The Pew Charitable Trusts

MADISON -- Republican Gov. Tommy Thompson has built a name for Wisconsin on the issue of welfare reform. As he often notes, the Democratic administration of President Bill Clinton often has copied Wisconsin welfare reform ideas and policies.

So it was with BadgerCare, a Wisconsin program created with great fanfare in July 1999. BadgerCare was created to provide health insurance for the ``working poor'' -- those who have just left government assistance or those who have always lived on the edge of poverty. A few conservative naysayers warned that the program could be a ``budget-buster.'' But the promise of doing something good to address a political concern -- health care for the uninsured -- overwhelmed the warnings. This was something politicians could trumpet as good news for those trying to work their way out of poverty.

Nine months later, the BadgerCare program is having some growing pains. It's so popular its pricetag has grown, and critics such as Assembly Speaker Scott Jensen, R-Waukesha, are calling for an overhaul. The program's budget problems show how hard it is to finance a health insurance program for the poor -- even in economic good times. Still, Thompson calls the program a success and says a change in federal funding could go a long way towards easing the looming BadgerCare budget crunch."I've taken some hits from those who think it's a runaway program. I don't think it's runaway at all," said Thompson Health Secretary Joe Leean last week, days after signing up most participating HMOs for an extended BadgerCare hitch. ``It's very valuable for families as they make their way up the economic ladder.''

Many of those in the program are ex-welfare recipients who used to be covered by Medicaid. Thompson always said the state's W-2 work program that replaced welfare would have to have substantial government assistance, including child care and health care.

Nobody has complained about the child care costs. But there has been a fight over the costs of BadgerCare, which now covers about 57,000 people and his projected to cover about 82,000 by the middle of next year.

The fight began in January, when Thompson, in his State of the State message, asked the Legislature to use about $11 million of a projected $380 million surplus to take care of BadgerCare's growing enrollment. The Legislative Fiscal Bureau, lawmakers' budget shop, said the added appropriation should be $13 million; the Democratic-led Senate placed that amount in its ill-fated "mini-budget."

Meanwhile, the state's leading HMOs -- their profits already endangered by rising health-care costs -- increased pressure on the Thompson administration and lawmakers for an even higher appropriation to handle higher-than-expected insurance costs for BadgerCare clients. Not only were enrollments going to exceed expectations by mid-2001, but state reimbursements were inadequate because more adults than children were enrolled, the HMOs said. Adult health care costs more than child health care, and HMOs said they needed help to stay in the program.

Without broad HMO coverage, fiscal analysts warned, the BadgerCare program would cost even more because clients would get their care based on more expensive "fee for service" at hospitals and clinics. So far, about 30,000 of the 57,000 current enrollees are covered by HMOs; that's estimated to go to 55,000 of 82,000 enrollees by the middle of next year.

Leean, a former lawmaker and co-chairman of the budget-making Joint Finance Committee, made no apologies for the adult-heavy enrollment. He said the key to covering children was to cover families.

But he worked for weeks with 17 state HMOs to come up with a compromise. He proposed an added appropriation of about $20 million from general taxpayer funds; the proposal featured higher reimbursements, a risk-sharing pool and other elements to help keep BadgerCare going without limiting enrollment. Limiting enrollments, most observers agreed, wouldn't be a real election-year option for lawmakers.

Leean set a March 31 deadline for HMOs to sign up again -- for BadgerCare and for Medicaid. If an HMO participates in one of the programs, it also has to participate in the other.

But one of the state's biggest HMOs balked, threatening to leave BadgerCare. Leean at the time said he wouldn't be intimidated by Compcare, a Milwaukee-based health maintenance organization linked to Blue Cross-Blue Shield of Wisconsin. He called his a final offer. Then the Legislature got involved again. The GOP-controlled Assembly, whose leaders had always worried about the expense of BadgerCare, unveiled a late-breaking bill to shift the problem-solving to the Joint Finance Committee.

Under the bill, the Finance Committee sometime later this year would decide how much more money should go to BadgerCare for growing enrollment and higher reimbursements -- taking the money from unused appropriations of existing programs or even from the state's budget cushion. Some BadgerCare advocates estimated the true additional cost at about $28 million.

The Democrat-led Senate protested. Democratic Leader Chuck Chvala said surpluses, not the state budget cushion, should be used given bond-rating agency concern about the state's ending balance. The Assembly nevertheless passed the bill. But the legislation stalled in the Senate during the last week in March as a Legislature divided by partisanship and personalities ground to gridlock on the big issues in the last scheduled week of the regular session.

Near the end of March, Leean ended up sweetening the state offer -- to an estimated $23.7 million in general taxpayer dollars on top of the already established two-year budget of about $143 million. When up and running with full enrollment, the program is projected to cost about $120 million a year in state and federal money. Under the year-long deal, HMOs can take a 12 percent rate increase or an 8 percent increase and get help with losses.

But Leean couldn't satisfy everybody.

Compcare, which has a client base of 190,000, quit the Medicaid (about 29,000 clients) and BadgerCare (about 5,700 clients) programs entirely. ``While we have been very supportive of the BadgerCare program since its inception in July, we simply cannot afford to continue to subsidize the program,'' Compcare President Mary Traver said in a letter to the state.

A second HMO, Dean Health Plan of Madison, announced a partial pullback. Dean Health Plan President Jack Turcott projected at least $600,000 annual losses if Dean stayed in the program. So Dean decided to reduce the area it covers and thus cut the number of enrollees to 8,200 from about 13,000. Two others Blues-related HMOs also cut down on their coverage areas, a Blues lobbyist said.

Leean said 14 of 17 HMOs have signed up so far, and he expects 16 of 17 HMOs to eventually join the fold. The actions of Compcare and the other HMOs won't affect the program, he said, because other health-care groups will happily pick up the slack.

But there's one problem: Leean isn't sure where the extra $23.7 million will come from. The Legislature technically extended its session, but apparently only to deal with a bill to help the Green Bay Packer renovate 43-year-old Lambeau Field. To deal with it before the elections, Thompson would have to call a special session and include BadgerCare in the call; the Legislature would have to call itself back in; or the Finance Committee could get the hot potato.

Leean isn't ruling out a legislative solution in coming weeks, but he concedes he might have to dip into the department's 2000-01 budget until next year's budget debate. A federal waiver also could help ease much of the budget crunch.

But he thinks the political commitment is there. ``Both houses have indicated an intent to give more money to BadgerCare,'' he said.