State of Contention as Officials Wrestle Over Reform Law

Many of the nation’s governors continue to clash with the White House over implementing the health reform law, forcing some state health officials to straddle election-year politics and new federal policies.

The law gives states discretion over key provisions, such as the design and implementation of the insurance exchanges, through which as many as 30 million U.S. residents may buy health coverage. HHS Secretary Kathleen Sebelius has repeatedly referred to the overhaul as the “most state-friendly Washington-designed bill” that she’s seen in years.

However, one GOP governor says, “The bill raises almost 1,000 questions [about implementation] and so far they have zero answers,” and even Democratic leaders have expressed concerns about the law’s funding and timing. Some state budgets are so strapped that agencies lack staffers who can “handle basics such as writing grants to apply for implementation funding,” the Wall Street Journal reported.

State-Level Resistance Grows

As some states take on the challenge of health reform implementation, other states are actively fighting specific provisions.

A Virginia lawsuit challenging the individual mandate’s constitutionality continues to move forward, and Missouri voters on Tuesday passed a ballot measure intended to ban any government from mandating that residents have health insurance or penalizing residents for personally paying their medical bills. Although Missouri’s measure likely will not have any legal effect — federal law typically trumps state law — its symbolic passage could spur similar efforts in other states.

Colorado is the latest state to consider an amendment that would prohibit the new reform law’s individual mandate and allow medical personnel to accept cash for their services.

Exchange Design a Key Point To Watch

The Obama administration says it expected challenges over the bill’s mandate, which could reach the Supreme Court in coming years. In the interim, the design of and control over new insurance exchanges will likely become “one of the federal-state battlegrounds that will play out over the next months and years,” according to Stuart Butler of the Heritage Foundation.

The exchanges require governors to make many “technical and ideological” decisions, says Joanne Kenen of the New America Foundation. Will states create their own exchanges or partner with others to manage regional exchanges? Which health plans will be allowed to participate and how will they be regulated?

Some help could come in the form of new grants HHS announced last week that would allow states receive up to $1 million toward their exchange planning efforts. According to Rick Curtis, president of the Institute for Health Policy Solutions, these added funds are essential because most states currently lack “resources to take these critical initial steps.”

However, some governors say they need more time and information from the government in order to properly construct their exchanges.

Some Officials in Awkward Position

The situation in Texas mirrors what many officials in other states are experiencing. Roughly one in four Texas residents is uninsured, and the new reform law promises to provide the state with billions of dollars in federal aid to help its uninsured residents obtain adequate coverage and care.

However, some of Texas’ most-prominent lawmakers — including Gov. Rick Perry (R) and the state’s attorney general — have shown “open hostility” toward the overhaul and have joined or launched broad efforts in opposition to it, citing the potential “fiscal threat” to the state. 

Despite the rhetoric, Texas health agency officials have said that local lawmakers and elected officials have not interfered with their efforts to prepare for the law’s requirements to establish a new health insurance exchange or implement strict rules on health insurance companies. According to Texas Health and Human Services Commissioner Thomas Suehs, Perry “expects me to implement the federal law in the most cost-effective, efficient manner.”

California: ‘Willing but Broke’

California officials might have a more positive outlook on reform, but the state still faces bumps in the road to reform implementation. While it ultimately failed, Gov. Arnold Schwarzenegger’s (R) own health reform plan campaign left California well-positioned to implement the national overhaul, notes the New America Foundation’s Kenen. Further, Schwarzenegger has emerged as the most prominent Republican to champion the overhaul, and state lawmakers have moved forward with a slew of bills intended to assist with the rollout.

The Golden State also has experience with insurance exchanges, through its PacAdvantage system. Without a large pool of purchasers, small businesses were unable to muster the collective bargaining power to negotiate lower insurance rates, and the exchange dissolved in 2006. Experts suggest that California’s exchange failed because it did not require all stakeholders to participate, unlike the current overhaul.

However, California’s ability to be a leader on reform implementation could be hindered, as the state continues to grapple with severe budget concerns that may force cutbacks to safety-net programs like Medi-Cal, the state’s Medicaid program. California’s unemployment rate more than doubled between 2007 and 2009, boosting the number of state residents without health coverage and setting up additional fiscal challenges.

Essential Decisions May Wait Until After Fall Elections

Sebelius is ramping up her efforts to address governors’ concerns and has begun meeting with state leaders in both individual and group settings. Sebelius’ office in early August also plans to host governors’ staff from several states to discuss the exchanges.

However, many key decisions might need to wait until after this fall’s elections. Some GOP governors currently up for re-election could dial back their resistance to the overhaul, particularly if they determine the law will bring their states needed funds. Meanwhile, national efforts that shape implementation, such as making available more federal funding or changing deadlines, could hinge on whether Republicans make significant gains in Congress.

Here’s a look at what else is happening in health reform.

In the States

  • On Aug. 1, the Connecticut Department of Social Services will begin accepting applications for a federally funded high-risk health insurance pool for individuals with pre-existing conditions. To be eligible for the program, individuals must have a pre-existing condition, have been uninsured for at least six months and have been unable to obtain coverage due to their condition. Coverage will begin as early as Sept. 1 and last for the next 3.5 years. Premiums for the pool will range from $285 per month for adults under age 30 to $893 per month for individuals ages 65 and older. The state will use $50 million in federal funds to operate the pool (AP/Modern Healthcare, 7/24).
  • A Florida Circuit Court judge has removed from the November ballot a measure (HJR 37) challenging the new reform law’s individual mandate, saying the amendment was “manifestly misleading.” Circuit Court Judge James Shelfer said the measure — which would have prohibited the state from creating a health insurance exchange that compels residents to purchase coverage — contained political phrases and issues not addressed in the proposal. For example, the summary states that the amendment would “ensure access to health care services without waiting lists, protect the doctor-patient relationship (and) guard against mandates that don’t work.” Shelfer said the amendment does not guarantee those items (Logan, Miami Herald, 7/30).
  • Last week, Nebraska Gov. Dave Heineman (R) said he would implement the overhaul but not seek federal grants or apply for demonstration projects. Heineman said that he is unsure whether he will apply for a $1 million grant to help his state establish a health insurance exchange. The governor also has refused to participate in the high-risk insurance pool program — saying that it is not adequately funded — and has said he will not create a formal system through which experts and stakeholders can discuss the overhaul, as many other states have done (Hicks, Lincoln Journal Star, 7/31).

On the Hill

  • Last week, a group of high-ranking Senate Republicans introduced a bill (S 3653) that would eliminate the Independent Payment Advisory Board, which was established under the health reform law to rein in Medicare spending growth. IPAB would consist of 15 members appointed by the White House and confirmed by the Senate. The panel is required to make recommendations to Congress on ways to cut the Medicare spending growth rate once it exceeds certain levels. The sponsors of the bill — Senate Minority Whip Jon Kyl (R-Ariz.) and Sens. Tom Coburn (R-Okla.), John Cornyn (R-Texas), Orrin Hatch (R-Utah) and Pat Roberts (R-Kan.) — said that “unelected, unaccountable bureaucrats” should not be authorized with such significant power over Medicare (Lillis, “Healthwatch,” The Hill, 7/28).
  • Last Friday, the House voted 241-154 to reject a bill that would have repealed a tax-reporting requirement intended to partly offset the cost of the federal health reform law. The vote on the Democrat-sponsored bill was held under procedures that required a two-thirds majority for approval (Ohlemacher, AP/Philadelphia Inquirer, 7/30). The reporting mandate, which will take effect in 2012, requires businesses, not-for-profit groups and government offices to file 1099 forms with the Internal Revenue Service when they purchase $600 or more in goods from another business in a given year. Although Democrats and Republicans agreed that the provision should be repealed, they failed to reach an agreement on how to make up for the lost revenue. The provision is expected to generate $19 billion in revenue over the next decade (Ohlemacher, AP/Bloomberg Businessweek, 7/30).
  • Lawmakers and health care industry watchdogs are questioning the integrity of White House claims that Medicare solvency has been extended and that beneficiaries’ benefits will remain unchanged by the federal health reform law (Norman, CQ HealthBeat, 8/2). The White House earlier this week released a report finding that the overhaul will save Medicare $8 billion by the end of 2011 and $575 billion by the end of the decade, adding 12 years to the solvency of Medicare’s trust fund. Meanwhile, the administration last week launched a $700,000 TV ad campaign about the Medicare benefits. Republicans roundly criticized both the report and ad campaign. Senate Finance Committee ranking member Chuck Grassley (R-Iowa) said that the Obama administration “isn’t letting the facts get in the way of the story it wants to tell” (CQ HealthBeat, 8/2).

Administration Actions

  • The Medicaid and Children’s Health Insurance Program Payment and Access Commission, known as MacPAC, will hold its first meeting Sept. 23 and Sept. 24, as it begins to scrutinize Medicaid payment levels and the quality of care beneficiaries receive. The new, permanent commission is expected to draw on the model of MedPAC, the Medicare Payment Advisory Commission, in its size, budget and mission. MacPAC was created in the 2009 law that re-authorized funding for CHIP through 2014, though it did not gain funding until the passage of the federal health reform law (Reichard, CQ Today, 7/31).
  • Last Friday, CMS released its final rule for fiscal year 2011 inpatient payments, which would reduce total inpatient payments to hospitals by 0.4%, or $440 million (AHA News Now, 7/30). Under the rule, which takes effect on Oct.  1, hospitals will receive a 2.35% market basket update, which includes a 0.25% reduction as mandated by the federal health reform law. However, CMS also finalized a -2.9% payment adjustment aimed at offsetting a rise in case mix index as a result of the switch to a new payment methodology in 2008 (Modern Healthcare, 7/30).

In Public Opinion

  • A majority of U.S. residents still are unsure about the provisions and benefits in the new health reform law, according to a according to a poll released last week by Harris Interactive/HealthDay. The poll found that a majority of respondents could accurately identify just four of 18 key reform provisions included in the new law. The poll also found broad uncertainty regarding the law’s goals and regulations. For example, 63% of respondents acknowledged that they are not sure or they do not know if the new law will expand the number of people eligible for Medicaid. A similar Harris/National Council on Aging poll released recently also found broad misunderstanding among seniors about the overhaul’s Medicare provisions (Commins, HealthLeaders Media, 7/29).
  • A recent poll conducted by Rasmussen finds that 59% of likely voters favor repealing the federal health reform law, the highest level of support Rasmussen has recorded since its passage. Thirty-eight percent of respondents said they want the law to remain in place (Zimmermann, “Healthwatch,” The Hill, 8/2). Only 32% of respondents said they think the law is good for the country, while 57% said the law is bad for the nation, the highest level of disapproval recorded by the polling firm since March (UPI, 8/2).

Related Topics

Road to Reform The Health Law