FixHealthCarePolicy

The End of Federalism: How Obamacare Will Impact States

More Medicaid

Mandated Expansions: All the health bills before Congress depend on a massive Medicaid expansion to expand coverage. If Congress raises eligibility to 133% of the federal poverty level, 33 states would see their Medicaid populations increase by 30%, and 10 states would see their Medicaid populations jump by 50%. Of course, this scenario is far worse if Congress moves eligibility to 150% FPL, as proposed by the Senate HELP Committee.

Less Flexibility: The Obama Administration and Congress have already taken numerous steps to roll back many of the flexibilities extended to the state Medicaid and SCHIP programs. The health care proposals would further restrict states ability to manage and stabilize their own programs.

Unknown Costs: State Medicaid spending is already outpacing projections. Recent surveys found that states saw an 8% increase in spending during Fiscal Year 2009. Governors and state officials should be skeptical of any promise from Washington that these reforms will not add additional costs to the states. Governor Bredesen (D-TN) warns that the costs to his state alone could be over $3 billion.

Gutting State Authority

Transferring State Power to Federal Regulators: The bills before Congress would place an unprecedented amount of power in the hands of the federal government, especially the Secretary of Health and Human Services, to determine health insurance rules and benefits. These powers have traditionally been held by state officials.

Minions to a Federal Bureaucrat: In place of its traditional role of regulating health insurance markets, the states would become merely an administrative arm of the federal government. State action on health care would be based on dictates and memoranda passed down from Washington.

Flexibility in Name Only: The federal one-size-fits-all approach of the bills before Congress would undermine state reform and innovation. Each state has its own demographic and political challenges, and no one federal solution can address the unique needs of each state.

A Better Approach to Health Care Reform

Promote True Federal-State Partnerships: Instead of the top-down approach of a federal health care reform, federal policymakers should embrace the principles of federalism and allow states to develop innovative ways to address their unique challenges to health care reform.

Preserve State Flexibility: Ease the burden on states by giving them greater flexibility to modernize and manage the Medicaid and SCHIP programs. This includes preventing the weakening of existing state flexibilities.

Tackle Fundamental Medicaid Reform: Expanding Medicaid is neither new nor innovative nor reform. Rather than expanding Medicaid, there should be a serious effort to reform it. Such policies would include moving healthy moms and kids into private health insurance through tax credits, premium assistance, and vouchers and adopting a “money follows the person” model for self-directing long-term care.

Tags: federalism, Medicaid, regulation, States

A Federalist Approach to Health Reform: Finding the Best Way Forward Through State Innovation

With Democrats’ eyes focused on increasing the federal government’s power in the health sector, the possibility of state-level health reform is getting overlooked. However, as Dr. Henry Aaron of the Brookings Institution and Dr. Stuart Butler of The Heritage Foundation have written, “…measures to energize state experimentation within a federal-state framework based on clear national goals will achieve two objectives: it will extend coverage in the near term, and it will advance the date at which coordinated national action is possible.” The authors explain the benefits of federal encouragement of state initiatives:

“-Breaks political deadlocks. [T]here are deep disagreements among reasonable and committed people—including between us—about what the best practical approach is. That makes it very difficult to get political support for coherent, workable action even among those who broadly agree on goals. Our strategy is designed as a political device to break that deadlock by making it possible to launch a variety of bold approaches quickly, with the more successful initiatives helping to build consensus for more sweeping action.

-Allows for glitches in a limited arena. [G]iven the complexity of current U.S. health care financing, it is likely that well-intentioned reformers will make mistakes. Eventual national action will emerge with fewer glitches if those mistakes are made on the limited stage of individual states than if a full-blown national plan must be designed in advance.

-Can accommodate states’ variations. [W]e believe that any national system would have to accommodate considerable state-to-state variation, at least for many years. If that is so, then why not begin with a system that incorporates state variation as an instrument to spur continuous improvement amid uncertainty and disagreement about the ideal solution?”

The federal government could take steps to facilitate state innovation:

“If the federal government were to encourage states in tangible ways—in particular, by a process that would allow states to apply for major alterations in existing federal law and programs within their borders and perhaps that offered modest financial assistance—we believe that there would be many more creative state proposals. We think that this approach would improve understanding of what works and what does not and would accelerate the search for the best way forward.”

Tags: federalism, state health reform