LANSING – Gov. Jennifer Granholm’s proposal to create a health care plan for 550,000 state residents that do not now have health insurance could cut health-care costs and improve business competitiveness, administration officials said during a hearing Wednesday. The program would cover adults with incomes up to 200 percent of the poverty line, which for a family of four is $38,000.

While details on the financing of the proposal are not yet clear, state officials were confident they could convince the federal government to leverage from $500 million to $1 billion needed to finance the plan. If the program does not get implemented, the state could find itself facing even higher medical costs as many uninsured working people will become eligible for Medicaid in future years, the two panels were told.

Community Health Director Janet Olszewski and top DCH officials Paul Reinhart and Fran Wallace did not face particularly tough questioning from the Senate Health Policy Committee and the Appropriations Community Health Subcommittee, as members wanted more details on how the proposal might work.

Several Senate members questioned why the state was putting an emphasis on providing insurance to individuals instead of encouraging healthy behavior to prevent the need to use health care. Ms. Olszewski said the state is encouraging both, and when people have health insurance they intend to use health care in a more appropriate and cost effective manner. People with insurance are less likely to use an emergency room and see a doctor when ill, she said.

Sen. Tony Stamas (R-Midland) said the Senate would have more questions about the program, which administration officials said they hoped would come into operation by April 1, 2007.

Olszewski and Reinhart also said the Michigan First Healthcare Plan is in keeping with the kind of innovative programs the federal government is encouraging of states.

Michigan has already lead many states in its management of Medicaid by having recipients participate in managed care operations, and its pharmacy programs have helped the state save money, Ms. Olszewski said. What is hurting the state is the increase in Medicaid caseload and that is related to the state’s continuing economic difficulties, she said.

Reinhart said the program will be much like a program recently approved for Iowa by the federal government. Funding for the program will come from federal matching funds. The model for the program will be in part the program used by the state for its adult benefit waiver for mental health care. Under that program the state took $40 million it was spending in mental health, redefined its application and was able to win federal matching funds of $93 million.

Reinhart said the state and local governments are already spending some $400 million to help pay the cost of the uninsured health care. If that money can be used as the state’s contribution to the program, then it could leverage as much as $530 million in federal funding.

If that funding is not allowed as the state match, the state will look at what other states have done to win federal funding, Reinhart said. The state will even argue that the money non-profit hospitals pay for uninsured care should qualify for the federal match if needed, Reinhart said.

And the program will not be free to participants, Ms. Wallace said. Participants will actually purchase private health care coverage. There will be premium assistance on a sliding scale based on income.

The program would cover adults with incomes up to 200 percent of the poverty line, which for a family of four is more than $38,000. Reinhart said the monthly premium for a family in that situation would likely average $50.

If the federal government grants the waiver for the program then the waiver would likely last for five years. Senate Majority Floor Leader Bev Hammerstrom (R-Temperance) and Senate Appropriations Chair Sen. Shirley Johnson (R-Troy) both raised worries about what would happen to those covered if the waiver is not continued after the five-year period.

While that is a possibility, the DCH officials said, if the program is ended it will not mean the end of either state or federal coverage for those individuals. Many will become eligible for Medicaid and government and business would still find itself helping to cover the cost of uninsured care.

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