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Can states point the way to solving the access crisis?

From the June ACP Observer, copyright 2006 by the American College of Physicians.

By Robert B. Doherty

There was a time when Republicans advocated for expanding the power of state governments and for limiting the federal government's role. And it was Democrats who called for a stronger role for the federal government and a diminished one for states.

But the political landscape today is in a topsy-turvy state of flux, as political parties no longer consistently stick to their ideological underpinnings but still find plenty to fight about. A case in point is the debate over the roles of federal and state governments in regulating access to health care coverage.

The debate over state regulation

Early last month, the U.S. Senate was busy debating a bill, championed by the GOP leadership and President Bush, to exempt health plans sponsored by small businesses and their trade associations from many state-mandated benefits and consumer protections.

Instead, the federal government would take on a larger role in regulating such plans. Proponents of such “association health plans” argue that state-mandated benefits are driving up the health care premiums that small businesses must pay, making it impossible for businesses to pool their resources and buy affordable coverage.

The bill, S. 1955, enjoys strong support from the business community, but is meeting fierce opposition from many state insurance commissioners, consumer and provider groups. Critics contend that the legislation would weaken consumer protections, limit coverage for needed services like cancer screening and lead to problems with adverse selection. Because supporters have been unable to overcome a Democrat-led filibuster of the legislation, S. 1955 is unlikely to be enacted this year.

While that debate was going on, Sens. George Voinovich (R-Ohio) and Jeff Bingaman (D-N.M.) joined together to introduce legislation that would take the federal and state governments off in the opposite direction.

The Health Partnership Act (S. 2772) would give more authority to state governments to implement reforms to shrink the ranks of the uninsured and loosen federal restrictions on how states can use federal dollars to support such reforms. States would apply to a federal health care expansion and improvement commission for federal dollars to support state experiments in expanding access. Once approved by the commission, a state’s application for federal grant support would be sent to Congress under expedited rules for legislative approval.

The Health Partnership Act gives states the leeway to decide which approaches that would work best for them. Those could include tax credits, expanded Medicaid or State Children's Health Insurance Program (S-CHIP) coverage, pooling arrangements, single-payer systems, health savings accounts, or a combination of all of the above, as well as other options.

When making a grant application, states would have to include a timetable and benchmarks for demonstrating progress in expanding coverage within five years. States would also have to include a plan to improve quality, reduce administrative costs (including paperwork burdens) and provide for the use of health information technology.

Some states are already moving forward without waiting for Washington. In April, Massachusetts became the first state to enact legislation to require all state residents to have coverage.

The bill, signed by GOP Gov. Mitt Romney with the overwhelming support of a legislature controlled by the Democrats, mandates individual coverage by Jan. 1, 2007—or residents will face a fine. The legislation will provide low-income individuals with access to “affordable” coverage subsidized by the state.

Businesses that do not provide coverage to their employees will be required to make a $295 per employee annual contribution to support those state-subsidized low-cost plans. Critics of the Massachusetts plan argue that the mandate is unworkable because those subsidies won't be enough to ensure low-income individuals' access to low-cost coverage.

Achieving reform, state by state

Does ACP believe that states can point the way to solving the crisis of the uninsured? Or are states, with their individual priorities and budgets, part of the problem?

The College recognizes that excessive state regulation of benefits can drive up health care premiums. Those high premiums increase the numbers of the uninsured by putting affordable coverage out of reach for many small businesses and individuals.

Association health plans may effectively lower the premiums charged to smaller businesses—but at the risk of leaving employees with bare-bones coverage that excludes essential services, such as preventive screening benefits.

They could also do an end run around prompt payment laws and other consumer protections that fall under state regulatory authority. Such an arrangement might be feasible if the federal government had in place an alternative regulatory structure to make sure association health plans provide essential benefits and abide by consumer protection rules. But that is not the case.

On the other hand, states have an uneven record in expanding health coverage. For every state like Massachusetts, Hawaii or Maine that has taken big steps to provide affordable coverage for most or all of its residents, there are other states that are willing to tolerate large numbers of uninsured residents. States also tend to provide more generous coverage under Medicaid and S-CHIP when their economy is booming and their treasuries are full, but then cut back on benefits and eligibility at the first sign of an economic downturn.

Still, ACP believes that state-based health reforms may provide the best chance yet to end the logjam on health care reform. The College has endorsed the Health Partnership Act because it doesn’t depend on politicians in Washington reaching an agreement on a particular solution. It doesn’t require Congress to choose between such ideological extremes as a single-payer system or health savings accounts. Instead, it allows states to chart their own course with federal dollars, if they can demonstrate improved results.

Universal appeal

The Health Partnership Act should appeal to conservatives who have traditionally championed state rights, notwithstanding the GOP’s recent support for exempting association plans from state regulation. But the bill can also appeal to liberals who are frustrated with Washington’s decades-old failure to find a solution to the crisis of uninsured Americans.

Given the confused and polarizing political environment in Washington, the best that Congress may be able to do to expand access is to give states the money they need to support their own reforms. As long as those states can demonstrate progress, Washington should try to not interfere as states point the way to an eventual national solution.

Robert B. Doherty is ACP's Senior Vice President for Governmental Affairs and Public Policy.

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