States Consider Options for Funding Health Care Reform

As states work to expand health care coverage for the uninsured, they "appear to be on a collision course with the Bush administration," which "has balked at state initiatives that increase costs to the federal government," the New York Times reports.

In his fiscal year 2008 budget proposal, President Bush has called for cuts in Medicare and Medicaid to slow spending growth and limits on SCHIP funding. Bush also said he wanted to bring SCHIP back to its "original objective" by only covering children in families with annual incomes of up to 200% of the federal poverty level, limiting eligibility of parents and prohibiting coverage of childless adults.

Sixteen states currently cover children and their parents at levels above the federal guidelines.

Bush, during his State of the Union address, said he wanted to help "states that are coming up with innovative ways to cover the uninsured." He said in his budget proposal that health system change should be fueled by "subsidizing the purchase of private insurance" and not by expanding public programs that would increase costs to the federal government.

With limits in federal funding, states are looking at other ways to fund expansions of health programs, including tobacco taxes, fines on employers who do not provide insurance to their employees and pools of money dedicated to charity and uncompensated care. State efforts to expand coverage face several challenges: costs could dramatically increase over time, the state could experience an economic downturn that would reduce revenue, and the federal Employee Retirement Income Security Act of 1974 could stop state initiatives that would require employers to change their health plans.

Even with these challenges, there "is such a political divide in Washington that many people believe that the only reasonable chance to succeed is at the state level," according to Jeffrey Crowley, a senior research scholar at the Health Policy Institute of Georgetown University (Pear/Hernandez, New York Times, 2/13).