Can States Take Over Health Care?

A new report shows how states can lower health costs and deliver care better than the federal government.

US Department of Health and Human Services (HHS) Secretary Mike Leavitt speaks during a news conference in the heavily fortified Green Zone area in Baghdad on October 20, 2008. The official spoke about the US-Iraqi relations in the field of health and humanitarian aid. AFP PHOTO/POOL/ALI ABBAS 
National Journal
Sophie Novack
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Sophie Novack
Jan. 9, 2014, 4:55 a.m.

Fed­er­al health care spend­ing has been get­ting all the at­ten­tion, but it’s the states that are best equipped to re­form the sys­tem and con­tain costs, says a new re­port or­gan­ized by the Uni­versity of Vir­gin­ia’s Miller Cen­ter.

The re­port — fun­ded by Kais­er Per­man­ente and the Robert Wood John­son Found­a­tion — out­lines meas­ures states can take to im­prove care and re­duce cost. Ac­cord­ing to the con­trib­ut­ors, states have unique tools to take the lead in ad­dress­ing the is­sues with the U.S. health care sys­tem in ways the fed­er­al gov­ern­ment can­not.

“The grid­lock in Wash­ing­ton will in­ev­it­ably chan­nel these prob­lems to a place that can find a solu­tion,” said Mike Leav­itt, the former U.S. Health and Hu­man Ser­vices sec­ret­ary and a former gov­ernor of Utah who co­chaired the State Health Care Cost Con­tain­ment Com­mis­sion, which put to­geth­er the re­port. “The eco­nom­ic im­per­at­ive to find these solu­tions is far big­ger than the Af­ford­able Care Act, or any­thing hap­pen­ing in Wash­ing­ton. The ques­tion is how chaot­ic is it, or how or­derly is it? States will be a place where or­der will be found, ul­ti­mately be­fore Wash­ing­ton.”

Former Col­or­ado Gov. Bill Ritter is the oth­er com­mis­sion co­chair.

The au­thors de­scribe five im­port­ant “policy levers” that states pos­sess to in­flu­ence the way care is priced and de­livered. States con­trol gov­ern­ment-sponsored health pro­grams like Medi­caid and CHIP, health in­sur­ance ex­changes, and state em­ploy­ee health be­ne­fits; have au­thor­ity over in­sur­ance, pro­vider rates, and med­ic­al mal­prac­tice; can set an­ti­trust laws and re­quire plans to provide trans­par­ent cost and qual­ity in­form­a­tion to con­sumers; can pro­mote pop­u­la­tion health through pub­lic health ini­ti­at­ives; and have the abil­ity, through gov­ernors, to en­gage vari­ous stake­hold­ers in find­ing solu­tions.

This fi­nal lever is em­phas­ized as one of the most im­port­ant. “In the past, this hasn’t been a place gov­ernors have played a lead­er­ship role,” said Robert Re­is­chauer, Medi­care trust­ee and former dir­ect­or of the Con­gres­sion­al Budget Of­fice, and a mem­ber of the com­mis­sion. “[But] this is an op­por­tun­ity that only gov­ernors have as lead­ers and con­veners.”

The unique abil­ity of gov­ernors to gath­er stake­hold­ers to find col­lab­or­at­ive solu­tions is the first in the com­mit­tee’s sev­en re­com­mend­a­tions to states, and gen­er­ally ac­know­ledged as the crit­ic­al first step to achiev­ing the oth­ers.

The six oth­er re­com­mend­a­tions for the states are col­lect data to cre­ate a health care pro­file; set stand­ards and goals for spend­ing and qual­ity; use ex­ist­ing pro­grams such as Medi­caid and the ex­changes as lever­age to ac­cel­er­ate co­ordin­ated, risk-based care; in­crease trans­par­ency of plans to im­prove con­sumer in­form­a­tion and mar­ket com­pet­i­tion; re­form reg­u­la­tions like med­ic­al mal­prac­tice and scope of prac­tice to in­crease ef­fi­ciency; pro­mote pop­u­la­tion health and per­son­al re­spons­ib­il­ity through edu­ca­tion and well­ness pro­grams.

The re­port’s con­trib­ut­ors em­phas­ize these changes are a long-term pro­cess, with a five- to 10-year ho­ri­zon. Each state will need to de­cide how to im­ple­ment changes and de­term­ine its own bal­ance between gov­ern­ment over­sight and reg­u­la­tion and mar­ket in­nov­a­tion.

Al­though the ACA is seen as a na­tion­al health care over­haul, the way the law has rolled out has placed great deal of re­spons­ib­il­ity on states, blur­ring the line between the fed­er­al and state role in man­aging care.

“As the ACA has evolved, we’ve watched as states made the in­di­vidu­al de­cision to per­haps take a dif­fer­ent path, wheth­er they’ve ad­op­ted to ex­pand Medi­caid or not, or run their own ex­changes or not,” said com­mit­tee mem­ber An­drew Drey­fus, pres­id­ent and chief ex­ec­ut­ive of­ficer of Blue Cross Blue Shield of Mas­sachu­setts. “Some of the na­tion­al stand­ard­iz­a­tion an­ti­cip­ated in the ACA has not come to pass at the same level, which I think has put a much great­er fo­cus on states as the locus of ac­count­ab­il­ity for health care.”

Leav­itt says the re­port was writ­ten not only for state of­fi­cials but for the Obama ad­min­is­tra­tion as well. For states to take more of the reins in health care, the fed­er­al gov­ern­ment needs to loosen them.

“We have seen real­ity set in on the ad­min­is­tra­tion and those im­ple­ment­ing the ACA, and that is how lim­ited their ca­pa­city is to im­ple­ment a na­tion­al strategy,” he said. “The ad­min­is­tra­tion over time has be­gun to grant great­er flex­ib­il­ity to states in or­der to in­centiv­ize as many as pos­sible to be­come in­volved.”

Leav­itt points to the es­sen­tial health be­ne­fits and the Arkan­sas Medi­caid waiver as ex­amples of the fed­er­al gov­ern­ment grant­ing flex­ib­il­ity to states in how to im­ple­ment ACA pro­vi­sions.

“If you’re go­ing to have na­tion­al stand­ards, then neigh­bor­hood solu­tions is the way you im­ple­ment those. The more you can provide flex­ib­il­ity, the more ef­fect­ive the fed­er­al gov­ern­ment will be.”

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