Getting to a Single-Payer System UsingMarket Forces: The CHOICE Program

by Helen Ann Halpin

Overview

The CHOICE program is a new approach tohealth care reform that very quickly achievesnearly universal access to a single-payerhealth insurance system for all U.S. residentswithout any individual mandates or newregulations for employers or health insurers. Itaccomplishes this goal by offering all U.S.residents a new choice for their health insur-ance coverage that better meets their prefer-ences as health care consumers, providers andemployers. CHOICE offers Americans the op-tion of unrestricted access to nearly all li-censed health care professionals and facilitiesin their state for comprehensive, affordable,high-quality health care without eliminatingany of their current health insurance options.The simple beauty of the CHOICE program isthat it achieves these goals through economicincentives, competition with the existing sys-tem, and ultimately transitioning the entiresystem as a result of the voluntary choices ofindividuals, businesses, and health care pro-viders. The result is increased access, equity,efficiency, choice, and security for all.

CHOICE is a shared responsibility betweenthe federal and state governments, with stateshaving flexibility in how they design and ad-minister their programs. CHOICE recognizesthe differences in the public programs and de-livery systems operating within each state, aswell as the varying needs of their populations,and gives states the opportunity to tailor theirprograms within federal guidelines. Financing

is a mix of public and private, and each statecontracts directly with private and publichealth care providers and organized deliverysystems in the state to provide covered healthcare services. All U.S. residents who enroll inCHOICE will have two major options for af-fordable, comprehensive health insurancecoverage:• The CHOICE Single-Payer Network:CHOICE enrollees may receive their medicalcare from any licensed health care profes-sional or facility that contracts with the state-wide CHOICE fee-for-service network to pro-vide covered services. It is anticipated thatnearly 100 percent of all health care providers(except those who practice in group- or staff-model HMOs) will elect to contract with theirstatewide CHOICE Network. All providers inthe network will be paid Medicare paymentrates for all enrollees, regardless of theirsources of financing (for example, employer,Medicaid, Medicare).• Organized Delivery Systems: CHOICE en-rollees may select among all state licensed or-ganized delivery systems (ODSs), which in-clude both group- and staff-model HMOs, thatelect to contract with the CHOICE program intheir state. ODS will be paid an age-, sex-, andrisk-adjusted capitation payment for eachCHOICE enrollee. In addition, health insur-ance carriers and health plans will be offeredfederal tax incentives to develop new partner-ships with large multi-specialty groups in ex-clusive arrangements, creating more ODS op-tions that will compete with each other and

with the CHOICE Network for enrollees.CHOICE makes coverage affordable by

basing the amount that enrollees pay towardCHOICE coverage on their annual wages andfamily size. Employers contribute by paying apayroll tax of 5.5 percent or 6.5 percent, de-pending on firm size, which is substantiallyless than many now pay for coverage. An em-ployer that continues to offer workers healthcoverage will be credited for the full amountof the tax for each worker enrolled in the em-ployer’s plan. States and the federal govern-ment will contribute to CHOICE financingwhen people move from existing state or fed-erally subsidized programs to CHOICE.

Objectives of the CHOICE program

The CHOICE program has five major objec-tives:

1. To Increase Coverage

The primary objective of the CHOICE pro-gram is to guarantee access to affordable,comprehensive health insurance coverage forall non-elderly adult workers (regardless oftheir immigration status) and their non-working dependents as well as all Americanswho are currently eligible for Medicaid, theState Children’s Health Insurance Program (S-CHIP), or Medicare. A “worker” is broadlydefined to include full-time, part-time, sea-sonal, contractual, and temporary workers aswell as the self-employed.

It is expected that the CHOICE programwill increase coverage to at least 95 percent ofall U.S. residents within one year of adoption.The CHOICE program will extend eligibilityfor coverage to nearly all currently uninsuredU.S. residents and their families. It also willincrease coverage, through mass media cam-paigns and extensive community outreach, forU.S. residents who are eligible for S-CHIP andMedicaid but are not enrolled, and it will pro-vide for more comprehensive and affordablecoverage for elderly Medicare beneficiaries

who elect to enroll in the CHOICE programthrough a federal Medicare DemonstrationProgram.

2. To Increase Choice

All working, non-elderly U.S. residents andtheir non-working dependents, as well asMedicaid, S-CHIP, and Medicare beneficiaries,will retain all of their current health insurancecoverage options, but they will be offered anew option in the form of the CHOICE pro-gram. For example:• Workers and their families will retain theoption of getting their coverage through theiremployer (if offered), public programs (if eli-gible), the individual market (if affordable), orthe new CHOICE program.• Elderly Medicare beneficiaries will havethe option of getting their coverage throughthe traditional Medicare program, Medi-care+Choice plans, or the new CHOICE pro-gram.• Individuals eligible for Medicaid, S-CHIP,and other state-administered and -financedhealth insurance programs will have the op-tion of continuing their coverage in thesepublic programs or enrolling in the newCHOICE program.• Employers will have the option of decid-ing whether to offer employer-sponsored cov-erage and will remain free to decide whatshape and form that coverage will take with-out any regulation of the benefits they offer.• CHOICE enrollees will have the option ofchoosing from their statewide CHOICE Net-work of health care providers or enrolling inan organized delivery system (ODS) for theirmedical care.• CHOICE enrollees will have the option ofchoosing their own doctors and hospitals fromamong all health care providers who contractwith the statewide CHOICE Network.• Health insurance brokers will have theoption of offering the CHOICE program to in-dividuals and small firms.• Health insurance companies and health

plans will have the option of continuing to sellcoverage in the group and individual marketsand will be offered incentives to partner innew exclusive arrangements with multi-specialty medical groups to form new ODSs.• Health insurance companies and healthplans will also have the option of developingand selling supplemental products that coverservices not included in the CHOICE benefitspackage as well as contracting with theCHOICE program to perform administrativefunctions.

3. To Increase Equity

An objective of the CHOICE program is to en-sure that everyone pays a fair share of the cost tosupport access to comprehensive, affordablecoverage for all U.S. residents and their fami-lies. The CHOICE program achieves financialequity by requiring all parties (individuals,employers, and state, county, and federal gov-ernments) that currently support the healthcare system financially to continue to do so ata level that is affordable and necessary to pro-vide comprehensive, high-quality health careservices. The CHOICE program also increasesequity by:• Making premium contributions affordablefor individuals and families by tying them towage levels up to a maximum annual wage.There is no out-of-pocket premium for indi-viduals and families with annual incomes be-low 150 percent of poverty. On average, U.S.residents with incomes above 150 percent ofpoverty will pay 2 percent of their annual in-come applied up to the maximum wage sub-ject to the Social Security tax (approximately$87,000 per year in 2003) to enroll in theCHOICE program.• Setting employer contributions to help fi-nance health insurance coverage so that allemployers operating in the United States payinto the CHOICE program for any employeeswho do not take up employer-sponsored cov-erage. The payroll tax under the CHOICEprogram is considerably less than what em-

ployers now pay to buy coverage in the small-and large-employer group health insurancemarkets.• Providing a reasonably comprehensivestandard set of benefits to all CHOICE enrol-lees.• Providing fair payment to all health careproviders in the CHOICE Network through100 percent Medicare payments, regardless ofpatients’ source of financing.• Providing each participating ODS with anage-, sex-, and risk-adjusted capitation pay-ment for all covered services for its CHOICEenrollees.

4. To Increase Efficiency

Another objective of the CHOICE program isto increase efficiency in administering healthinsurance coverage and to purchase greatervalue with U.S. health care dollars. This meansmaintaining and improving the quality ofhealth care, while at the same time keepingcosts reasonable. This objective will beachieved by:• Taking advantage of electronic processingcapabilities for all administrative functions,including claims processing, auditing, andquality review and improvement.• Bulk purchasing of pharmaceuticals andmedical equipment through the Federal Sup-ply Schedule (FSS).• Coordinating administration of theCHOICE program with other state-administered health insurance programs.• Permitting any requirements for enroll-ment, including residency, work status, familystatus, and income, to be determined by a self-certification process with random paperlessverification.18

• Permitting automated enrollment of pa-tients in CHOICE by health care professionalsat the site of care.• Contracting directly with licensed health

18 Ana Montes. Latino Issues Forum. Memo to Norma Garciaof Consumers Union re: Self-Certification (April 20, 1999).

care professionals and facilities in the state-wide CHOICE Network, whose performancewill be assessed on quality and value.• Restricting contracts with ODS to onlystate-licensed group- and staff-model HMOs,whose performance will be assessed on qual-ity and value.19

5. To Increase Security

Ultimately, the goal of the U.S. health caresystem under the CHOICE program will be tomaintain and improve the health of all peopleliving in the United States and to meet theirmedical care needs. This means preventingdisease and disability, promoting health,managing chronic conditions, treating illnessand injury, and giving priority coverage tothose services that have been demonstrated tobe effective in improving health outcomes.This objective will be achieved by:• Providing coverage for those services andtreatments that have been demonstrated to beeffective and relatively cost-effective in theprevention, diagnosis, treatment, and man-agement of a medical condition.• Returning medical care decision makingto health care providers and their patientswith no preauthorization requirements.• Holding health care providers accountablefor the quality and cost of the care they de-liver.• Increasing the number of insured indi-viduals, thereby providing a reliable source ofnew revenue for safety net providers and, atthe same time, increasing per capita statefunding for indigent medical care for personswho remain uninsured.20

Coverage/Eligibility

1. Eligibility Criteria

U.S. residents who meet the following criteriaare eligible to enroll in the CHOICE program,

19 UC Berkeley Annual Survey of Health Plans (1997). 20 California LAO analysis (2001).

regardless of their race, age, gender, religion,ethnicity, sexual orientation, legal status,health status, family status, or income.

Non-elderly (0–64 years) U.S. residentswho meet all three criteria below are eligible toenroll in the CHOICE program:• Currently reside in the United States withthe intent to remain.21

• Are not covered by Medicare.• Meet one of the following criteria:

—Worked in the United States (or is thenon-working dependent[s] of an eligibleworker) for at least three months out of thelast 12. A “worker” is defined to includefull-time, part-time, seasonal, temporary,and contractual workers and the self-employed.—Are eligible for Consolidated OmnibusBudget Reconciliation Act (COBRA) healthbenefits.—Are receiving state unemployment bene-fits.—Are eligible for S-CHIP.Elderly U.S. residents are eligible if they

meet the following conditions:• Are 65 years of age or older.• Currently reside in the United States withthe intent to remain.• Are eligible for Medicare.

Non-working, non-elderly U.S. residentsand uninsured elderly U.S. residents can buyinto the CHOICE program by paying the fullpremium. However, persons enrolled in mili-tary/CHAMPUS/Veterans Administration(VA) programs are not eligible for theCHOICE program. In addition, non-workingadult (18 and older) U.S. residents who areeligible for or enrolled in the Medicaid pro-gram will not be eligible in the first phase ofimplementation to enroll in the CHOICE pro-gram, but they will remain covered underMedicaid. Non-elderly Medicare enrollees alsowill not be eligible to enroll in CHOICE ini-

21 The language of “present with intent to remain” is usedto determine Medicaid eligibility.

tially. Once the CHOICE program is up andrunning and covering the majority of the U.S.population, the non-working Medicaid andnon-elderly Medicare populations will becomeeligible to enroll in the program. This phasedapproach avoids adverse selection of thesehigh-risk, high-cost populations into the riskpool too early in the program’s development.By first establishing a very large and relativelyhealthy risk pool, it will be easier to absorb arelatively small but higher-risk populationlater without substantially changing the aver-age costs of offering coverage to the entirepopulation.

2. Guaranteed Annual Renewal

Individuals and families who elect to enroll inthe CHOICE program will have coverage forone full year. Once an individual or family hasenrolled, annual renewal is guaranteed, con-ditional on continued payment of the income-based share of the premium (if any is re-quired).

Subsidies

The CHOICE program offers subsidies to in-dividuals, based on their annual income andtheir family size, and to firms, based on thenumber of employees (size of firm). No subsi-dies are offered to anyone who purchases cov-erage outside the CHOICE program, with theexception of subsidies offered as part of ex-isting public insurance programs, includingMedicaid, S-CHIP, and Medicare.

1. Subsidies for Individuals and Families

For those who enroll in CHOICE, the subsidyfor individuals and families is based on bothannual wages and family size, gradually in-creasing as income decreases and family sizeincreases, with limits on out-of-pocket costscapped along both dimensions. Individualsand families who enroll in the CHOICE pro-gram pay, at a minimum, nothing toward themonthly premium (for those in families with

an annual income below 150 percent of thefederal poverty guideline) and, at a maximum,2.5 percent of their annual income up to theannual wage cap for Social Security taxes(about $87,000 in 2003), or a maximum of $181per month for a family of any size.

Individuals with incomes between 151 per-cent and 250 percent of the poverty guidelinepay 0.5 percent of their monthly wage towardthe premium; those with incomes between 251percent and 350 percent of the federal povertyguideline pay 1.5 percent; and those with an-nual incomes above 350 percent pay 2 percent(applied up to the annual wage cap for SocialSecurity taxes). For each non-working de-pendent who is also covered under CHOICE,an additional 0.5 percent of monthly wages ispaid toward the premium, up to a maximumof 2 percent of monthly wages for familieswith an income between 151 percent and 350percent of poverty, and up to a maximum of2.5 percent of monthly wages for families withan income above 350 percent of poverty, againapplied only up to the annual wage cap forSocial Security taxes. The subsidies are onlyoffered to individuals and families who enrollin the CHOICE program and are not availablefor any other source of coverage.

2. Subsidies for Employers

Firms are also subsidized relative to their cur-rent costs in the group market or as self-insured employers. The subsidy, however, isgreater for small firms (1 to 50 employees)than it is for larger firms (more than 50 em-ployees). Under CHOICE, small firms will paya quarterly tax of 5.5 percent of total payroll,with large firms paying at a marginal rate of6.5 percent for the 51st employee and beyond.Firms with employees who elect to get theircoverage through the firm’s plan will receive atax refund equal to the amount of the payrolltax paid on the wages of those employees.

Financing

The CHOICE program is financed by existingprivate and public (state and federal) fundingfor health insurance and new sources offunding.

1. Existing Funds

State Funding

The state will pay its share of cost for:• workers and their dependents eligible forMedicaid who enroll in the CHOICE pro-gram;22

• persons eligible for S-CHIP who enroll inthe CHOICE program;23

• workers eligible for other state-subsidizedhealth insurance programs who enroll in theCHOICE program.

Federal Funding

The federal government will pay its share ofcost (federal match) for persons eligible for S-CHIP and Medicaid who enroll in theCHOICE program as well as the Medi-care+Choice premium for elderly Medicarebeneficiaries who elect to enroll in their state’sCHOICE program.

2. New Sources of Funding

Worker’s Share of Premium

The CHOICE program does not require work-ers to take coverage under either their em-ployer’s plan (if offered) or the CHOICE pro-gram. Thus, workers retain the option of nottaking health coverage and not paying a pre-mium, with no individual mandate to buycoverage. All workers and their families, re-gardless of whether their employer offershealth insurance coverage, will have the op-tion of enrolling in the CHOICE program. Per-sons who take employer-sponsored coverage

22 HCFA Final Management Report for FY 2000. Available athcfa.gov/meidcaid/fmr00.zip. 23 “State Children’s Health Insurance Program Allotmentsfor Federal Fiscal Year.” Federal Register 65, no. 101 (24May 2001).

are responsible for their share of the premiumas determined by their employer; it is not sub-sidized. Workers who take coverage under theCHOICE program pay only the subsidized,wage-based share of the CHOICE premium (ifany); they do not pay the premium for theemployer’s plan.

Table 1 presents the share of the monthlypremium each worker who elects to enroll inthe CHOICE program will be required to payas a function of his or her monthly wage rela-tive to the federal poverty guideline and thenumber of non-working dependents in thefamily.

Thus, a worker with annual wages of lessthan $13,000 will be fully subsidized under theCHOICE program and will not be required tocontribute anything toward the premium. Thesame is true for a family of four with an an-nual income below $26,000. At the other ex-treme, individual workers who earn morethan $87,000 per year will pay $145 per monthfor themselves, while a family of two or morewith an annual income greater than $87,000will pay a maximum of $181 per month underCHOICE.

Rationale. One of the biggest barriers tohealth insurance coverage for most uninsuredAmericans is affordability. Thus, one mecha-nism for expanding coverage is to tie individ-ual and family premium contribution levels toworkers’ wages (up to the maximum annualwage subject to Social Security tax), makinghealth insurance affordable for all U.S. resi-dents and their dependents.

Workers who elect to enroll in the CHOICEprogram will pay a fair share of the cost of themonthly premium, which varies as a functionof their monthly wage and the number of non-working dependents in their family. The pre-mium is structured so that those who can af-ford to pay more are asked to pay a largershare of the premium than those with lowerincomes. No individual or family enrolled inthe CHOICE program will be asked to paymore toward the annual premium than 2.5

percent of total wages, applied up to themaximum annual wage per worker subject tothe Social Security payroll tax. Workers withwages below 150 percent of the federal pov-erty guideline will not be required to pay anyout-of-pocket monthly premium.24 Workerswho are eligible for Medicaid or S-CHIP willnot be required to pay a premium that exceedsthe requirements of those programs in theirstate. The self-employed pay the worker’sshare of premium for themselves and theirnon-working dependents.

Employer Payroll Tax and Tax Refund

All firms operating in the United States willpay a quarterly payroll tax to help finance theCHOICE program based on firm size and totalpayroll. The self-employed are treated assmall firms of one employee for the purposesof the payroll tax. The tax, levied on all wages,tips, and salaries, applies to the total quarterlypayroll across all workers. Firms are catego-

24 Individuals/families with incomes below 150 percent ofthe federal poverty guideline will pay no out-of-pocket shareof premium to enroll in the CHOICE program and no co-payment for services or pharmaceuticals. Enrollees in theCHOICE program through no-cost Medicaid will also face nopremium cost or copayments if enrolled in the CHOICE pro-gram. Premiums and copayments for persons enrolled in theCHOICE program through S-CHIP or share-of-cost Medicaidwill not exceed the requirements under these programs.

rized by size, with smaller firms (those with 1to 50 workers) paying at a lower rate thanlarger firms, as shown in Table 2.

State government will pay the payroll taxto cover state employees under CHOICE, andall municipal and county governments willpay the payroll tax for their employees. Thefederal government will continue to offer Fed-eral Employees Health Benefits Program(FEHBP) plans to federal employees; however,we expect federal workers will do whateverminimizes their costs and meets their needs(either remain in FEHBP or move toCHOICE).25

All U.S. employers who hire foreign work-ers residing in the United States, both docu-mented and undocumented, will participate infinancing their health care coverage by in-

TABLE 1

Worker Out-of-Pocket Monthly CHOICE Premium

WORKER ANNUAL WAGE AS APRECENT OF THE FEDERAL POVERTY

GUIDELINE 1, 2,3

PERCENT OF MONTHLYWAGE PER WORKER

ADDITIONAL PERCENT OFMONTHLY WAGE FOR EACHNON-WORKING DEPENDENT

MAXIMUM PERCENT OFMONTHLY WAGE PER

WORKER

Up to 150% of poverty 0% 0% 0%

151%-250% of poverty 0.5% 0.5% 2%

251-350% of poverty 1.5% 0.5% 2%

Above 350% of poverty 2% 0.5% 2.5%1 Individuals enrolled in the CHOICE program who are eligible for Medicaid or S-CHIP will be required to pay only the premium that isrequired under these programs, if any.2 Based on the worker’s monthly wage up to the annual wage cap for Social Security payroll taxes (approximately $87,000 annual wagein 2003).3 The same rates and restrictions would apply to income of elderly Medicare beneficiaries who voluntarily enroll in CHOICE through thedemonstration program of the Centers for Medicare and Medicaid Services (CMS).

TABLE 2

Employer Quarterly Payroll Taxes under theCHOICE Program

FIRM SIZE MARGINAL TAX RATE

1st to 50th worker 5.5%

51st worker and beyond 6.5%

cluding the wages of these workers in theirtotal payroll, which is subject to the CHOICEemployer payroll tax.

While all employers are required to pay thetax, an employer that continues to offer itsworkers health insurance benefits will becredited with the full amount of the tax foreach worker who accepts coverage under theemployer-sponsored plan. The tax is alsocredited for workers with qualified coverageunder CHAMPUS or Medicare (for those eld-erly beneficiaries who do not enroll inCHOICE). However, there will be no recoveryof tax payments for other persons not coveredunder the employer’s plan, including workerswho are covered under a spouse’s employer’shealth plan.

Rationale. While firms are not required tooffer employer-sponsored coverage under theCHOICE program, nor is such coverage regu-lated by the state, employers are required topay a modest payroll tax that is significantlyless than the average cost of coverage in thegroup market—on average a 15 percent sav-ings for firms that now offer coverage.26 Thus,all workers and their non-working depend-ents in all firms will have the option of en-rolling in the CHOICE program when thepayroll tax goes into effect or getting theircoverage through their employer, if it is of-fered. This differs significantly from tradi-tional “play or pay” programs, as there are norules or restrictions on what firms may offerand even if an employer offers coverage, theiremployees always retain the option of enroll-ing in the CHOICE program—thus is it not aneither/or proposition to the employer.

Most non-elderly Americans with healthinsurance receive their coverage through theiremployer (67 percent); yet, in 2002, only 61percent of smaller firms (with 3 to 199 work-ers) offered their workers health insurancecoverage.27 In addition, approximately 76 per-

26 Ibid. 27 Kaiser/HRET Survey of Employer-Sponsored Health Bene-fits: 2002

cent of non-elderly adults who were unin-sured in 2000 were employed either full- orpart-time. While employment is the most im-portant route to coverage, with employerssubsidizing on average 84 percent of the pre-mium cost for single coverage and 73 percentof the premium cost for family coverage, em-ployment in the United States certainly doesnot guarantee coverage.28 The probability ofbeing offered employer-sponsored insurancevaries significantly as a function of firm size,industry, and employment status (full- orpart-time, contractual, temporary, seasonal).The CHOICE program seeks to eliminate all ofthese inequities by guaranteeing all U.S.workers and their families access to compre-hensive and affordable health insurance cov-erage, regardless of their work status or theiremployers’ characteristics.

Recent estimates suggest that, among firmsthat offer coverage, the employer share ofpremium is the equivalent of about a 7 percentto 8 percent payroll tax. The payroll tax underthe CHOICE program is considerably lesscostly for nearly all U.S. firms that currentlyoffer coverage (5.5 percent tax for small firms;6.5 percent tax for large firms). Thus, it is ex-pected that most firms will stop offering theirown coverage, pay the tax and encourage theirworkers to enroll in CHOICE rather than con-tinuing to steer them into employer-sponsoredhealth plans.29 The firms least likely to pursuethis strategy are very-high-wage firms, forwhom the payroll tax might represent an in-crease over their costs of self-insuring or pur-chasing coverage in the group market.

Lower payroll taxes for small firms recog-nize the difficulty these firms have in afford-ing coverage in the group market as well as 28 Kaiser/HRET Survey of Employer-Sponsored Health Bene-fits: 2002 29 A similar idea of a payroll tax low enough to encouragemany employers to choose a public coverage option ratherthan continuing to offer coverage themselves was devel-oped independently in another paper in this series. SeeJacob S. Hacker. “Medicare Plus: Increasing Health Cover-age by Expanding Medicare.” Covering America: RealRemedies for the Uninsured, Vol. 1. Economic and SocialResearch Institute, 2001.

their reported desire to be able to offer healthbenefits to their workers. Using a marginalpayroll tax rate lessens the impact of firm ex-pansions on employer health care costs andreduces the likelihood of negative responses tothe payroll tax among firms.

The CHOICE program is also structured toreduce employers’ potential to “game” thesystem. For example, an employer could offercoverage but not contribute toward the cost ofit, thus avoiding all costs. Similarly, employerscould choose to offer coverage with onlyminimal benefits to reduce costs (there are nominimum benefits requirements for employer-sponsored coverage under CHOICE). How-ever, if employers make coverage look less at-tractive than that available under the CHOICEprogram, and their employees elect not to takethat coverage and enroll in CHOICE instead,the employer will still be responsible for thepayroll tax for these workers. As a result, thehealth plans that employers continue to offerto their employees are expected to be similarto those they currently sponsor and to becompetitive with the CHOICE program.

Because the payroll tax rates that help fi-nance the CHOICE program are so reasonable,it is expected that most firms will find the costof the payroll tax to be considerably less thanthe cost of paying for health insurance fortheir workers and will encourage their work-ers to enroll in CHOICE.

Financing for Medicare Beneficiaries

In addition to the federal Medicare+Choicecapitation payment from CMS, the premiumfor elderly Medicare beneficiaries who volun-tarily elect to enroll in the CHOICE programwill be funded in two ways:• An income-based share of premium (seeworker share of premium above for rates), notto exceed 2.5 percent for a couple in the high-est income brackets and applied to an annualincome capped at the Social Security taxmaximum annual wage.• For those who have retiree health benefits,

the amount the employer pays to purchase re-tiree health benefits will be paid to theCHOICE program for each eligible Medicarebeneficiary who voluntarily enrolls inCHOICE.

Public Health Taxes

Three public health taxes also will be used tohelp finance the cost of providing health in-surance coverage to U.S. residents. They in-clude:• A federal tobacco tax of $1 per pack ofcigarettes, with a proportionate increase onother tobacco products, which will be ear-marked exclusively as revenue for theCHOICE program.• A new federal tax on alcoholic beveragesearmarked exclusively as revenue for theCHOICE program.• A new federal tax of ten cents per 12ounces of sweetened soda/soft drinks ear-marked exclusively as revenue for theCHOICE program.30

Rationale. The specific items to be taxedwere selected based on analysis of the leadingcauses of disease and years of life lost in theUnited States, which include use of tobaccoproducts, alcohol consumption, and obesity.31

Safety Net Savings

Under the CHOICE program, 80 percent ofper capita state safety net spending on medi-cal care for the indigent and uninsured will beredirected to the CHOICE program for eachpreviously uninsured person who enrolls inthe program. The safety net will retain 100percent of federal disproportionate share hos-pital (DSH) funds, 100 percent of current percapita safety net spending on medical care forpersons who remain uninsured, plus the 20percent of current per capita spending for

30 Jacobson MF, Brownell KD. Small Taxes on Soft Drinksand Snack Food to Promote Health. American Journal ofpublic Health. 2000 90(6):854-857. 31 McGuiness JM, Foege WH. Actual Causes of Death in theUS. JAMA 1993;270(18):2007-12.

each previously uninsured person who enrollsin CHOICE.

Rationale. Federal and state governmentsspend billions of dollars on the safety net eachyear; however, not all of this funding will beavailable to help finance the CHOICE pro-gram for the previously uninsured. It is criticalthat funding to DSH facilities be maintained,and that funding is not only maintained butincreased as well to pay for health care for the4 percent to 5 percent of the population whoremain uninsured after CHOICE is fully im-plemented.

The CHOICE program will quickly reducethe number of uninsured people in the UnitedStates, and, commensurately, fewer peoplewill need indigent medical care. Under theCHOICE program, Medicare payments willreplace indigent care funding for previouslyuninsured people. This approach will providethe safety net with a much more stable sourceof financing in the long run by offering higherpayments for covered services, and it will en-able all safety net providers to deliver morecomprehensive, high-quality health care to allof their clients. In addition, the amount thestate spends to fund the safety net per unin-sured person will be increased under CHOICEby increasing the per capita funding for thosewho will remain without coverage.

NAFTA Social Integration Fund

Under a new provision of the North AmericaFree Trade Agreement (NAFTA), health in-surance for Mexican workers who live andwork in the United States will be financed inpart by a social contribution from bilateraltrade between the United States and Mexico.A bilateral side agreement will be negotiatedto create a NAFTA Social Integration Fundthat will require a 2 percent contribution on allcross-border transactions. In the United States,the NAFTA Social Integration Fund will sub-sidize the cost of coverage in the CHOICEprogram for Mexicans living and workinghere. The amount of bilateral trade between

the United States and Mexico in 2000 was es-timated to be $174 billion.32 Two percent ofthis would yield $3.5 billion toward financingcomprehensive health insurance coverage un-der CHOICE for all Mexican workers andtheir families who reside in the United States.

Rationale. NAFTA is the free trade agree-ment among the United States, Mexico, andCanada to eliminate all tariff and non-tariffbarriers to trade by 2005. Under NAFTA,United States-Mexico bilateral trade has morethan doubled, growing from $82 billion in1993, to $130 billion in 1996, to $174 billion in2000. Before NAFTA was enacted, duty onproducts and services averaged 10 percent inMexico; by 1996, this had decreased to lessthan 6 percent. In the United States, averagetariffs fell from 4 percent to about 2.5 percentover this same period.

The reduction in trade barriers and tariffshas allowed many smaller U.S. firms to exporttheir goods. Both the Bush administration andPresident Fox of Mexico favor “regularizing”Mexicans who are in the United States ille-gally—that is, taking the steps necessary tomake it legal for them to live and work in theUnited States as citizens of Mexico. Mexicorecognizes that its citizens who work in theUnited States are not only important politicalconstituents, but also that the remittances theysend to Mexico constitute the second- or third-largest source of Mexican income.NAFTA has already negotiated two bilateralside agreements on the environment andsafety and labor issues. As part of adoption ofthe CHOICE program, another side agreementwill be negotiated to address social invest-ments, including public health and healthcare. Adoption of a Social Integration Fundwith Mexico will greatly reduce the burden onthe United States to subsidize the cost ofemergency, maternity, and indigent care for

32 Personal communication with Joe Kafchinski, U.S. CensusBureau, Foreign Trade Division (Feb. 6, 2002).

Mexicans and their families who live andwork here.

This expansion will be modeled on theEuropean Union’s Maastricht Treaty devel-oped in 1993.33 The participating countries de-veloped a strategy that pursues “a high levelof human health protection by encouragingco-operation between the member countries”and, if necessary, by lending financial supportto their action. In terms of health insurancecoverage under European Union regulation, across-border worker is entitled to medical carebenefits in both the member country in whichthe worker is employed and the membercountry in which he or she lives.

Insurance Risk

The federal government will bear the insur-ance risk for enrollees in the CHOICE Net-work in each state. State-licensed group- andstaff-model HMOs that contract with theCHOICE program in each state will bear theinsurance risk for their enrollees.

Administration and Regulation

1. Administration by a Designated State Agency

A state agency designated by each state’s gov-ernor will administer the CHOICE programand will coordinate with other state agenciesto streamline and simplify enrollment in S-CHIP and Medicaid, regulate providers, as-sess quality, collect and report data, and reachout to the community. The designated stateagency will provide or arrange for a central-ized electronic clearinghouse for claims proc-essing, benefits coordination, payments toproviders, utilization review, quality man-agement, and other administrative functions.Administrative costs for the ODS contractingwith the CHOICE program are expected to beabout 5 percent, similar to costs for large-

33 The European Commission. Communication on the De-velopment of Public Health Policy. Available athttp://europa.eu.int/comm/health/ph/grneral/phpolicy2.htm.

group health plans. Program administrationfor CHOICE is estimated to be 3 percent.

2. Enrollment

Workers will enroll in the CHOICE programthrough their employer. The wage-based em-ployee share of the monthly premium forworkers enrolled in the CHOICE program willbe collected through automatic payroll de-ductions and sent by electronic funds transferto the designated state agency. The quarterlyemployer payroll tax will also be collected bythe CHOICE program by electronic transfer offunds. Medicare beneficiaries will enroll inCHOICE through the CMS demonstrationprogram or through the employer that ad-ministers their retiree health benefits.

3. Self-Certification and Automated Verification

To further reduce barriers to enrollment, allrequirements for residency, work, and incomewill be determined through a self-certificationprocess, whereby individuals verify their in-formation by signature, with a random pa-perless online verification process. Self-certification with periodic auditing has beenfound to be cost effective and results in verylittle fraud. The cost of more extensive verifi-cation does not produce enough savings indecreased fraud to make it cost-effective.34

Implementation of an automated eligibilitydetermination system has the potential to re-duce Medicaid and S-CHIP administrativecosts by at least 20 percent.35

4. Electronic Claims Submissions

All providers in the statewide CHOICE Net-work will be required to submit all claimselectronically. We assume the CHOICE pro-gram will not be fully operational until 2005,at which time it is expected that more than 90percent of health care providers and medicalfacilities and organizations will have elec-

34 Ana Montes, op. cit. 35 The Lewin Group (March 2002), op. cit.

tronic claims processing capability. Additionalfederal funding to facilitate adoption of elec-tronic claims processing should be appropri-ated for the remaining 10 percent of healthcare professionals and facilities without thiscapability. Electronic review of claims submis-sion will be ongoing to prevent fraud andidentify providers in the CHOICE networkwith utilization profiles that are statisticaloutliers. Claims will be reviewed to assessquality and costs as well.

5. Bulk Purchasing

Costs of prescription drugs and durable medi-cal equipment will be significantly lower un-der the CHOICE program, because they willbe purchased using the Federal SupplySchedule (FSS). It is estimated that the savingsgenerated from bulk purchasing using the FSSwill amount to about 40 percent for prescrip-tion drugs now purchased in the private sec-tor and about 30 percent for drugs now pur-chased through Medicaid.36 Similar savingswill be realized from bulk purchasing ofmedical equipment under the FSS.

6. Statewide CHOICE Network

All state-licensed health care providers andhealth care facilities will be eligible to partici-pate in the statewide CHOICE Network toprovide covered services, but as part of theircontracts they will be required to provide dataon quality and costs and to participate inquality studies. The designated state agencywill coordinate regulation of health care pro-viders participating in the CHOICE Networkwith regulation of providers participating inother state-administered health insuranceprograms. Enrollees will be covered onlywhen services are received from providers inthe CHOICE Network, with the exception ofcoverage for emergency care by non-networkproviders.

36 Ibid.

Rationale. We anticipate that nearly all phy-sicians, other health care providers, medicalgroups, hospitals, and other health care facili-ties will elect to contract with the CHOICENetwork because of higher payment rates,lower administrative costs, less uncompen-sated care, and the millions of U.S. residentsenrolled in the CHOICE program. We alsoanticipate that providers will actively encour-age their patients to enroll in CHOICE, soproviders can receive higher payments thanhave been available from HMOs and Medi-caid. Under CHOICE, providers will be lessburdened with paperwork and administra-tion, and they will have the freedom to referpatients to specialists and other ancillary andrehabilitative services as they deem necessary,without any requirements for pre-authorization, approvals, or referrals.

7. Provider Payments

All health care providers and facilities will bepaid at rates equal to 100 percent of Medicarepayment rates (for example, RBRVS for physi-cians and DRGs for hospitals). No physicians,medical groups, or hospitals contracting withthe CHOICE Network will be paid capitationpayments.

Rationale. Providing all providers with 100percent Medicare payments will result in in-creased payments to providers for patientsnow covered under Medicaid and S-CHIP.Uncompensated care for health care providersand facilities will decline, and payments tophysicians and hospitals for CHOICE enrol-lees who are eligible for Medicaid will in-crease substantially. This approach achievesequity in payment to providers, regardless ofpatient’s source of financing. It will also helpto ensure an adequate supply of providers toserve all CHOICE enrollees, regardless of theirsource of financing, which has been a signifi-cant problem under Medicaid.

8. PCP Selection

The CHOICE Network allows enrollees to se-lect any participating provider at any time.Enrollees will be required to select a primarycare physician (PCP) who will be held ac-countable for provision of recommended pre-ventive care and chronic disease management.Enrollees will not be required to obtain a re-ferral/authorization from their PCP to visit aspecialist or receive any other covered serv-ices. Enrollees may change their PCP at thebeginning of each calendar year, and the newPCP must notify the CHOICE program of thechange.

9. Contracts with Organized Delivery Systems(ODSs)

Under the CHOICE program, the only ODSswith which a state may contract are group-and staff-model HMOs. Participating ODSswill be required to offer the CHOICE programstandard benefits package to CHOICE enrol-lees, but they may offer additional coverage aswell. States also may elect to contract withMedicaid managed care plans operating intheir state.

While the CHOICE program will not con-tract with any independent practice associa-tions (IPAs)/network-model HMOs, point-of-service (POS) plans, or preferred provider or-ganizations (PPOs), all state-licensed U.S. dis-ability insurers or health plans will be encour-aged, through federal tax incentives, to createnew group- or staff-model HMOs that maycontract with the CHOICE program in eachstate. For purposes of this proposal, a group-model HMO is any health services plan thatoffers an exclusive multi-specialty network ofphysicians (who provide services only to thatone carrier’s enrollees). ODSs will be paid anage-, sex-, and risk-adjusted capitation pay-ment to address any adverse selection in themarket. Self-funded employer plans will beexempt under the Employee Retirement In-come Security Act (ERISA) from the risk-adjustment process.

Formation of these new partnerships willrequire time to implement. Carriers and multi-specialty groups that partner to form newgroup-model HMOs will be required in yearone to have at least 30 percent of the multi-specialty group’s enrollment be through thepartner carrier’s plan, increasing to 50 percentat the end of two years, 70 percent at the endof four years, and 100 percent at the end offive years, thereby achieving exclusivity.37

We also assume that disability insurers andhealth care services plans will develop sup-plemental products to offer additional cover-age beyond what is provided in the CHOICEstandard benefits package and will try to de-velop and market low-cost products to com-pete with the options available underCHOICE. In addition, it is expected that manystates will contract with private health insur-ers to perform administrative functions underCHOICE, including claims processing, bene-fits coordination, and payments to providers.

Rationale. The ultimate goal of these provi-sions is to retain the option of organized de-livery systems under the CHOICE programand to establish competing exclusive multi-specialty groups of physicians who practice inODSs and who see only patients who are en-rolled in the partner carrier’s plan. It isthrough their ability to increase benefits be-yond those offered through the CHOICENetwork that ODSs will best be able to com-pete against each other and the CHOICE Net-work in the reformed market. To the extentthat Medicaid recipients would like to con-tinue to receive their medical care throughMedicaid managed care plans, and other indi-viduals and families living in their service ar-eas would like to be able to enroll in them, theCHOICE program will give states this optionin designing their programs.

37 S. J. Singer and A. C. Enthoven. “Structural Problems inManaged Care in the U.S. and Some Options for Amelio-rating Them.” The U.S. Management Review 43 (1) (Fall2000): 50–65.

The CHOICE program will not contractwith IPA and network-model HMOs andother forms of managed care because theyhave been shown to be associated with anumber of problems with respect to the effi-cient delivery of high-quality care.38 Major ef-ficiency problems with IPA/network-modelHMOs include their inability to negotiate withor select high-quality, efficient medicalgroups; their lack of physician loyalty, cohe-sion, and leadership; their redundant and of-ten contradictory rules and processes; theirlack of investment in the health care deliverysystem; and the insulation of medical groupsfrom efficiency-enhancing market competi-tion.39

A random sample survey of consumer ex-periences in managed care in California foundthat individuals enrolled in IPA/network-model HMOs reported significantly moreproblems in getting needed care than thoseenrolled in group-model HMOs or PPOs.40 Inanother survey of callers to California’s Om-budsman Service, consumers in IPA/networkHMOs reported problems at a rate three timeshigher than that for consumers enrolled ingroup-model HMOs or PPOs. 41 As a result ofthe problems inherent in IPA/network-modelHMOs, there is also substantial dissatisfactionamong physicians contracting with theseplans.42

Under CHOICE, the federal governmentwill use tax incentives to encourage formationof new group- and staff-model HMOs, givingAmericans more options for getting their

38 Ibid. 39 Ibid 40 H. H. Schauffler et al. “Differences in the Kinds of Prob-lems Consumers Report in Staff/Group Health MaintenanceOrganizations, Independent Practice Association/NetworkHealth Maintenance Organizations, and Preferred ProviderOrganizations in the U.S.” Medical Care 39 (1) (2000):15–25. 41 “Real Problems and Real Solutions: Making the Voices ofHealth Care Consumers Count.” Health Rights Hotline(1999). 42 Chebab et al. “The Impact of Practice Setting on PhysicianPerceptions of the Quality of Practice and Patient Care in theManaged Care Era.” Archives of Internal Medicine 161 (2):202–211.

health insurance and medical care throughODSs. These new partnerships between carri-ers and exclusive multi-specialty groups willrelate to one another in a way similar to that ofthe Kaiser Foundation Health Plan and thePermanente Medical Groups. In this type ofarrangement, insurer and the physician incen-tives are better aligned, so they work in part-nership to match resources to the needs of thepopulation served; to offer comprehensiveservices in the most appropriate setting; tointegrate and share information systems; toimprove care processes; to conduct evidence-based utilization management, formulary de-velopment, and continuous quality improve-ment; and to manage cost-benefits trade-offs.43

The goal of the CHOICE program is not toput insurance companies and health plans outof business but, rather, to try to redesign thesystem so the products they offer provide ac-cessible, comprehensive, coordinated care aswell as to take advantage of the expertise ofhealth insurers in performing specific admin-istrative functions. Both the group and indi-vidual health insurance markets will continueto operate and sell their products under theCHOICE program, but they will have to com-pete with options under CHOICE that will beavailable to all U.S. residents.

10. Community Outreach

The federal government will develop materi-als and buy media time for a national massmedia campaign on the CHOICE program. Inaddition, states will conduct extensive com-munity outreach through schools, health careproviders, and facilities to enroll eligible per-sons in Medicaid, S-CHIP, or the CHOICEprogram. As stated earlier, any uninsured in-dividual may be enrolled in CHOICE at thesite of care through an automated verificationsystem; and health care providers will be paid100 percent Medicare payments for the carethey provide. The CHOICE program in each

43 Singer and Enthoven op cit

state will coordinate with other state-administered health insurance programs inimplementing their outreach programs to en-roll all U.S. residents in eligible programs. Tothis end, the CHOICE program will work withemployers as well to inform all workers abouttheir eligibility.

The CHOICE program will work withother state-administered health insuranceagencies in the state in contracting with hos-pitals, physician offices, medical groups, andclinics, as well as pre-schools and elementaryand secondary schools, to ensure that personsseeking medical care who are eligible for stateprograms enroll and receive health insurancebenefits. All licensed hospitals, clinics, andother health facilities will be prepared to in-struct any uninsured patient to apply for theCHOICE program as well as Medicaid and S-CHIP. The individual can self-certify his or hereligibility and may allow an application forenrollment to be submitted while he or she isin the hospital, clinic, or facility. Women whogive birth at a hospital, clinic, or facility willbe similarly informed and provided an op-portunity to submit an application for them-selves and their child.

Additionally, pre-schools and public ele-mentary and secondary schools will informthe parent or primary caretaker living witheach child at least once each year about theCHOICE program, Medicaid, and S-CHIP. In-formation will include eligibility require-ments, and an application may be submittedat the education facility. There will be a sim-ple, uniform mail-in application and enroll-ment process as well as an electronic enroll-ment option for CHOICE, Medicaid, and S-CHIP.

Rationale. The CHOICE program will per-mit health care providers to make eligibilitydeterminations for a patient using an auto-mated eligibility system. Providers will re-ceive payment for all services provided to pa-tients enrolled in this way, even if the patientsare later deemed to be ineligible. Since about

55 percent of uninsured persons seek medicalcare each year, it is conservatively estimatedthat half of them will acquire coveragethrough this process.44 This would result in a28 percent reduction in the number of unin-sured adults and children in non-workingfamilies who are eligible for Medicaid and S-CHIP but are not enrolled.

11. Regulation of Employers and Health Insurers

Regulation of employer-offered coverage willnot be affected by adoption of the CHOICEprogram. Existing state agencies charged withthis responsibility will continue to regulateHMOs and disability insurers.

Benefits

1. Initial Standard Benefit Package

The Kaiser Foundation Health Plan standardbenefits package in the large-group market inCalifornia will be the benchmark for healthbenefits under the CHOICE program. Thesebenefits include, but are not limited to, cover-age of hospital care, outpatient care, prescrip-tion drugs, preventive care, chronic diseasemanagement, maternity care, mental healthcare, supplies and supplements, ambulanceservices, dialysis care, alcohol, tobacco and/ordrug dependency treatment, durable medicalequipment, emergency care and out-of-areaurgent care, family planning, hospice care, vi-sion care, health education, hearing care,home health care, imaging, lab tests and spe-cial procedures, ostomy and urological sup-plies, physical, occupational and speech ther-apy, multidisciplinary rehabilitation, pros-thetic and orthotic devices, reconstructive sur-gery, skilled nursing facility care, and trans-plants.

2. Wrap-Around Coverage

To ensure that no one will lose any benefits forwhich he or she is eligible under current pub-

44 The Lewin Group, Inc. Analysis of 1998 MEPS data.

lic programs (for example, long-term care un-der Medicaid and dental care for children un-der S-CHIP), supplemental or wrap aroundcoverage is provided for anyone who is eligi-ble for a state or federal insurance programwith benefits beyond those covered underCHOICE.

3. Payments for Covered Services

Payments for covered services will only bemade to health care providers that contractwith the Statewide CHOICE Network and toODSs that contract with the CHOICE pro-gram. Payments for out-of-network providerswill be made for CHOICE enrollees only foremergency and out-of-area urgent care.

4. Experimental Treatments

The CHOICE program seeks to encourage thedevelopment of new treatments and therapiesthat advance the practice of medicine. Assuch, it will cover experimental treatments, aslong as the treatments are being providedwithin the context of an Institutional ReviewBoard -approved randomized controlled clini-cal trial.

5. Pharmacy Benefits

Pharmacy management is a critical aspect ofboth cost and quality of care. A federal phar-macy and therapeutics committee, comprisingindependent physicians, pharmacists, con-sumers, and others, will oversee the CHOICEformulary process. Prescription drugs underthe CHOICE program will be purchasedthrough the FSS, which will make them muchmore affordable compared to current marketprices.

6. Copayments

No copayments will be required for receipt ofcovered clinical preventive services (screen-ing, immunization, or counseling services) inthe CHOICE program. There will also be nocopayment requirements for enrollees whoselect the CHOICE Network and whose an-

nual wages are less than 150 percent of thefederal poverty guideline. For enrollees in theCHOICE Network whose coverage is financedin part through Medicaid or S-CHIP, copay-ments will not exceed the requirements underthese programs.

Copayments for enrollees who select theCHOICE Network and whose annual wagesare above 150 percent of the federal povertyguideline (and whose coverage is not financedby Medicaid or S-CHIP) will be set initially at$10 per outpatient visit.45 Emergency roomcopayments will be $35 per visit. There is nocopayment, deductible or coinsurance for in-patient care.

Drug copayments for enrollees who selectthe CHOICE Network and whose annualwages are above 150 percent of the federalpoverty guideline (and whose coverage is notfinanced by Medicaid or S-CHIP) will be $10per prescription per month. Copayments forthose enrolled in CHOICE Network with in-comes below 150 percent of the federal pov-erty guideline will be waived. ParticipatingODSs may design their own copayment re-quirements for prescription drugs.

7. Updating Benefits over Time

An independent federal panel of experts com-posed of physicians representing the majorspecialties will be established to advise theCHOICE program on coverage for specificinterventions, treatments, or drugs that shouldbe added to or removed from the standardbenefits package. The panel will meet at leastannually to consider new drugs and treat-ments and to review scientific evidence ontheir efficacy, effectiveness, relative cost-effectiveness, and impact on the public’shealth. Only those drugs and devices thathave received U.S. Food and Drug Admini-stration (FDA) approval will be eligible forconsideration.

45 Fifty percent of covered workers in HMOs in 2001 had acopayment requirement of $10; see KFF/HRET EmployerHealth Benefits 2001 Annual Survey.

Rationale. A comprehensive standard set ofbenefits is one of the keys to the CHOICE pro-gram. Health benefit design sits at the centerof the debate over trade-offs among access,choice, quality, and costs. Health benefit de-sign is the determination of what is coveredby insurance and what is not. The Kaiser Per-manente Health Plan group-market benefitspackage was selected as the initial benchmarkbecause it is relatively comprehensive, wasdetermined through a clinical review process,and was designed to promote the health andmeet the medical care needs of the coveredpopulation.

One of the primary drivers of improve-ments in health care quality and growinghealth care costs is the increasing availabilityof new technology and pharmaceuticals, in-cluding diagnostic and therapeutic interven-tions. For example, direct-to-consumer adver-tising has increased patient demand for spe-cific drugs and treatments, as have the actionsof political advocates who have pressuredstate governments to mandate coverage ofspecific services or prescription drugs forgroups with particular conditions.46 The resultis often an irrational process for determiningwhich services and treatments are covered.

CHOICE offers a more rational frameworkfor determining what new technologies andpharmaceuticals will be covered. To preserveaffordability and prevent erosion of compre-hensive benefits, selection of benefits will bebased on evidence that establishes the likeli-hood that a given procedure, intervention, ordrug will produce genuine health benefits.CHOICE also must enable coverage of inter-ventions based on the cost-effectiveness of theprocedure, intervention, or drug compared toother comparably effective therapies for thesame condition or symptom complex. The de-cision-making process also needs to excludefrom coverage treatments deemed to be inap-

46 H. H. Schauffler. “Politics Trumps Science: RethinkingState-Mandated Benefits. American Journal of PreventiveMedicine 19 (2) ( 2000): 136–137.

propriate for insurance coverage because thebenefit of including them is limited or is faroutweighed by the cost and the effect on theaffordability of the benefit package.

The CHOICE program would achievenearly universal coverage (95 percent) whileensuring stable aggregate risk pools and anevidence-based approach to covered benefits.Under these circumstances, it is feasible toprovide broad access to a comprehensivebenefits package that is likely to produce de-sired health outcomes in a cost-effective man-ner. Such a benefits package would minimizeobstacles to receiving effective treatments andwould promote access to appropriate health-value-added care, including primary preven-tion, early disease identification and treat-ment, and management of chronic conditions.

This approach is highly preferable to usingthe blunt policy tools of higher and higher de-ductibles, coinsurance, and copayments. Theresearch shows that these tools do reduceutilization, but they are indiscrimi-nate—reducing the use of both appropriateservices and marginal, low-value services tothe same degree. The CHOICE programwould enable ODSs and health care providersto compete based on effectiveness and effi-ciency of care delivery and health status im-provement, rather than on underwriting, riskavoidance, cost shifting and risk pool ma-nipulation, all of which the current system en-courages.

Quality and Data Incentives

1. Patient Care Management

Disease Prevention

The CHOICE program covers all evidence-based clinical preventive services.47 CHOICENetwork providers will agree to implementpatient education efforts and reminders to ap-

47 US Preventive Services Task Force. Guide to Clinical Pre-ventive Services. Second Edition. (Baltimore, MD: Williamsand Wilkins). 1996.

propriate segments of the population (for ex-ample, women 18 and older for Pap smearsevery three years). PCPs in the CHOICE Net-work, and ODSs that contract with theCHOICE program, will be encouraged to en-sure their patients receive all recommendedpreventive services at recommended intervalsand, at a minimum, record that the serviceswere provided. Physicians in the CHOICENetwork will be required to submit claimselectronically for each preventive service pro-vided, which will enable analysis of claimsdata for quality assessment. In addition, pre-ventive services utilization will be included inquality performance measures that are linkedto provider incentives.

Management of Chronic Conditions

The CHOICE program will notify its enrolleesand network providers of those provider or-ganizations that sponsor approved diseasemanagement and self-care programs. Patientswill be encouraged to participate in diseasemanagement programs through reductions inor waivers of copayments. The CHOICE pro-gram also will evaluate the option of carve-outdisease management programs that have aproven record of success (for example, care forpatients with AIDS). The CHOICE programwill encourage patient participation in theseprograms by using similar incentives as thosefor provider-sponsored disease managementprograms. Additional incentives may be of-fered for patients who continue in a givenprogram for a specified period. For example, apatient with cardiac disease who continues tofollow a provider group’s approved protocolfor three years may receive a premium dis-count.Centers of Excellence. All enrollment materialswill highlight hospital centers of excellence forhigh-volume, high-cost procedures for whichthe literature indicates a correlation to quality.The CHOICE program will contract in-network only with those facilities that meet orexceed evidence-based standards for these se-

lect services. Where outcomes are not yetavailable, volume data will be used when ap-propriate, and network hospitals will be re-quired to participate in any scientific outcomestudies. Examples of conditions for whichthere are existing data for Centers of Excel-lence include transplants, coronary artery by-pass graft surgeries, and neonatal care. Ap-proved trauma centers (for example, burnunits) and centers of excellence will also beused for catastrophic care.

2. Provider Performance Measurement andImprovement

Quality Performance and Improvement

High-value providers will be recognized dur-ing enrollment, at annual renewal, andthroughout the year for their performance onquality performance measures (see below forprovision of such information and bonus in-centives). In areas for which several years ofcomparative data are available, high-valueproviders will be recognized. In the interim,providers will be recognized for improve-ments as well as for participating in qualitymeasurement programs.

Data and Information

There is a paucity of comparative providerperformance information. Such studies oftentake several years to produce meaningful re-sults and require substantial resources. As arequirement for in-network selection for theCHOICE program, providers will submit rele-vant electronic data to participate in a study orstudies related to their practice.

3. Patient Incentives

Financial Incentives

Plan design is one of the most effective meansof influencing patient behavior. Certainly,limiting coverage to in-network providers (ex-cept in emergencies) will encourage enrolleesto see providers who are willing to providecost and quality data. As mentioned above,

copayments can be waived or reduced for pa-tients who elect to participate in disease man-agement or self-care programs. Copaymentswill be waived for all preventive services.

Other Incentives

Additional patient incentives related to qual-ity will include aggressive promotion of edu-cational opportunities. All media, includingprint, the Internet, phone, and in-person dis-cussions, will be used as appropriate. The pa-tient’s condition, language, cultural perspec-tive, health literacy, disabilities, and prefer-ences will be taken into consideration. For ex-ample, rather than require a newly diabeticteenager to modify his or her eating habitsdramatically, the teen can learn how to countthe number of carbohydrates in whatever heor she wants to eat and adjust the level of self-injected insulin accordingly.

Several off-the-shelf, highly regarded edu-cational products will provide patients withevidence-based treatment option comparisonsand structured clinical decision support. Theseinclude consumer videotapes from the Dart-mouth Outcomes Project, condition-specificdisease management materials, and commer-cial software from Healthwise. This type of in-formation can be made available through anurse advice line, in addition to print and In-ternet materials.

4. Provider Incentives

Financial Incentives

After the first year of participation, bonus in-centives will be paid to providers based on (1)their performance on quality and performancemeasures, (2) improvement on quality andperformance measures, and (3) participationin quality-of-care studies. A bonus schemewill be developed with advice from the pro-vider community and will be paid on top ofthe Medicare payment rates. It is anticipatedthat the bonus will reach 10 percent over athree-year period.

Other Incentives

Other incentives include year-round recogni-tion through press releases, an annual recog-nition event, and publicity during enrollment.This recognition, in conjunction with financialincentives, will strive to provide enrolleeswith information on “best of class” providerswhen they need to make decisions about care.

Rationale. Measurement of quality at thephysician group, individual physician, andhospital levels is still in its infancy. The qualitymeasurement tools available today across alllevels focus on patient satisfaction with careand perceived quality. Physician group meas-ures in the United States include populationhealth status and measures across select dis-eases/conditions as well as utilization of pre-ventive care. Hospital measures include C-section and perinatal mortality rates, coronaryartery bypass graft (CABG) mortality rates,and several Medicare quality indicators. TheCHOICE program will work with organiza-tions across the country that provide com-parative provider performance information tomake such information interactive and avail-able in a variety of media for enrollees allacross the country.

The above approach differs from tradi-tional fee-for-service care because of the waycost and quality are factored into the CHOICEprogram. First, physicians participating in thestatewide CHOICE Network will be requiredto report on both quality and cost measuresand to participate in quality studies. Second,the CHOICE Network will include incentivesfor patients to migrate to relatively high-quality providers and to actively manage theirown health. Creation of consumer and pro-vider incentives for both cost and qual-ity—that is, value—as part of the CHOICENetwork distinguishes delivery of care in thismodel from others available in today’s U.S.marketplace. In addition, all health plans of-fered by the CHOICE program will be re-quired to meet any applicable standards is-sued by the National Committee on Quality

Assurance, to provide quality data, and toparticipate in quality studies.

Implementation and Transition to theFuture

No federal waivers are required to implementthe CHOICE program, no ERISA waiver is re-quired to adopt a new federal payroll tax, andthere is no individual or employer mandate tohave health insurance coverage.

1. Implementation Steps for States

Implementation of the CHOICE program willrequire each state to:• Designate a state agency to administer theCHOICE program.• Contract with licensed health care provid-ers and facilities that elect to participate in thestatewide CHOICE Network.• Contract with ODSs (licensed staff- andgroup-model HMOs) and develop an age-,gender-, risk-adjusted capitation payment.• Simplify and coordinate an administrativeprocess for enrollment and eligibility, includ-ing self-certification with paperless verifica-tion and electronic application.• Institute a system for collecting themonthly worker share of premium.• Develop and implement a communityoutreach strategy to inform residents aboutCHOICE and how to enroll and to increaseenrollment in Medicaid and S-CHIP for thosewho are eligible.• Develop an electronic application that willenable providers to enroll patients at the siteof care.• Implement an electronic claims processingand review system.• Develop a process for review of claimswith respect to quality and costs.• Institute a system for processing claimselectronically and a payment system for healthcare providers in the CHOICE Network.• Develop a fee structure for licensed insur-ance brokers who enroll those who are self-

employed and small firms (fewer than 50workers) in the CHOICE program.• Submit a proposal for review and ap-proval by the U.S. Department of Health andHuman Services that demonstrates all of theabove conditions have been met.

2. Implementation Steps for the U.S. Departmentof Health and Human Services

• Develop a national media campaign to in-crease awareness, knowledge, and under-standing of the CHOICE program and how toenroll, including a national media buy over asix-month period on all major network andcable outlets.• Review and approve a CMS nationalMedicare demonstration project to permit eld-erly Medicare beneficiaries to enroll voluntar-ily in CHOICE and pay their income-basedshare of premium.• Appoint a CHOICE National BenefitsPanel to review, at least once a year, newtreatments, drugs, and technologies that havebeen demonstrated to be effective and rela-tively cost-effective in improving health andmaintaining and increasing quality of life.Based on this review, update the CHOICEbenefit package to reflect the best and mostcurrent evidence-based science.• Institute a system for collecting the quar-terly employer payroll tax, distribute eachstate’s revenue to the appropriate administra-tive agency, and issue tax refunds to eligiblefirms.• Collect and distribute the federal taxesfrom tobacco, alcohol products and soft drinksto the states.• Develop an age-, sex-, risk-adjusted capi-tation payment for ODSs.• Arrange for bulk purchasing of prescrip-tion drugs and medical devices through theFSS.• Review and approve each state’s pro-gram’s regarding its compliance with the pro-visions of the CHOICE program prior to be-fore releasing federal money to the states, and

monitor state compliance with program rulesover time.

Changes to the Existing System

1. Impact on Existing Coverage and the HealthCare Market

Adoption of the CHOICE program does notautomatically replace any existing coverage.However, it does provide all non-elderly U.S.workers and their non-working dependents,including those who are eligible for S-CHIPand Medicaid, as well as elderly Medicarebeneficiaries with the option of replacing theircurrent coverage with the CHOICE program,if they choose.

The CHOICE program leaves in placeMedicare, Medicaid, S-CHIP, employer-sponsored coverage, and the private groupand individual health insurance markets.However, through the voluntary actions ofworkers and their families and health careproviders, and as a result of outreach to indi-viduals eligible for but not enrolled in S-CHIPand Medicaid, the CHOICE program is likelyto increase overall coverage rates to approxi-mately 95% percent of all U.S. residents, re-gardless of their legal status, within one yearof implementation. At the same time, theCHOICE program offers employers strongeconomic incentives to move much of theircovered population into the CHOICE pro-gram.

We anticipate that following the imple-mentation of the CHOICE program, the num-ber of persons covered by commercial PPOsand IPA/network -model HMOs will decline,and the number of employers who offer healthbenefits will decline. Within a year of imple-mentation, it is estimated that the number ofpersons receiving their health insurancethrough their employer in the group marketwill decline dramatically. In addition, thenumber of U.S. residents purchasing privatehealth insurance in the individual market willalso decline, as individuals understand that

coverage under CHOICE is both more afford-able and more comprehensive, with a muchbroader choice of providers. The individualhealth insurance market will try to competewith the CHOICE program, but it may not beable to do so effectively unless the healthplans can develop and sell a product that isless expensive than and competitive with thebenefits, out-of pocket monthly premiumcosts, and co-payments under the CHOICEprogram. It is estimated that enrollment inMedicaid and S-CHIP will also drop as well(although financing through these programswill continue), as individuals eligible for theseprograms move into the CHOICE program.

In addition, the CHOICE program offersfederal tax incentives to health insurance car-riers and health plans to partner with multi-specialty groups in exclusive arrangements tocreate new group-model HMOs in the UnitedStates. It is likely that the group-model HMOmarket will grow through the formation ofnew ODSs to compete with the existinggroup- and staff-model HMOs in each state.Commercial health plans will also have theopportunity to develop and market supple-mental products for coverage that exceeds thestandard CHOICE benefits package.

2. Impact on the Safety Net

Safety net providers will be less dependent ondirect state subsidies for indigent care, be-cause they will be providing services to a pre-dominantly insured population. They will alsobe paid at a higher rate for indigent care forthe remaining uninsured population. Eachstate will maintain its commitment to safetynet providers through continued state andfederal funding for indigent care programs forthose who remain uninsured. In addition,safety net providers will be strongly encour-aged to participate in the CHOICE Network intheir state. Those who do so will be reim-bursed at Medicare payment rates, which aremore than 50 percent higher than rates cur-rently paid by Medicaid and considerably

higher than is currently available through in-digent care funding.48 In addition, states havethe option of permitting Medicaid managedcare plans to contract with the CHOICE pro-gram. Thus Medicaid recipients now enrolledin managed care plans could stay in them, andthe plans would be newly accessible to othersin the areas they serve. In addition, theywould receive risk-adjusted capitation pay-ments that are significantly higher than Medi-caid payment rates.

Political Feasibility

Like any proposal that seeks to accomplishmajor reform of the U.S. health care system,there will be winners and losers. Though thepotential losers can be expected to oppose theCHOICE proposal, it may be unique in that itis likely to find much broader support thanprevious proposals because of its voluntaryapproach and the absence of restrictions onindividuals, employers, health insurers, andhealth care providers. However, it will facestrong opposition from at least two very pow-erful interests—the private health insuranceindustry and the pharmaceutical and medicaldevice industries, whose profit margins arelikely to be negatively affected once theCHOICE program is fully implemented.

There is probably nothing that can be doneabout opposition by the health insurance in-dustry in particular because, even though itwill still be able to sell its products in both theindividual and group markets, it will lose sub-stantial market share to the CHOICE programin both markets. However, there will be newopportunities for industry members to partnerwith large multi-specialty groups to form newODSs as well as opportunities to develop andmarket supplemental products that offer cov-erage beyond that included in the CHOICEstandard benefits package. In addition, healthinsurers will have the opportunity to contract

48 The Lewin Group (March 2002), op. cit.

with states to serve as third-party adminis-trators in processing claims and payments, co-ordinating benefits, and performing otheradministrative functions. However, none ofthis is likely to temper the industry’s opposi-tion to the CHOICE program. In defendingCHOICE against attacks, proponents need tostress that it offers Americans much broaderaccess to choose any doctor or hospital theywant, with much more comprehensive bene-fits, at a cost that is affordable and reasonable,and their health care providers will be com-pensated at a fair rate and will be able topractice medicine without interference bymanaged care administrators. It is a win-winsituation for them and their doctors.

However, health care providers may besplit in their support of CHOICE. While manymay welcome a single administrative struc-ture and single set of rules for providingservices and receiving payments, as well asthe freedom to make their own medical deci-sions about what is in the best interests oftheir patients, others may be concerned that asingle payer may reduce their payments overtime. Instead, most health care professionals,particularly physicians who serve Medicaidpatients and currently serve a substantial pro-portion of managed care enrollees, will bemuch better off, not only financially, but alsoin terms of reduced administrative burden, asa result of returning medical decision makingto their hands and eliminating prior approval,authorizations, or appeals of denied services.In addition, reporting requirements, particu-larly for quality measures, will be simplifiedenormously as a result of fee-for-service pay-ments and electronic claims processing. Notonly are Medicare payments likely to be muchhigher for many of their patients, but bad debtand uncompensated care will be virtuallyeliminated.

There is likely to be some oppositionamong health care providers who fear the fed-eral government will have too much power indetermining Medicare payment schedules.

However, historically, Medicare has been amuch more generous payer than the state-runMedicaid programs. In addition, the politicalcoalition of consumers likely to develop as aresult of adopting the CHOICE program isexpected to be even more powerful thanAARP, which developed following enactmentof Medicare, and should be able to exert atremendous amount of political pressure,along with the health care provider interestgroups, to keep Medicare payment rates rea-sonable and equitable.

Most hospitals are also likely to look fa-vorably on the CHOICE program becausethey will receive higher payments for Medi-caid-eligible patients, will not receive anycapitation payments, will have nearly all baddebt and uncompensated care eliminated,should see drastic reductions in the use ofemergency rooms for non-emergency condi-tions, will be able to finance operation of theirtrauma centers, and will be recognized for theacute care areas where they excel. In addition,hospitals will face less of an administrativeburden because they will be working primar-ily with a single payer in submitting claimsand receiving payment, and quality assuranceand assessment will be easier as a result ofelectronic submission of claims data, facilitat-ing review of quality and costs. In addition,public hospitals will greatly benefit becausethe vast majority of their clients will be in-sured under CHOICE, and they will have astable source of revenue to meet their patients’medical care needs.

Academic medical centers are likely to fa-vor the CHOICE program because it willcover experimental treatments, as long as theyare conducted within the context of an IRB-approved randomized controlled clinical trial.Thus, a substantial new source of revenue tosupport research and innovation in medicalcare will be available following adoption ofthe CHOICE program.

Opposition by the pharmaceutical andmedical device industries is likely to be strong

because all covered prescription drugs andmedical devices will be purchased through theFSS. However, it may be possible to softensome of this opposition if the prices paid un-der CHOICE still enable these industries tomake a reasonable profit. Since the quantity ofproducts purchased under the CHOICE pro-gram is likely to increase substantially givennearly universal coverage, it does not seemunreasonable that their margins should de-cline commensurately. The key to gainingtheir support will be to set prices in such away that they will continue to deliver a returnon investment to their shareholders.

The vast majority of the business commu-nity is also likely to favor the CHOICE pro-gram. Those who currently offer coveragemay continue to do so, but the CHOICE pro-gram gives them the opportunity to get out ofthe business of administering health benefitsand bearing the associated financial risks. Inmost cases, the CHOICE program will offer afirm’s employees an option for comprehensivehealth insurance coverage with much greaterchoice, with coverage as rich as, if not richerthan, that they currently have, and with muchlower patient cost sharing, at a reasonableprice. The coverage is also a bargain for theemployer.

However, there may be substantial oppo-sition from the Chamber of Commerce and theNational Federation of Independent Busi-nesses with respect to imposition of a payrolltax on small firms. Even though the majorityof U.S. firms, including small firms, offer theirworkers health benefits, and the CHOICEprogram will enable these firms to providemore comprehensive benefits for their work-ers at a lower cost than they pay now, organi-zations representing small-business interestsare likely to view any scheme that imposesnew taxes on firms as unacceptable. Under theCHOICE program, small firms will be subjectto a 5.5 percent tax on total payroll, but it isnot clear how this will play out. Many smallemployers would like to offer their workers

health insurance coverage but cannot affordthe prices. The payroll tax is substantially lessthan the cost of coverage in the small- andlarge-group markets. In addition, as previ-ously mentioned, high-wage firms are likely tocontinue to offer their workers health benefitsthat are more attractive than the CHOICEprogram to avoid paying more through thepayroll tax for health care than they do nowthrough self-insurance or purchasing groupproducts. Firms also may worry that as costsincrease, the payroll tax will creep up, buttheir costs are likely to increase regardless ofhow they participate in employer-sponsoredhealth benefits. Their premiums in the group-health insurance market are increasing now atdouble-digit rates. In addition, any increasedcosts imposed on employers under CHOICEwill be tempered by the ability to spread themacross the many different sources of revenuefor the CHOICE program, including the em-ployee share of the premium and the state andfederal sources of revenue as well as newsources of revenue, including new publichealth taxes. Under the current system, whenhealth insurers increase group premiums,there is no way for employers to share theburden of increased costs except to shift themonto employees.

Compared to a uniform federal program, afederal-state model of shared responsibility inachieving universal coverage is much morelikely to be politically acceptable both to statelegislators and to Congress. The success of S-CHIP suggests that the federal governmentcan play an important role in defining theframework and options for broad expansionsand reform of the health care system, includ-ing eligibility determination, outreach, andenrollment, leaving the details regarding ad-ministration, interagency coordination, regu-lation, and quality assessment and assuranceto each state. In fact, individual state programsmight look quite different under CHOICE. Insome states, the CHOICE program, once fullyimplemented, may resemble a single-payer

plan, where the state contracts with all privateand public providers in the state as part of theCHOICE Network with no ODS options. Thisscenario is particularly likely to occur in stateswhere there are no staff- or group-modelHMOs and no large multi-specialty groups fa-cilitating their creation. In other states, oncefully implemented, the CHOICE program mayresemble Alain Enthoven’s original vision ofmanaged competition49, with many organizeddelivery systems made up of exclusive groupsof providers in partnership with an insurercompeting against each other for enrollmentof the population living and working in theirservice area, with the majority of providers inthe state participating in one ODS. Most stateprograms probably will fall somewhere inbetween these extremes, with a choice of sev-eral ODSs, but with the majority of the healthcare providers contracting with the CHOICENetwork.

Many states are likely to welcome the pro-gram because it enables them to solve anenormous problem without requiring thatthey raise any new state revenue, and tostreamline administration and reduce costs as-sociated with existing public insurance pro-grams. In addition, states will be eligible forconsiderable amounts of federal revenue gen-erated from the payroll tax, public healthtaxes, and the NAFTA Social Integration Fundto solve what has been an intractable prob-lem—reaching near-universal health insur-ance coverage and offering comprehensiveand affordable coverage to all residents intheir state. However, states also will face anumber of new administrative challenges,which some states will be able to meet betterthan others.

It is unlikely that any comprehensive na-tional health care reform proposal will be en-acted in the foreseeable future, despite the factthat the number of uninsured is growing,

49 Enthoven, AC. Health plan : the only practical solution tothe soaring cost of medical care. (Reading, Mass: Addison-Wesley Pub. Co.) 1980.

health care is becoming more expensive, andthe issue is increasingly on the public agenda.However, given the current revenue shortfallsat the federal and state level and the attentionbeing given to fighting terrorism at home andabroad, Congress is unlikely to tackle theproblem of the uninsured and underinsured,with perhaps the exception of working to passsome kind of pharmacy benefit under Medi-care. While it is likely that comprehensive na-tional health care reform will become a moredominant issue in the 2004 presidential elec-tion, until the U.S. economy improves andthere is a change in leadership at the nationallevel, the problem of the uninsured is likely tocontinue to worsen and to be excluded fromthe formal policy agenda. However, this po-litical reality does not mean that we should

stop working on new proposals to solve thisongoing problem. One of the important les-sons from the failed Clinton health care re-form effort was that there was not a viable andacceptable policy solution ready to go with abroad base of support when the policy win-dow opened.50 In addition, strategies for re-sponding to opposing interests and framingthe debate were not well developed, and thebattle to win public opinion was ultimatelylost. Understanding where is the most likely astrong base of support on which to build abroad-based coalition and anticipating thesources of opposition and how they will try toreframe the debate will be key in winning thiswar.

Acknowledgements

The following people made significant contri-butions to this proposal: Sylvia Guendelman,Ph.D.; Joyce Lashof, M.D.; Sharon Levine,M.D.; Sara McMenamin, Ph.D.; Patricia Pow-ers, M.P.P.; and Sara Singer, M.B.A. Contribu-tions do not imply endorsement of the fullproposal. n

50 Kingdon, JW. Agendas, Alternatives and Public Policies.(New York. NY: Harper Collins) 1984.

Helen Ann Halpin

Helen Ann Halpin has proposed a program that emphasizes voluntary choice but which in-cludes incentives that are likely to produce a state-based, single-payer system over time. It hasthe following elements:

A CHOICE PLAN THAT WOULD CONTRACT with all willing (presumably most) licensed providersand group model or staff model HMOs and offer comprehensive coverage to most of thepopulation should they choose to enroll.

CONTINUATION OF MEDICAID, S-CHIP, MEDICARE, EMPLOYER-BASED PLANS, and private insurerplans as alternatives to CHOICE for those who prefer to stay with current forms of cov-erage.

A REQUIREMENT THAT EMPLOYERS EITHER OFFER COVERAGE (though neither the type of plan nor theamount of premium contribution would be regulated) or pay a payroll tax of no morethan 6.5 percent for each employee not covered under the employer’s health plan.

SUBSIDIES AVAILABLE ONLY TO PEOPLE ENROLLING IN CHOICE that would limit premium paymentsto a maximum of 2.5 percent of annual income, depending on income and family size.

FINANCING FOR CHOICE from individuals (premiums), states (replacing some current publicprogram subsidies), the federal government (some new “sin” taxes), employers (payrolltaxes), and a new assessment on cross border transactions between Mexico and theUnited States.

About the AuthorHELEN ANN HALPIN, PH.D., is Professor of Health

Policy and Director of the Center for Health andPublic Policy Studies at the University of Califor-nia, Berkeley School of Public Health. She is alsothe Director of the California Health PolicyRoundtable. She is a Phi Beta Kappa graduate ofSkidmore College, received her Masters of Sciencein Health Policy and Management from the Har-vard School of Public Health, and earned herPh.D. as a Pew Health Policy Fellow at BrandeisUniversity's Florence Heller School for SocialWelfare Policy. Dr. Halpin has testified manytimes before the California State Legislature andthe Senate Labor and Human Resources Com-mittee in the U.S. Congress. She served for 10years on the editorial board of the UC BerkeleyWellness Letter; and she is the Associate Editor forPolicy for the American Journal of Preventive Medi-cine. Prior to coming to the University of Califor-nia, she was a lecturer in Health Services Admini-stration for four years at the Harvard School ofPublic Health, and for 10 years she worked as ahealth care management consultant at Arthur D.Little, Inc., in Cambridge, Massachusetts.