July | August 2017


HOT TOPIC » Health Care Reform Impact on States

by Mary Branham
It’s hard for state officials to get past the anticipated costs of health care reform.
The estimated $1 trillion federal price tag has some tongues wagging across the country, but for state officials it’s the impact on their own budgets that raises red flags.
“States right now are very challenged with budgets in which revenues are down and expenses for existing Medicaid populations are up,” said South Dakota Gov. Mike Rounds, the 2010 president of The Council of State Governments.
As Congress debated an overhaul of the nation’s health care system, state officials pondered the effects any action would have on them and their budgets. Policymakers on both sides of the aisle saw potential problems.
Alabama Sen. Vivian Davis Figures, a Democrat and co-chair of the CSG Health Policy Task Force, voiced the same concern about money as her Republican counterpart on the task force, Kentucky Sen. Julie Denton.
“It’s going to be a financial hardship on many states throughout the country because right now many of us are in deficits,” Figures said. “Our revenues are down more than they ever have been historically, and I find it very hard to have a new expense when we are not even taking care of current expenses.”
Denton said potential mandates for coverage would hurt an already strapped Kentucky budget. “If they were to expand Medicaid and not send dollars to cover costs … that would put us in a very bad position,” she said.
The proposals, in fact, would require states to expand Medicaid coverage. (Congress had not taken final action on health care reform by the Capitol Ideas deadline.) Alan Weil, executive director of the nonpartisan National Academy for State Health Policy based in Washington, D.C., said the federal government would pick up a large share of the cost of drastically expanded Medicaid eligibility, but not all of it.
“Even a small share may be more than (states) can bear,” he said.
“Obviously states are struggling under the burden of financing programs they already run,” Weil said. “The notion that they’re going to be able to turn all their energy into this expansion and all these new exciting things is, I think, unrealistic.”
While that additional financial burden to states is a concern, Rounds said the added number of people getting services at discounted rates could have the unintended consequence of raising costs for others.
“Medicaid pays, at least in the upper Midwest, about 50 to 52 percent of the billed charges,” he said. “Physicians and facilities, both doctors and hospitals, will pass on or cost-shift that unpaid balance onto the private sector, which will make it more difficult for the private sector to continue to pick up their costs of health care for their employees.
“That to me is a very challenging situation which in the long-term will mean more uninsured.”

Reform Will Affect States in Other Ways

While the cost of expanding coverage to the uninsured has drawn a lot of attention, states would be impacted heavily when it comes to how health insurance is regulated.
New provisions related to regulation of insurance will require changes at the state level, Weil said. “States do regulate insurance, but very few of them do it around some of the parameters discussed in the federal reform, so that’s a major undertaking,” he said.
Jane Cline, West Virginia’s insurance commissioner, said the sweeping reforms to improve access and equity in health insurance markets will be the most important aspects of the bills from an insurance regulation standpoint.
“Insurance market reforms, particularly in the difficult-to-regulate individual insurance market, promise to make health coverage fairer, more transparent and more available,” she said.
The proposed health insurance exchanges, where uninsured people can buy health insurance, she said, would facilitate comparison between plans and enrollment in plans. Concerns lie in how those would be structured, which was still up in the air at press time.
If the federal government operates a national exchange, a national health choices commissioner could set rules in areas states already regulate, according to Cline. She fears that would create a system in which state and federal regulators would apply different standards in the marketplace.
“As you can imagine with this sort of construct, there is room for quite a bit to go wrong,” she said. If states are responsible for operating exchanges, Cline said, those pitfalls could be avoided.
Also, when it comes to health insurance issues, health reform could create other unintended consequences for states, according to Denton from Kentucky. Before Kentucky reformed its health care system in 1994, she said, there were more than 50 insurers providing coverage. Immediately after the reform legislation, only two companies remained, she said.
She’s worried national reform would create even less competition in the health insurance market. To counteract that, Denton and others believe it would be good to allow consumers to purchase health insurance across state lines. Minnesota Gov. Tim Pawlenty, in fact, is pushing legislation to allow just that. (See page 23.)
“You lower those barriers and offer more competition and more choices,” Denton said.
But Cline said while the idea sounds good on the surface, in reality, it could cause problems.
“An insurer that chooses a state with few benefit mandates and little regulation could entice the young and healthy away from a state (with more mandates) by offering bigger discounts than insurers that are following greater mandates that were required by (another state’s) individual state law,” she said.
That would leave some insurers with risk pools filled with older and sicker individuals, she said. The premiums for those people would reflect that, she said.
And it wouldn’t necessarily be good for those who buy insurance across state lines if they run into problems, Cline believes. “State insurance commissioners would be powerless to assist the individuals in their states who had purchased policies from out-of-state carriers where they were applying the lower benefit standards,” she said.
Cline said the proposal would in effect deregulate insurance markets across the country.
Proposals in Congress would allow the creation of an interstate compact for cross-state purchase of health insurance. But Cline doubts many states would participate.
“No low-cost state is going to consent to a compact with a higher cost state,” she said. “This would result in the citizens of the low-cost state subsidizing the citizens from the neighboring state that would have the higher premiums.”
But it’s not all added costs and unintended consequences, according to Weil of the National Academy for State Health Policy. Weil said the national proposals can actually help states achieve some of their goals, such as coordination and integration of the system as well as moving to a system more oriented toward results.
Weil said the reform proposals include a lot of demonstration projects. “You almost can’t count how many demos there are around coordination and integration, public health, preventive services, health IT,” he said.
While these federal demonstrations will offer opportunity for states, Weil believes states will retain ultimate responsibility to coordinate and integrate a new health care system.
“No law in Washington is going to integrate across social services and social supports and health care services,” he said. “It just can’t be done at the national level, so most of that work remains at the state.” But, he said, “the number of resources states are going to need to actually achieve the promise of health reform is astonishing.”
Weil said the federal government must not just pass the legislation, it has to stay with reform for the long haul.
“Without a major national investment in actually helping states do the implementation (of health care reform), it doesn’t matter what’s on a piece of paper,” he said.

State Officials Watch from Sidelines

While there has been much discussion on the national level, some state officials believe their concerns haven’t weighed too heavily on the minds of those in Congress.
Denton of Kentucky said she doesn’t think state concerns were taken into consideration, especially when it comes to Medicaid. “You can’t be putting any more burden on our states at this point,” she said. “That’s a recipe for disaster.”
And Figures of Alabama would like to see more programs for education about healthy lifestyles in reform, “because some people just don’t know.”
Rounds, the South Dakota governor, said although Congress is missing the boat in some areas, there are things in the bill he believes take a good step forward.
“Health care reform should focus on requiring portability, moving from one group to another,” he said. “I think the plan to require portability and renewability, many of which some states have already done, is a good thing.”
As governor of a Western state, Rounds is also happy to see health care reform address the needs of specific groups, such as the Native American population, which, he said, has been historically underserved by federal programs.

TOP 5 » State Priorities for Improving Health Care

The National Academy for State Health Policy surveyed its leadership of state health policymakers to determine what states are trying to accomplish and their priorities for reforming health care. According to executive director Alan Weil, states are trying to:
1 Connect People to the services they need
“What good is it to have a health care system if people don’t actually get the services they need?”
2 Bring greater coordination, integration into the health system
“Fragmentation is very expensive. It’s cause for medical errors, inefficiencies, things we’re trying to drive out of the system.”
3 Improve Care for People with Complex Needs
“States have primary responsibility for populations with complex health needs . . . people with traumatic brain injury, Alzheimer’s, children with autism . . .”
4 Orient the Health System Toward Results
“Instead of paying for procedures or tasks or tests, we’re trying to figure out what the health system produces and orient the system in that direction.”
5 Promote a More Efficient Health Care System
“Resources are short. Anything we can do to make the system more efficient is on the top of the agenda.”


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