The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

States and Health Care Reform

Posted by Alan on May 22, 2011


Health insurance has long been a state affair in the USA. Insurance companies were even exempt from many aspects of federal anti-trust law to better enable state regulators to oversee their activities. Yes, there were federal laws that standardized certain aspects of the business—think HIPAA and COBRA. Think about Medicaid, Medicare and SCHIP while you’re at it. But when it came to health insurance regulation the states reigned supreme.

Enter Congress and President Barack Obama stage left. With the passage of the Patient Protection and Affordable Care Act the federal role in shaping and regulating health insurance shifted significantly to Washington, DC. The Secretary of the Department of Health and Human Services is now arguably the most important health insurance regulator in the country. The Department of Labor and Internal Revenue Service will also play significant roles in determining the future of the nation’s health insurance market and the choices (or lack of choices) Americans have to meet their health care coverage needs. No wonder critics of the PPACA condemn the law as a “federal takeover.”

That the nexus of health plan oversight has shifted to the federal government is beyond argument. The new health care reform law touches everything from how medical plans are designed, priced, offered, maintained and purchased. To conclude that state insurance regulators are shunted to the sideline, however, dangerously overstates the case. In fact, the PPACA invests tremendous flexibility in the states, allowing them to implement the federal requirements in what will likely be very divergent ways.

Rebecca Vesely, writing in Business Insurance, makes this clear in her article describing how two states, Vermont and Florida, are taking strikingly different paths in addressing health care reform. Vermont has taken the first step toward creating a single payer system by 2017. Legislation to set up a five member board to move the state in this direction has already been enacted. And while many details need to be worked out (funding, to name one) and Vermont will need to obtain a waiver from the Centers for Medicare and Medicaid Services to put the package together, the state is further down the road to single payer than any other.

Then there’s Florida where the move is in the opposite direction. That state is seeking to shift virtually all of its Medicaid population from government coverage into private plans starting in July 2012. These private managed care plans would be offered through large health care networks with health plan profits above five percent shared with the state. Whether this approach will achieve the $1.1 billion in first year savings promised by the Governor or not, it has brought new participants into the Medicaid marketplace such as Blue Cross and Blue Shield of Florida.

The Business Insurance article includes a prediction by Boston University law professor Kevin Outterson that the Obama administration will sign off on the waivers Vermont and Florida need to move forward.

What the starkly different approaches to reigning in skyrocketing health care costs being taken by Florida and Vermont demonstrates is the broad flexibility states retain in shaping their own health care destiny. Yes, federal waivers are required, but that would be the case even if the PPACA had never passed—Medicaid is a federal program after all. The CMS web site lists 451 state waivers or demonstration projects in place today. The concept of allowing experimentations and exceptions is ingrained in the Medicaid program just as they are in the Patient Protection and Affordable Care Act. There’s nothing wrong with this any more than having shock absorbers on a car is an indictment of an automobile’s chassis or tires.

The marked variation in approaches being taken by Vermont and Florida are extreme examples of what we’ll see as states implement exchanges and other aspects of the Patient Protection and Affordable Care Act. Of course, whether this is good news or bad news depends a great deal on the state in which you live and work. States that are heavily tilted toward one party or the other (I’m looking at you California and Wisconsin) could make some of their residents yearn for the federal government to step in and keep things in perspective. Given the way the PPACA preserves state powers, however, they are going to be disappointed.

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10 Responses to “States and Health Care Reform”

  1. The variability of the state’s implementation of healthcare reform will ultimately make this all a big administrative nightmare. The law of unintended consequences is just around the corrner.

  2. Darlene said

    There is a lot of controversies over if “Medicare is sustainable in its current form?” Will the government figure out a plan where health care will be available to citizens and be able to afford the plan without taxes being raised to ridiculous prices. Also if “Ryan’s plan” is a thing for the government to look into instead of what they’re doing now.

  3. G Cox said

    Alan, is the blog dead? No new posts from you in two months? Where do we get our good inside info, now?

  4. We are blessed in the UK with a (mostly) free healthcare system but plans are afoot to introduce more private health initiatives to reduce the burden on the state. The plans are sensible but have met with stiff opposition from patient support groups over here.

    Its only when you realise how bad things are state-side that you understand the huge benefits and privileges that we enjoy on this side of the pond.

    • Really? You have a (mostly) free healthcare system there in UK? You’re so lucky, because we here in German have to pay a lot for health insurance etc etc.

      However to writer of article, thanks a lot. I’m a regular visitor of this blog and i enjoy my time reading your articles. Thanks again.

  5. Jen said

    We’re going to single payor. You can rant and rave against it, but it is going to happen. Stories like this just get us there sooner:

    http://news.yahoo.com/s/ap/20110613/ap_on_he_me/us_medicare_drugs

    If you are an agent who sells IFP, it is time to move on to something else because comp is not coming back, NAHU can’t bring it back, and when the Dems run against the Reps as wanting to go back to the “good old days” of insurance company rescission, it simply is not going to fly.

    Sorry that all of those wonderful folks who work for the health divisions of the large carriers will be out of a job… but my guess is that no one is going to cry many tears over it… especially agents who took the brunt of the MLR while the insurance carrier drones kept their fat salaries.

    Single-payor is an idea whose time has come… it will just take a few more years to finally arrive.

    Get over it. Get used to it.

    Jen

  6. Malcolm Cutler said

    Alan,

    I just finished a CAHU email and it referred to the Alan Katz “law of laws” and I am preparing a client up date and wish to quote you, but wanted to give a correct description of “law of laws.”?

    Thanks.

    Malcolm

    • Alan said

      Hey Malcolm. The two laws on laws are basically a way of describing why what you get from Congress is not necessarily what you see when the law is finally implemented. There’s two of them:

      Law #1: The Law of Regulatory Change
      There is what the law says. Then there is what a regulator says the law says. And what the regulator says the law says is what the law says unless a judge says the laws says otherwise.
      (Think what happened with dependent children. The PPACA requires carriers to cover pre-existing conditions, but it doesn’t say they should be accepted regardless of pre-existing conditions. HHS said otherwise and eventually worked out a way for that happen).

      Law #2: The Law of Implementation
      There is what the law says and there is what regulators say the law says. Then there is what carriers say the law says. And what carriers say the law says is what the law says unless a judge or regulator say the law says otherwise.
      (You can’t make a carrier accept your application unless you have a regulator or judge backing you up. So how insurers — and others who live under the law — interpret that law goes a long way to determining how it is ultimately implemented.)

      In other words, legislation is like the blueprints for a house. It goes a long way toward defining what’s built, but ultimately, it’s what the carpenters, plumbers and electricians do that truly determine the outcome.
      Hope this helps,
      Alan

  7. Mark Goodman said

    The Left and the Right are spinning which politely means nothing is happening. Rep. Ryan’s plan is rebuffed in a Republican district in NY where the previous Republican candidate won with over 70% of the voters.

    Once you unhinge the various parts of healthcare from the cost of paying for the healthcare you cannot solve the problem.

    For those of us who track premium we know that a voucher worth even 15 thousand dollars won’t cover the senior population the way Medicare does. Looking at table rates for the 65+ non Medicare recipients you have premiums starting over $1000 a month for a high deductible plan and only going higher for richer benefit plans. Let’s not discuss Cadillac plans at this time. The law of large numbers doesn’t work the way some of us may have learned in stat class. Your population is starting with ailments and will only get worse. I think Rep. Ryan would like to show this off as a shining light of the free enterprise system but he should have started with Medicare Part D and let carriers negotiate drug costs.

    The Democrats tout Medicare as an effective low cost plan that provides security for millions of our citizens. The fact that it is imploding seems to leave them upstream without a paddle, so to speak. They can’t figure how to pay for it long term. They understate the overhead and overstate the efficiency.

    While this war of words goes on no one is really minding the issues. There are things that can be done right now while Washington tries to get its own house in order. In yesterday’s New York Times editorial page there was this article by Rita Redberg a professor of medicine at UCSF. I have a link at the bottom. Her views and recommendation are eminently doable.

    The problem as I see it is the American system of health care is: I want it I want you to do it and I want someone else to pay for it. This is not a small hill to get over. It’s more like climbing Everest with one hand tied behind you.

    http://www.nytimes.com/2011/05/26/opinion/26redberg.html?_r=1&scp=2&sq=medicare&st=Search

    • JimK said

      The article by Professor Redberg describes a practice that was included in the original ACA proposal; the ACA called for efficacy studies and would base approved procedures based on these studies. This provision was led to the cry of rationing by opponents of the ACA. As far as I know this provision is still in place but I believe the original purpose has been changed. I don’t know if the change was a matter of semantics or that the provision will be toothless.
      The irony of course is that it was the Republicans who consistently stated that the ACA would lead to rationing, yet it is in States such as Arizona where actual government rationing was imposed on Medicare patients.

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