March | April 2017


The Path to Success

States Make Tough Choices on Expanding Medicaid, Operating Exchanges

By Mary Branham, CSG Managing Editor
For Arizona Gov. Jan Brewer, the decision to take the federal government up on expanding Medicaid just made sense.
“By expanding Medicaid just slightly beyond what Arizona voters have twice mandated at the polls, we can draw down nearly $8 billion of our own tax dollars from the federal government,” she said.
Since the federal government will cover individuals earning up to 138 percent of federal poverty level, Brewer said that influx of money will cover costs the state was incurring as people without health insurance sought care in emergency rooms—the least affordable option.
She wasn’t as accepting of establishing a state-based exchange.
Brewer’s consideration of two of the Affordable Care Act’s most visible pieces for states—expanding Medicaid and setting up health insurance exchanges—illustrates the decisions with which policymakers around the country have wrestled.
Fourteen states—and the District of Columbia—that will be operating a state-based insurance exchange, and six states that have committed to a partnership exchange with the federal government, also are expanding Medicaid. On the flipside, only six states that are deferring to the federal government for an exchange support expanding the joint federal-state health insurance program for low-income people. That leaves 17 states rejecting, outright, two major parts of the act. Four states are still mulling whether to expand Medicaid.

Medicaid Expansion

South Carolina is one of those states saying thanks, but no thanks, to Medicaid expansion and the exchange. And it’s doing so with confidence.
Tony Keck, director of Health and Human Services for South Carolina Gov. Nikki R. Haley, said expansion of Medicaid—and expansion of insurance coverage in general—doesn’t address the real question the country faces. That is, “How do you get as many people as healthy as possible,” he said.
“The debate has made the universal assumption that everybody should have health insurance,” he said, “that health insurance is the path to healthiness.”
But if the state or federal government isn’t focusing on real problems, improving health outcomes and lowering costs, the value of health care isn’t getting better, he said.
South Carolina has been focusing on reducing costs and improving outcomes for several years. It’s changed the way it pays providers to encourage them to consider outcomes as opposed to volume. It’s also worked with providers to better integrate clinical care “to view the patient as a whole.”
The state this year introduced the next phase of its strategy, focusing on hot spots to figure out the issues in areas that have particularly high health care needs.
“There’s a real question about putting all this money into a system before you get the system to actually show that it can produce results,” said Keck. “We think if you just expand with asking nothing in return, you expand without reforming the health system, that is just making false promises. It’s just wasting money.”
Arizona, too, has been working with its health care system to lower costs. Its prepaid, capitated-care model contracts through public and private health plans to pay a predetermined amount per patient for care each month. Brewer said that model keeps costs down and makes coverage affordable.
But people without coverage often use the hospital emergency room for care.
“Those costs are threatening our hospitals, weighing down our economy and hitting every Arizonan with what I call the hidden health care tax,” she said.
Brewer estimates that’s nearly $2,000 more in health premiums the average Arizona family pays to cover those uncompensated care costs.
In Minnesota—a state that has continually worked to improve health outcomes while lowering costs—a report from the Minnesota Budget Project found covering the additional 87,000 people under Medicaid expansion would improve health outcomes and reduce state costs.
The state took advantage of the early option to expand in 2011 to help very low-income people access health insurance. Medicaid previously covered those individuals fully under a state-financed program; now the federal government is picking up half the tab.
Ellen Benevides, assistant commissioner in the Minnesota Department of Health, said the Medicaid expansion will help the state continue its efforts in reforming the state’s health care system.

State-based Insurance Exchanges

She said the same thing about the state-based health insurance exchange, as well as other components in the Affordable Care Act.
“All of that reform around us feeds into what we’ll be doing with the state innovation model grant,” she said of federal funding that allows a state to reform its health care system through payment reform and other state-led initiatives.
Benevides will be involved with regulating the qualified health plans available through the exchange.
“I think about what kind of quality measures are the qualified health plans providing that people can purchase on an exchange and how do they align with what might be available to somebody in an accountable community for health,” she said of a plan in Minnesota to develop 15 areas in the state to improve the health of residents there.
But the appetite across the country for states to operate their own health exchange isn’t as hearty as the federal government had hoped, for several reasons.
Brewer, for instance, said she and her health policy team determined it would be a state health exchange in name only.
“Our actual authority would have been very limited and we would have needed federal approval for many of the things required to meet the unique needs of Arizonans,” she said.
In addition, she and her team saw too many unknowns about how the exchange would actually function.
South Carolina had those same concerns, Keck said.
The state did put together a group to study the exchange option, even though the governor intuitively was opposed to it. The group came to two conclusions.
“One, that there was so little guidance in terms of what would be required of the states—what the cost would be, how the federal government would be regulating it—that it was very risky for a state to implement,” he said. “The other reason it would be risky for a state to implement it was that the timelines were completely unreasonable.”
So South Carolina rejected the idea of operating its own exchange, but is keeping its options open.
The federal government will operate the exchange in both Arizona and South Carolina, and Keck said that means residents in his state still will get access to those benefits.
Plus, he said, the federal government is leaving open the option for states to take over operation of the exchange down the road.
“If it’s a train wreck and it’s hurting the people of South Carolina, we’ll have to step in,” Keck said.

Assessing Decisions

While Jan. 1, 2014, is a date to watch as states and the federal government begin full implementation of the Affordable Care Act, state officials will be watching the results to determine if they’ve made the right decision on these two key elements.
“I’ll know we’ve made the best decision for Arizona based on the overall wellness of our citizens and the health care system in our state,” Brewer said. “The key will be to keep costs down and government interference to a minimum.”
As for Minnesota, one of the few states embracing both Medicaid expansion and a state-based exchange, the key for Benevides will be when the discussion changes.
“What I will look for is if we stop talking about health care reform and start talking about health,” she said. “We need a different conversation about health.”