department of Community Health (MDCH), state officials turned to an external enrollment broker because they doubt whether health plans or the state itself could provide the kind of objective information and assistance that recipients need to make good decisions about health care.

For example, over the years, both the MDCH and legislators have received numerous allegations of marketing abuses by health plans hoping to recruit Medicaid enrollees. Officials believe that the problem made it impossible for those seeking a health insurance carrier to make a well‐​informed decision.

In addition, Ms. Isaacs explains that the information compiled by the state on health plans was insufficient to meet the needs of recipients: “[They could not] make informed decisions about joining a health plan [based on] the limited written communications coming from the state.” She says the volume of calls that the Medicaid help desk was receiving was greatly increasing, which reflected confusion and frustration on the part of recipients.

Another reason the state selected an enrollment broker, suggests Ms. Isaacs, is the desire to increase the number of Medicaid recipients who choose a health plan versus being assigned one. MDCH staff and others feared that in the confusion resulting from the shift to managed care, Medicaid enrollees simply would opt for being assigned to a health plan rather than selecting one themselves. Ms. Isaacs explains that promoting enrollee choice was the basis of the decision to contract for “an enrollment service that could provide expanded information, follow‐​up on beneficiary contacts, and opportunity for face‐​to‐​face counseling.”

Major Concerns

Despite MAXIMUS’ s experience in other states as an enrollment broker, many Michigan citizens and community watchdogs are concerned that the organization will be out of touch with the needs of the state’s Medicaid population. “MAXIMUS must become familiar with the various distinctions among health plans and be able to utilize this information effectively in the process,” warns Ms. Garcia. She emphasizes that to understand the link between health plans and Medicaid clients, the enrollment broker must have a thorough understanding of recipients’ needs and the characteristics of every individual health plan.

Supporters of the decision to select an enrollment broker point out that MAXIMUS is allowed to subcontract with many community‐​based organizations (e.g., local health departments and community action groups), and such entities already have considerable experience in working with local Medicaid beneficiaries and have their interests at heart. The community organizations’ primary responsibilities will be helping enroll clients in health plans and serving as ombudsmen; they will provide patient advocacy if needed and education on managed care, assignment and referral to doctors, use of emergency rooms, and illness prevention.

Still, the possibility of subcontracting only adds to some people’s concern that the enrollment broker contract will add to the complexity of enrollment, and there is concern that this complexity may disrupt recipients’ continuity of care.

Performance Evaluation

Although many are concerned about the quality of services MAXIMUS will provide clients, Ms. Ruff, the project’s manager, points out that the enrollment broker’s contract establishes some very ambitious goals meant to ensure high standards.

For example, she explains that the enrollment broker’s contract requires it in the first year to help at least 85 percent of its clients choose a health plan rather than being assigned one; the rate must be 90 percent in the second year, and 95 percent in the third year. If the organization does not achieve these goals, the state is entitled to terminate the contract.

In addition to these expectations, MAXIMUS must adhere to some other very strict guidelines and quality assurance measures: For example, the enrollment broker must answer 100 percent of calls it receives by the fourth ring, enrollment counselors may have no more than two calls each in the phone queue at any time, and counselors must spend sufficient time on each call to ensure that the recipient is given adequate information.

Furthermore, the enrollment broker must ensure that its clients have adequate access to its services. For example, clients must be able to communicate with MAXIMUS’s counselors via mail and telephone, and the organization must make community presentations and conduct walk‐​in sessions and home visits.

Not only will the state be monitoring how well the enrollment broker performs each of these duties, there will be customer‐​satisfaction surveys and the state will monitor use of MAXIMUS’s complaint and grievance process.


Despite the challenges that MAXIMUS faces, the state stands behind its decision to privatize the enrollment broker process. “With enrollment counseling services in place, persons with Medicaid coverage will be able to make objective, informed decisions on the managed care options available to them and choose a plan that best fits their family needs,” concludes Ms. Isaacs. Ms. Garcia adds, “Health plans are encouraged by … the [move] to managed care. The enrollment of the Medicaid population [in such a program] will contribute to a healthier population.”

Copyright © 1997

Policymakers, Others Examine MDCH’S MIChild Program — October

October 1997

Policymakers, Others Examine MDCH’s MIChild Program

by Lisa D. Baragar, Consultant for Public Policy

The Michigan Department of Community Health (MDCH) wasted no time in developing its plan for using Michigan’s share — $91.6 million — of the $24 billion that Congress appropriated in August for the federal children’s health initiative.

On October 7, Carol Isaacs, director of health legislation and policy development for the MDCH, explained to the House Appropriations Subcommittee on Community Health that state officials already have concrete ideas on how they will obtain the $40 million in matching funds that Michigan must contribute to receive its first year’s federal allotment. In addition, she presented the initial framework for MIChild (pronounced “my child”) — the new health insurance program for uninsured children.

Although the full details of the new program are not yet available, officials are poised to put it in place early next year. Still, Isaacs describes the plan as “a work in progress” and acknowledges that the state has much fine‐​tuning to do before launching the new initiative. At the hearing, she explained a few specifics about the program.


The program will target a very specific population: children aged under 19 who are ineligible for Medicaid but whose family income is at or below 200 percent of the federal poverty level (FPL); the FPL is $13,330 for a family of three. Unlike Medicaid, no asset test will be used to determine a child’s eligibility for the new program.

The MDCH expects MIChild to cover 156,000 of the state’s 228,000 uninsured children (this figure is based on U.S. Census Bureau data), which means that approximately 70,000 Michigan children will remain without any coverage despite implementation of the new plan.

Isaacs pointed out that the objectives of MIChild are to

  • continue the state’s commitment to managed care;
  • encourage mothers to give birth having received proper prenatal care and avoided alcohol, tobacco, or other drug consumption during pregnancy;
  • support development that keeps children away from alcohol, tobacco, and other drugs and unsafe, premature sex;
  • decrease child mortality and morbidity (instance of disease);
  • encourage the existence of a medical “home” for each child, where s/​he can have an ongoing relationship with a primary care provider;
  • establish affordable health insurance: Families will be asked to pay an annual premium of $8 per child ($96 a year) or a maximum of $192 annually for the family, and no copayments will be charged for inpatient care or preventive services; and
  • require participants to maintain responsible, healthy lifestyles (e.g., children must stay in school or lose their eligibility for the program).

Isaacs added that the plan will cover the following services: well‐​child visits and immunizations, hearing and vision screening, primary care and specialty physician visits, emergency care and transportation, mental health care, diagnostic treatment, inpatient and outpatient hospital visits, dental care, and prescription drugs.

So far, MDCH officials intend to offer MIChild through the health plans and networks already established as Michigan’s qualified health plans (plans that have been awarded state contracts to provide capitated Medicaid managed care). Implementation will begin soon after the first of the year in Wayne, Oakland, Macomb, Washtenaw, and Genesee counties, with the remainder of the state scheduled for spring 1998.

Premium Sharing

Although MDCH officials contend that the plan is in relatively good shape, policymakers and some organizations have concerns about key aspects of the plan. Representative Robert Emerson (D‑Flint) is one legislator, for example, who sees room for improvement. At the subcommittee meeting, he explained that he does not believe that premium sharing or copayments should be a part of the program, especially because it is unclear whether they will decrease the federal government’s share of the cost or offset state funding.

Isaacs pointed out, however, that federal law allows states to impose premium sharing, which can be no more than five percent of a family’s income; Michigan’s proposed coinsurance of $8 a child is, on average, less than one percent. Emerson argued that just because the federal government allows Michigan and other states to impose premium sharing does not mean they must, especially if it hurts those eligible for the program: “State workers do not pay anything for their health insurance; what makes them think that families that earn up to 200 percent of the FPL can afford to do so?”

Isaacs justified premium sharing by comparing MIChild to Michigan’s Healthy Kids — a recent expansion of Medicaid to cover more children. She explained that Healthy Kids failed because parents (1) did not like the stigma of being a part of a Medicaid program, (2) thought the program was too bureaucratic, and (3) thought they would find insurance soon, but if, in the meantime, their children really needed health care, they would take them to an emergency room. “By incorporating premium sharing in the MIChild program,” Isaacs suggested, “parents will feel less as though it is an entitlement; instead, they will have ownership in the program and their children’s health.”

She added that this is why the state opted to create a new health insurance program for children instead of expanding Medicaid.

Crowd Out

Isaacs explained that another major problem facing MIChild is “crowd out” — the deliberate exclusion of a child from any private or public health insurance plan with the expectation that MIChild will pick him/​her up — which is prohibited by the federal children’s health initiative. According to Isaacs, the Michigan program seeks to comply with the crowd‐​out prohibition stipulating that if an employer ceases to offer dependent health insurance coverage, parents must wait six months before their children are eligible for MIChild; if a family moves to Michigan, they too must wait six months.

Still, federal law and Michigan’s policy may not adequately address the issue. In separate discussions, both Blue Cross and Blue Shield of Michigan (BCBSM) and the federal Health Care Financing Administration (HCFA) — the Medicaid and Medicare regulatory agency — explained that crowd out will remain a major problem.

For example, BCBSM administers the Caring Program for Children, which covers outpatient services for 4,200 children aged up to 19 whose family income is equal to or less than 185 percent of the FPL. “Because MIChild covers children up to 200 percent of the FPL, [children in the Caring program] will be disqualified from the Caring Program,” explained Tracy Baker, manager of state relations for BCBSM. The likelihood, she added, is that the Caring Program will be discontinued.

The loss of such programs, however, is what federal legislators sought to avoid when they drafted the children’s health initiative. According to Debbie Chang, director of the Office of Legislation for HCFA, state initiatives such as MIChild are supposed to be in addition to, not instead of, states’ existing programs; the purpose is to expand the number of children eligible for health care, not make children who already have coverage eligible for a new program.


Despite their differences on premium sharing and crowd out, MDCH officials, legislators, and others agree that outreach and enrollment simplicity and flexibility will be the key to the new program’s success. Isaacs stated that the state plans to work with community organizations to help enroll children in MIChild or Medicaid, whichever is appropriate. In addition, families will be able to enroll using a single, mail‐​in form that they can pick up at schools and doctors’ offices.

Still, there are many other issues surrounding the initiative, such as defining the relationship between MIChild and the health plans that will administer Michigan’s Medicaid managed‐​care initiative: Will qualified health plans’ contracts be modified to require participation in MIChild? Will capitation rates differ for the Medicaid and MIChild populations? Although the MDCH has come a long way in creating a framework for MIChild, many are quick to remind the department that it still has a long way to go.

Copyright © 1997

Dr. Gilbert Omenn: New Man at U. of M. — November

November 1997

Dr. Gilbert Omenn:  New Man at U. of M.

by Lisa D. Baragar and Peter Pratt

Gilbert Omenn, M.D., Ph.D., is the University of Michigan’s (UM) first executive vice president for medical affairs. Public Sector Consultants recently interviewed Dr. Omenn, whose new title carries with it the responsibility of managing the University of Michigan Health System (UMHS), which consists of the medical school, six hospitals, numerous speciality outpatient facilities, 30 community‐​based health centers, emergency transport services, the health maintenance organization (M‑CARE), and various network and joint‐​venture relationships.

Even on the surface, Dr. Omenn’s job seems daunting. He explains, “My role is to look at the big picture — to integrate and align various functions of the institution.” He says his ultimate purpose is to find the optimal balance between patient satisfaction and quality of life and the health system’s cost effectiveness. Certainly, Dr. Omenn’s background gives him many of the tools he will need to achieve this goal and, in only two months after assuming his new role, he has developed a clear plan for building on the UMHS’s already excellent national reputation.

The Man Behind the Plan

In fulfilling his duties, Dr. Omenn plans to draw on what he has learned both as a medical doctor and an academician: He earned his medical degree from Harvard Medical School and did his doctoral work in genetics at the University of Washington. Immediately preceding his appointment at the University of Michigan, Dr. Omenn was for 15 years dean of the School of Public Health and Community Medicine at the University of Washington; he joined the university in 1969 as a fellow in medical genetics and later became a professor of internal medicine and chair of environmental health.

During his career Dr. Omenn has earned many honors and distinctions. He is the founding director of the University of Washington Robert Wood Johnson Clinical Scholars Program and was the first Science, Technology, and Policy fellow at the Brookings Institution. He is noted for his groundbreaking studies on prenatal diagnosis of inherited conditions and has published extensively on such issues as the effect on public health of environmental and occupational hazards. He also headed the landmark clinical prevention trial that showed advance effects (more lung cancer and heart‐​attack deaths) from beta carotene.

Dr. Omenn also has served in the public sector as a researcher for the National Institutes of Health, special assistant to the chair of the Atomic Energy Commission, associate director of the White House Office of Science and Technology Policy, associate director of the Office of Management and Budget, and chair of the Presidential/​Congressional Commission on Risk Assessment and Risk Management.

During his career he has been a practicing physician, public health administrator and researcher, and high‐​level federal official. In his new role, he will call on all his acquired expertise.

Find the Middle Ground

Dr. Omenn believes the purpose of academic medicine is to provide a social good. Academic medical centers accomplish social good by educating and training physicians and other health professionals, conducting research, and providing health care and other community benefits to anyone — regardless of social or physical condition — who needs them. He points out that each of these activities is expensive, and academic medical centers are particularly sensitive to these costs. To survive in today’s changing market place, such centers have been forced to find the middle ground between business and health care.

For the University of Michigan, this means budget cuts — $200 million from the hospitals’ budgets over three years. Dr. Omenn’s goal is to implement the cuts without disrupting the quality of care provided, research conducted, or students educated.

To guarantee success, he is seeking input from key community members. For example, he and his colleagues have been meeting with representatives from the Big Three automakers. Dr. Omenn says “They care about value (cost and quality); they and we feel we’re on the right track.”

Clinical Redesign

Dr. Omenn’s approach to streamlining the UMHS budget is pragmatic. He explains that some traditional cost‐​cutting measures have been used, such as layoffs, but the tool he believes most efficient is clinical redesign, which involves carefully examining and monitoring how health care is provided, with an eye to improving both quality and efficiency.

An example he cites is the treatment of severe chronic congestive heart failure. Five years ago the average patient with this condition required 12 hospital stays a year. By carefully monitoring patients’ condition — their blood pressure, weight, stress level, medications, and so on — and helping them regulate their health, the university has been able to reduce to two their average annual hospital stays.

Clinical redesign requires all personnel involved in a patient’s care — including doctors, nurse practitioners, technicians, and clerical staff — to carefully observe and interact with patients. Dr. Omenn points out that employing this technique already has helped in the multifaceted process by which $1,500 per case has been cut from the UMHS budget.

Underlying the success of clinical redesign, believes Dr. Omenn, is the commitment of health professionals to address the health care needs of an entire population — not just individual episodes of care. “The outcomes of clinical redesign are quality of care and quality of life.… [It] is responsive to patients’ needs and represents the best side of managed care.”

New Directions for Medical Education

Just as patient health care must keep pace with changes in the health care industry, so must medical education, contends Dr. Omenn. He believes the UMHS to be well‐​founded in the modern world of medicine and sees as evidence of this recent changes the institution has made in its health‐​professional education.

Currently, there is need for more general practitioners, and the UMHS now requires third‐​year medical students to receive training in family medicine. Administrators earlier reduced class size from 190 to 170 students, to help reduce the supply of doctors, which many believe is too high.

Medical education also will be affected by the role of specialists, which Dr. Omenn sees changing: “Many specialists will become the primary‐​care physician for patients having severe, chronic illness.” He points out that 15 percent of patients account for 80 percent of medical costs, and specialists will need training to enable them to manage these complicated cases efficiently and effectively.

Finally, he contends that both medical education and research are fundamental social benefits that deserve special priority in American society. “When you look at the number of medical conditions that we don’t know how to treat — arthritis, psychoses, common cancers, and others — it’s very sobering,” says Dr. Omenn.

He adds that without adequate attention to research, health professionals would remain able only to diagnose and treat the symptoms of disease, rather than prevent and treat the root causes. And without well‐​trained doctors, there will be no way to ensure that patients receive the best care available. Dr. Omenn concludes that society is beginning to acknowledge that medical education is an integral part of the health care continuum; he points out that the University of Michigan has done this by formally making medical education a part of — not an addition to — its health system.


The University of Michigan considered more than 200 applicants for the position of executive vice president for medical affairs. The fact that Dr. Omenn was dean of public health at an academic institution — not a medical school or administrator of a health system — suggests a change in direction for the UMHS. Dr. Omenn notes that “It sends the message that medical care needs to be looked at from a broader perspective.” Still, he insists that UM had been heading down this path and his hiring only confirms that.

Furthermore, he argues that research, education, and direct patient care are intrinsically linked, and he plans to enhance the university’s track record in each area. This is no small goal, but Dr. Omenn’s record as an experienced clinician, biomedical researcher, and medical professor indicates that if anyone can succeed, it is he. He emphasizes that this challenge is not his alone; he will rely on others — academics, health professionals, students, churches, community and political leaders, and others — to help improve the health of the patients and communities the UMHS serves.

Copyright © 1997

The Year in Review: Health Policy — December

December 1997

The Year in Review: Health Policy

by Lisa D. Baragar, Consultant for Health Policy

Early this year, Sen. Dale Shugars (chair, Senate Committee on Health Policy and Senior Citizens) and Rep. Joseph Palamara (chair, House Health Policy Committee) talked with Public Sector Consultants about the health issues they believed would dominate the 1997 – 8 legislative session. As their priorities, they cited legislation dealing with health insurance gag clauses, managed‐​care oversight, and hospital conversion/​acquisition.

Now the 1997 – 8 legislative session is half over. What has been accomplished? What remains to be done?

The Numbers Game

In total, the number of new laws enacted in 1997 is a modern‐​day record low: to date, a mere 151. This is in sharp contrast to the first year of the two previous legislative sessions.

  • In 1995, 291 bills were enacted.
  • In 1993, 363 bills were enacted.

The number of health‐​policy initiatives enacted in 1997 also is unusually low. Of the 252 health‐​care bills that PSC tracked/​analyzed this year, to date only 7 have become a public act (P.A.).1Again, 1997 suffers by comparison.

  • In 1995, of 241 health bills, 15 were enacted.
  • In 1993, of 266 health bills, 21 were enacted.

Some argue that 1997 was less prolific than previous years because of the partisan split between the chambers: Democrats control the House, and Republicans control the Senate. Yet, in 1991 — another year in which power was divided — 201 measures made it into the law books, including 13 health‐​related bills. Another view is that the year’s output was affected by the coming term limits, causing many legislators to slip into a lame‐​duck mode; that is, they may be concerned less with policy and more with figuring out what to do (e.g., run for another office) when their term comes to its enforced end.

Some observers say that the principle of supply and demand is simply at work, and if there were more need there would be more new public acts. In general, however, lawmakers point to the quality, not the quantity, of the bills passed and are satisfied that the year was a success.

The Successes

Although they are not many in number, the seven health‐​care bills passed by the legislature in 1997 have important implications. Four protect consumers, and three apply to health professionals.

  • The first three consumer‐​protection measures are House Bills (HBs) 4392 and 4394 and Senate Bill (SB) 68 — now P.A.s 66 – 8. They apply to health maintenance organizations (HMOs), commercial insurers, and Blue Cross and Blue Shield of Michigan (BCBSM), respectively, and prohibit gag clauses from being included in health provider contracts. Such clauses preclude health professionals from discussing with patients information about alternative/​additional treatments; some also preclude providers from revealing the financial implications of alternative or additional treatments/​procedures. According to the bills’ supporters, no health care organizations doing business in Michigan have gag clauses in their provider contracts, so rather than making a substantive change to existing law, the bills represent symbolic opposition to such practices.
  • The fourth consumer‐​protection measure is HB 4080 — now P.A. 136 — which requires HMOs to cover emergency health services provided to people who, because of their symptoms, reasonably believe their health will be seriously impaired if they do not receive treatment. In 1998 legislators expect to adopt bills that impose similar requirements on indemnity insurers and BCBSM.
  • Of the three new laws affecting health professionals, the first is SB 297 — now P.A. 78 — requiring an ambulance operation to obtain a license upgrade before allowing emergency personnel to provide life‐​support services at a level higher than that for which the ambulance operation is licensed. Until passage of this law, personnel training was the determining factor in ambulance licensure, and an operation was permitted to provide only the level of care it could guarantee 7 days a week, 24 hours a day. For example, if an ambulance agency could not guarantee at least one paramedic per shift, the operation was not permitted to provide advanced life support at all. Supporters of the new law argue that it will save lives.
  • HB 4944 — now P.A. 139 — allows physicians and surgeons licensed under different provisions of the Public Health Code to form professional service corporations. The bill permits, for example, a podiatrist, M.D., and D.O. to form a professional corporation dedicated to providing foot care. Before, a podiatrist could form such an entity only with another podiatrist.
  • Finally, SB 139 — now P.A. 151 — allows optometrists to administer anti‐​glaucoma drugs, as long as in certain instances they consult with an ophthalmologist or physician. The law corrects an oversight that occurred when a 1994 law expanded the scope of practice for optometrists.

On the Starting Block for 1998

In addition to passing the seven laws described above, Michigan legislators made substantial inroads on other important health‐​care issues.

  • House Bills 4681 – 6, introduced by Representative Law, will establish pain management as a fundamental component of medical care. The bills encourage (but do not require) health insurers and managed‐​care organizations either to initiate comprehensive pain‐​management programs or establish pain‐​management referral relationships. They also allow physicians to administer certain controlled substances for pain‐​management purposes. The package has passed the House and awaits Senate action in the new year.
  • Senate Bills 743 – 6, introduced by Senator Shugars, will require conversion of nonprofit hospitals to for‐​profit status to be approved by the attorney general and Michigan Department of Community Health (MDCH). Similar bills — SBs 149 – 50 and 158 and HB 4500 — have been introduced by other legislators. The legislation was sparked by the proposed merger of the not‐​for‐​profit Lansing‐​based hospital, Ingham Regional Medical Center (formerly Michigan Capital Healthcare), with the Tennessee‐​based, for‐​profit hospital, Columbia HCA. Although the merger failed to materialize, hospital conversion is of critical interest, and lawmakers have held several hearings across the state on the issue.
  • House Bills 5384 – 5, introduced by representatives Ciaramitaro and Palamara, are legislative vehicles for Michigan’s new children’s health initiative (MIChild). The program, which the MDCH is spearheading, is intended to provide health insurance coverage to 156,000 of the state’s estimated 228,000 uninsured children. Although it is not certain whether legislation is necessary to move the initiative forward, the sponsors introduced the bills to encourage early legislative debate on the program.
  • Finally, although there has been no legislation introduced on the issue of Medicaid capitated managed care — another major MDCH initiative — many lawmakers are taking part in committee hearings and meetings on the issue.

More to Come in 1998

We believe that 1998 will see an increase in the number of initiatives passed. Generally, the second year of a legislative session yields more public acts than the first. During the first year, a certain amount of time and priority must be given to getting new bills drafted and introduced, but during the second there is more time for studying, debating, and moving legislation. Given the groundwork they completed this year, legislators are well‐​positioned to achieve their remaining health policy goals in 1998.

Copyright © 1997