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State Implementation of National Health Reform: Harnessing Federal Resources to Meet State Policy Goals

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State Implementation of National Health Reform: Harnessing Federal Resources to Meet State Policy Goals State Implementation of National Health Reform: Harnessing Federal Resources to Meet State Policy Goals by Stan Dorn Prepared for State Coverage Initiatives by the Urban Institute July 2010 (Updated on September 3, 2010) 1 Table of Contents Executive Summary . 3. Overview of Report . 5. Key Features of National Health Reform . 6. Maximizing Residents’ Health Coverage and Access to Care . 11. Fundamental Questions about Health Insurance Exchanges . 17. Restructuring Health Insurance to Function More Like a Traditional Market . 18. Holding Insurers Accountable to Consumers . 25. Reforming Health Care Delivery and Financing to Slow Cost Growth and Improve Quality . 30. Reducing State Budget Deficits . 38. Conclusion . 42. Notes . 42. About the Author Timothy Waidmann . The author is also based information and assistance to state Stan Dorn, J .D ., is a senior fellow at the grateful for the good counsel of the State leaders in order to help them move health Urban Institute’s Health Policy Center . He Coverage Initiatives program staff as well care reform forward at the state level . SCI has worked on health care issues for more as Joel Ario, the Pennsylvania Insurance offers an integrated array of policy and than 25 years at the state and federal levels . Commissioner; Alice Burton, consultant technical assistance services and products Mr . Dorn is a leading national expert on for the Maryland Governor’s Health Care to help state leaders with coverage programs and issues affecting low-income Reform Coordinating Council; Allen expansion efforts as well as with broader people and other vulnerable populations, Feezor of North Carolina’s Department health care reform . Our team of policy including the Patient Protection and of Health and Human Services; Eugene experts tailors its approach to meeting Affordable Care Act, Medicaid, the Gessow, the Director of the Arkansas state decision makers’ needs within SCI is Children’s Health Insurance Program Division of Medical Services within the a national program of the Robert Wood (CHIP), and subsidies for uninsured, laid- Department of Human Services; Jeanene Johnson Foundation administered by off workers . Before the Urban Institute, Smith, Administrator of the Office for AcademyHealth . For more information Mr . Dorn served as a senior policy analyst Oregon Health Policy and Research; Jackie about SCI, please visit our web site, at the Economic and Social Research Scott of the National Academy for State www .statecoverage .org . Institute; Health Division director for the Health Policy; and Stephen A . Somers About the Urban Institute Children’s Defense Fund; and managing of the Center for Health Care Strategies . The Urban Institute gathers data, attorney at the National Health Law Neither these individuals, the Urban conducts research, evaluates programs, Program’s Washington office . Institute, AcademyHealth, nor the Robert offers technical assistance, and educates Wood Johnson Foundation are responsible Acknowledgements Americans on social and economic issues for the opinions expressed in this report, The author thanks his Urban Institute — to foster sound public policy and which are the author’s sole responsibility . colleagues who provided assistance effective government . and advice, including Linda Blumberg, About SCI Kelly Devers, John Holahan, Ariel Klein, The State Coverage Initiatives (SCI) Juliana Macri, Brenda Spillman, and program provides timely, experience- 2 Executive Summary The Patient Protection and Affordable afford . Insurers’ desire for market share slow cost growth while improving quality . Care Act (PPACA) gives states many new will drive innovation that meets customers’ The resulting plan could be offered in tools and resources with which to pursue needs, as occurs in smoothly functioning the exchange, increasing competition for longstanding health policy goals . markets . private insurers . State officials seeking to maximize State officials who want to hold insurers coverage and access to care can take accountable for providing consumers Not all state officials advantage of PPACA’s new options to with high-quality, affordable health establish eligibility for Medicaid and coverage could: share the same health subsidies in the exchange . These options Dramatically increase their capacity to policy goals. But use highly streamlined methods to help the • detect insurance company misbehavior by uninsured receive coverage while lowering most state health care state administrative costs . States could carefully analyzing the new data that PPACA leaders will find that also implement the Basic Health Program requires insurers to provide; option for residents who are ineligible for they can use PPACA Medicaid (because of income or a recent • Permit only insurers that comply with to make significant grant of legal immigration status) but reasonable state requirements related to whose incomes do not exceed 200 percent cost and consumer protection to offer progress toward of the federal poverty level (FPL) . Such plans in the exchange; an option could make coverage and care meeting objectives much more affordable for low-income • Educate the public and health plans they have long viewed residents than under the standard subsidy about insurers’ potential liability for system established by PPACA, while the treble damages under the False Claims as important to the federal government would still pay all Act, empowering public agencies to residents of their state. subsidy costs . States could also consider pursue such claims and to use the supplementing PPACA’s subsidies to proceeds to fund further enforcement improve affordability of coverage and care efforts; State policymakers interested in to low- and moderate-income residents . • Use available federal grants to fund restructuring health care delivery and financing to slow cost growth States interested in reforming health independent consumer assistance while improving quality have a host of insurance to function more like a programs to help consumers vindicate opportunities under PPACA . States can: traditional market can give consumers their individual rights and to bring much improved information about the systemic problems to the attention of the • Implement Medicaid demonstration services offered by particular providers public and responsible state officials; projects to test new reimbursement methods as well as health coverage options . If • Use new federal grants to support rate that reward value, rather than volume; state officials decide to operate a health review as well as leverage the exchange to For public employee coverage, use new insurance exchange rather than to leave • supply administrative resources needed Medicare methods to base payment on that function to the federal government, for enforcement of PPACA’s insurance provider performance; state policymakers can structure the market reforms; and exchange to make a wide range of health • Incorporate Medicare, Medicaid, and plan choices available to as many state • Establish a publicly administered plan private coverage into multi-payor residents and employers as possible . In to compete in the exchange . Such a plan initiatives that implement reimbursement such a system, the consumer, not the would include, as its core membership, and delivery system reforms; employer, selects his or her own health Medicaid beneficiaries, enrollees in the plan, and those who want more expensive Children’s Health Insurance Program • Help high-cost, chronically-ill patients coverage must pay the resulting increase (CHIP), as well as public employees in Medicaid, public employees, and in premiums . Private health plans will and retirees . This critical mass could the privately insured participate in the thus have an incentive to offer consumers make it feasible for a state’s providers to “patient-centered medical home” model the services they want at a price they can implement delivery system reforms that of coordinated care; 3 • Implement initiatives to prevent costly States interested in reducing budget these adults’ coverage . Finally, Medicaid rehospitalization, improving health deficits could achieve savings on public cost growth could be slowed by taking status and saving money for public and employee health costs by participating advantage of PPACA’s new options to private payors alike; in federal reinsurance subsidies for early fully integrate Medicare and Medicaid retirees . Significant General Fund savings financing and services for dual eligibles . • Use the results of comparative could also be achieved, in many states, by Coordinated care that smoothly integrates effectiveness research to encourage substituting federal Medicaid dollars for the two funding streams, eliminating public employees to avoid costly current state and local spending on adults’ current incentives for cost-shifting and procedures and treatments that do indigent care, mental health services, provider gaming of multiple payors, offers not contribute to patient health, social services, and other state-funded the possibility of significant health status while permitting private employers to programs that, for the first time, will gains for beneficiaries and cost savings for give their covered employees similar potentially fit under Medicaid’s umbrella . states . incentives; and At the same time, states that now cover Not all state officials share the same health some adults with incomes above 138 • Apply for federal grants and participate policy goals . But most state health care percent
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