Top 5 Issues for 2012 Expanded: Health

Top-of-the-mind health care topics in states are Medicaid and implementation of the federal Affordable Care Act. Medicaid enrollment continues to grow, federal stimulus funds have disappeared, and in many states providers are pressuring for increased reimbursement. States also must grapple with complying with mandates in the federal Affordable Care Act. The U.S. Supreme Court is expected to rule on the constitutionality of the law sometime in 2012. In the meantime, states must decide how far to go in their own implementation.

1.      Medicaid and Money

Medicaid will continue to challenge state policymakers. Meeting growing Medicaid budgets is severely restricting states’ abilities to increase funding for other public policy priorities and to restore budget cuts made during the recession.

The National Association of State Budget Officers reported in its December 2011 State Expenditures report, Medicaid is the single biggest piece of the state budget pie, accounting for 23.6 percent of all state expenditures in 2011, up from increased from 22.3 percent in 2010 and 21.9 percent in 2009. The shares for elementary and secondary education, as well as higher education, continue to decline.

The growth of states’ Medicaid budgets is the result of a number of factors: growing enrollment driven by the economic downturn, the loss of federal stimulus funds that propped up state budgets, increasing costs in the health care services sector, and pressure from providers to increase reimbursement rates.

States increasingly are turning to managed care to build efficient Medicaid health systems to deliver quality services at reduced costs. Many states are seeking waivers to expand managed care. The 2011 Kaiser Family Foundation 50-state survey on Medicaid managed care found that two-thirds of all Medicaid beneficiaries are enrolled in some form of managed care. However, significant expansion of managed care is expected in 2012-2014 in Texas (3 million enrollees), Georgia (1.5 million enrollees), Florida (2.8 million enrollees) and Illinois (1.5 million enrollees). States are turning to managed care for populations with complex care needs in an effort to bring down costs.

The Kaiser survey reported uncertainty about the capacity of current managed care organizations to handle the increased enrollment under expanded Medicaid eligibility and whether they can expand to insure the non-Medicaid population that will purchase subsidized health insurance through state health insurance exchanges.

States continue to explore ways to bring down Medicaid costs, including reducing eligibility in states such as Arizona and Maine, using new models of care, such as North Carolina medical homes documented to save almost $1 billion over a four year period, and expanding managed care in states like Texas, Florida and Kentucky.


2.      Waiting for the Supreme Court to Rule on Health Reform

States threw down the gauntlet as soon as President Obama signed the Affordable Care Act in 2010. Virginia lead the way as the majority of states sued over the constitutionality of the new law. The U.S. Supreme Court will hear arguments and is expected to rule before the November presidential election. The possible decisions range from upholding the entire law to overturning the entire law, with possible narrower decisions on whether the mandate that individuals have health insurance is constitutional and whether states’ roles in regulating health insurance is being usurped by the federal government. 

Stateline summarized the four issues before the Supreme Court:

  • whether the “Anti-Injunction Act” applies (if it does, the tax penalties in the individual mandate cannot be struck down until they are applied in 2015); 
  • the individual mandate and whether Congress exceeded its authority by requiring people to buy something they don’t want;
  • whether ruling against the individual mandate will invalidate the entire law or whether there is “severability;” and
  • does the mandated Medicaid expansion violate federal-state balance of authority and fiscal responsibility (this question can be taken up separately because severability does not apply to it).

The Supreme Court cases are National Federation of Independent Business v. Sebelius, No. 11-393; U.S. Department of Health and Human Services v. Florida, No. 11-398; and Florida v. Department of Health and Human Services, No. 11-400.

Arguments before the Supreme Court are scheduled for five and one-half hours on March26, 2012 and most court observers expect a decision in June.


  • Senator McConnell and 35 other U.S. Senators file amicus brief, Roll Call, Jan. 6, 2012
  • 26 States file brief on Medicaid expansion, Politico, Jan. 10, 2012.
  • Health Reform Source (Kaiser Family Foundation)

3.      Health Insurance Exchanges

More than half the states have received federal funding to assist with planning and early implementation of state-run health insurance exchanges required under the Affordable Care Act. Even some states challenging the law have moved forward. Legislatures in 2012 that have not already established governance structures for exchanges will likely take up bills to do so. Many state health and insurance offices will move forward with exchange implementation, including working out technology and coordination issues around the exchange/Medicaid interface. States may opt out of running exchanges, leaving it to the federal government; but if states plan to operate an exchange they must satisfactorily demonstrate capacity to the federal government by Jan. 1, 2013.


4.      Health Care Workforce

Increased access to health insurance and more emphasis on preventive care raise the question of sufficient primary care services – how many new patients can the current system absorb? Policymakers will continue to explore ways to increase the primary care workforce and spread services to underserved areas through technologies such as telemedicine. They also may encourage technological efficiencies such as electronic medical records and health information exchanges.


5.      Promoting Wellness to Save Money

Chronic illness accounts for 75 percent of health care spending in the U.S. While policymakers are challenged now to find short term low-cost solutions that reduce smoking and obesity and encourage physical activity, a growing body of evidenced-based study offers solutions that are shown to save money in the long run. Nebraska is one state leading the way by incorporating a wellness model in its state employee health insurance plan. Other states are following the private sector and incorporating both rewards and penalties for state employees, and sometimes Medicaid enrollees as well, around wellness.



See the rest of CSG's Top 5 Issues for 2012: