Health Care Reform: Will States Be Left Holding the Bag?: Session Summary

“Health Care Reform: Will States Be Left Holding the Bag? “
2010 CSG Economic Summit of the States New York, NY, May 20, 2010

Session Summary

Dr. Marcia Nielsen, Vice Chancellor for Public Policy & Planning at the University of Kansas Medical Center, suggested that the discussion of the recent federal health reform bill begin at the beginning. She asked “Does the United States need health care reform?” and answered the question with a review of data on the health status and health outcomes in the United States compared to other nations. She examined data about US health spending and concluded that the US is spending more on a variety of measures than other first-tier nations but nonetheless has worse health outcomes.

An overview of the provisions of the federal health reform legislation was provided by Jennifer Tolbert, Associate Director, Kaiser Commission on Medicaid and the Uninsured, Henry J. Kaiser Family Foundation. The goals of the law include:

  • “Shared responsibility” in which employers, consumers, health plans, providers, and state and federal governments participate in and help pay for reform
  • Make health insurance work for consumers

    • Insurance market reforms
    • Health insurance exchanges
  • Make health insurance more affordable

    • Medicaid expansion
    • Federal premium and cost-sharing subsidies
  • Reform delivery system to reduce health care cost growth and improve access to and quality of care

Tolbert reviewed the immediate provisions and the longer-term provisions of the law. In 2010 these nine changes will be made:

  • Temporary high-risk pools will be established (if states opt out, federal government will provide coverage)
  • Extend dependent coverage to age 26
  • No lifetime limits or rescissions; restricted annual limits
  • No pre-existing condition exclusions for children
  • No cost-sharing for preventive services
  • Review increases in health plan premiums
  • Establish web portal to identify coverage options
  • Federal tax credits for small businesses to provide employee coverage
  • $250 rebate for reaching Medicare Part D coverage gap (the “doughnut hole”)

Mary Kennedy, senior policy advisor for the Centers for Medicare and Medicaid (CMS), covered the ins and outs of the mandated Medicaid coverage expansion. All adults with incomes up to 133 percent of the federal poverty level will be mandated to be included in state Medicaid programs beginning in 2014. Also beginning in 2014, state exchanges will offer insurance to low income individuals and small businesses. She reviewed the increase in federal support for Medicaid:

  • 100% match for “newly eligible” group for 3 years, 95-90% match phase down to 90% in 2020 and beyond
  • Increased match for “childless adults” in “expansion” states (reaches 93%/90% in 2019/2020)
  • Increased match for CHIP in FFY 2016 ( existing CHIP match plus 23 percentage points)
  • Regular federal match for remaining currently eligible groups

Kennedy said that Medicaid will operate under a new paradigm. The reform is predicated on the principle that everyone who is eligible is enrolled; and that coverage is stable. She said that is will be incumbent on states to stop the churn in Medicaid eligibility if they are to achieve cost containment and quality improvement. States will need to rethink Medicaid enrollment and renewal processes, to simplify Medicaid rules and to consider the intersection and coordination of Medicaid and the state health exchanges.

Kennedy echoed Tolbert’s recommendation that states need to begin strategic planning immediately. She said if she could deliver just one message to her audience it would be: “2014 starts today.”

Dr. Christine Eibner, an economist with the RAND Corporation, presented the results of her organization’s analysis of the impact of splitting risk pools for individuals and small employers within the state exchanges or combining the two groups into one risk pools. States will be making this policy choice. Dr. Eibner told the audience that the RAND microsimulation model came to the following conclusions:

  • Most individuals enrolled on the exchanges will get federal government subsidies

    • Individual premium payments will be capped as a percent of income
    • Federal government will pay costs over the cap
  • Small employers will face lower prices if exchange pools are split
  • States could reduce costs for small businesses by splitting pools
  • This decision would shift individual premium costs to the federal government.