State-Federal Partnerships for Access to Care: Title and subTitle BreakAn End and a Means

By 2013, the number of uninsured individuals in the United States is projected to be 56 million, approximately 1 in 5 US residents.¹ Because uninsured individuals have a 25% higher mortality than those who are insured, substantial increases in the uninsured population may contribute to a decrease in US life expectancy.² For many reasons, the problems of the US health care system have defied efforts to address them at the federal level. But federal inaction permits opportunity—the 50 states can step into the vacuum and move the country forward. Several states are now beginning to address the problems of the uninsured, as well as health care cost and quality. Although a few states can create and enact reform by themselves, the federal government can and should facilitate state initiatives.

In the 110th Congress, 2 bills were recently introduced in the US Senate and the House of Representatives promoting federal-state partnerships to improve coverage, cost, and quality. In this Commentary, we discuss state-based reform in the context of these bills with the goal of understanding how the states and federal government can improve health care in the United States, despite the current political constraints limiting comprehensive reform approaches.

State health care reform is both an end and a means. As states begin to improve coverage and reform the health care systems within their borders, this change is an “end” in itself to reduce the numbers of uninsured and improve the functioning of regional health care systems. However, equally importantly, state experiments will serve as a “means” to decide what works and what does not. The Institute of Medicine³ has recommended that state models be used as demonstrations for national health policy, as has the Harvard Interfaculty Program for Health Systems Improvement.⁴ State initiatives have traditionally provided the impetus for policy innovation in the United States.

A major hindrance to state health care reform has been lack of funding. The requirements that most states face to balance their budgets place greater limits on their ability to experiment with potentially risky initiatives, such as expanded coverage programs. Additionally, if one state has a particularly generous program, residents of neighboring states may move into the more generous state. Alternatively, if a state imposes individual or employer mandates, citizens and tax-paying businesses may leave. Furthermore, some states may not have the infrastructure to mount new initiatives. In its fullest sense, the United States could have 50 different state plans, which is not likely to be desirable. A few states may demonstrate successes that can then contribute to federal program development, or be replicated by sister entities. Clearly, if states are to be models for the whole country, any eventual unifying federal program would need to provide pathways to migrate from state approaches to a national one.

On balance, state innovation does seem to be a valuable part of any current national solution to the nation's health care problems, and one currently supported across a broad political spectrum.⁵

The first bill, and the one on which the others were based, is the Health Partnership Act (HPA) S.325 introduced in January 2007 by Senators Jeff Bingaman (D, NM) and George Voinovich (R, Ohio).⁶ The HPA would authorize grants to individual states and groups of states to perform any of a broad range of private and public strategies to increase health care coverage, to improve health care quality and efficiency, and to use information technology to improve health care infrastructure.

According to the provisions of the bill, a bipartisan commission would issue a request for proposals that would specify 5-year targets for coverage, quality, cost, and information technology; it would review the proposals and recommend those approved as well as the amount of federal grant money each state should receive. Congress would vote “up or down” in the same way as military base closings.

Each year, the state would be required to report progress toward targets in the proposal as well as attend a yearly meeting in which states share information on successes and failures. At the end of the 5-year period, the commission would be required to report to Congress about whether the states are meeting the goals of the act and recommend future action Congress should take concerning overall reform, including whether to extend the program.

The same day that HPA S.325 was introduced, Representatives Tammy Baldwin (D, Wis), Tom Price (R, Ga), and John Tierney (D, Mass) introduced the Health Partnership Through Creative Federalism Act HR.506. The marked similarities between the bills are shown in the Table.

Given the large proportion of the population that is uninsured, it seems reasonable that the commission would expect a 50% reduction in the state's uninsured during a 5-year period. The commission should also accept a number of innovative and different approaches to reducing the uninsured.

Most attempts to improve the safety net in recent years have taken the form of individual states' expansions of Medicaid, the State Children's Health Insurance Program (SCHIP), or both, with the addition of new categories of covered individuals through waivers,⁷ such as providing improved coverage to childless adults, parents, pregnant women, or children. Public program expansion under the HPA could, for example, extend coverage to those individuals up to 300% of the federal poverty level from birth to 65 years, whether single or in a family. Public program expansion must consider measures to avoid “crowd out” so that businesses do not discontinue their health insurance coverage provisions.

If every person who worked in a small business (and their dependents) had health insurance coverage, the number of uninsured would be estimated to decrease by approximately 75%.⁸ The insurance market for small business is inefficient and could be improved by the creation of “pools” of small businesses joining together, reducing administrative costs; this has been attempted in several states, such as New York's Health Pass.⁹ Ideally, such pools would include large numbers of groups (with all members of the group joining) such that risk could be spread broadly and adverse selection minimized. Alternatively, individuals could join large systems, such as the Federal Employee Health Benefits program, or state employee plans. The commission could allow state-sponsored plans to access these pools, but it is likely that different actuarial calculations would be needed (ie, a different pool) for the currently uninsured because they will have higher medical expenditures.

The other major stumbling block to providing insurance through small business is lack of resources. Small businesses have less administrative infrastructure to manage insurance and have a high proportion of low-wage employees. The solution requires state subsidy for individuals or businesses desiring to purchase more affordable insurance available through pools. The subsidy must be considerable for voluntary participation; even a 30% subsidy to small business (with no subsidy to the individual) is unlikely to be sufficient.¹⁰ States have found multiple ways to provide this subsidy, some through small business and some directly to the employee.¹¹ Without substantial subsidies, and perhaps mandates of the type included in the recent Massachusetts legislation (described below), incremental coverage reforms are unlikely to enroll substantial numbers of employed uninsured.

In recent months, Massachusetts has passed legislation¹² that creates an individual mandate to purchase health insurance, a pay or play requirement for businesses, a state authority that approves affordable plans for the uninsured, premium assistance for adults up to 300% of the federal poverty level, and Medicaid expansion for children up to 300% of the federal poverty level. The question of whether this will work in Massachusetts clearly will be answered only when the plan rolls out in its entirety, and it is determined which residents can afford the mandated insurance, what benefits will be covered, what it costs the state every year (and if the state can afford the burden), and ultimately if every citizen of Massachusetts is covered. The recent California proposal is similar in concept and adds an important provision of making the premium a percentage of income, averaging approximately 5% of income for those individuals at 150% of federal poverty level. This truly should make health care affordable.

An increasing number of states are creating their own systems. Vermont has a similar approach for small business as Massachusetts, but without the mandates, as does the recent Cover Tennessee initiative. The Dirigo plan in Maine and the state of Michigan also address small business. Pennsylvania and Illinois are focusing on coverage for children. Many of these systems are new programs, and time will be required to gauge effectiveness.

The purpose of the federal health partnership bills is to facilitate state experiments of this type, to assist a broader range of states with ways to inaugurate coverage plans, and to provide funding for those states with promising plans but insufficient funding. It can be argued that under these bills, states will encounter after 5 years the same problems of funding as before. It is possible that in further debate on these bills, the funding will be extended beyond 5 years as long as targets are met; federal match rates could be improved, thus adding some degree of protection to states (with greater federal funding) and therefore less liability in the coverage. The yearly conference required by each of the bills will be essential to demonstrating what has worked and what has not, as well as holding states accountable for progress.

The HPA requires that the plan contain appropriate results-based quality indicators. Monitoring quality is particularly important as cost-reduction strategies are initiated. Ideal federal metrics relating to the HPA would have the following characteristics: they should be readily understood by the public, as well as recognized and validated by national authorities; they should be applicable to the populations currently lacking insurance, which include large numbers of young adults and children; and they should either be currently measured at the state level or states should have the ability to measure them. Measures that would fit these criteria include the incidence of myocardial infarction, prevalence of diabetes in patients who initiate dialysis, incidence of late-stage colon cancer diagnosis, and rates of emergency department visits for asthma by children.

The HPA requires a state to improve the efficiency of health care, including a specific 5-year target for reducing administrative costs. In addition to administrative waste, other targets for reducing waste in the system include duplication of tests, overuse of health resources by physicians and patients, malpractice costs, and defensive medicine, as well as fraud and abuse. Developing appropriate efficiency metrics is currently a widely debated topic and much input to the commission will be important in this area.^{13 - 14} It could be that the commission would require a reduction in the rate of increase in cost before renewing a grant beyond 5 years.

Under the HPA, a state is to provide for the appropriate use of health information technology to improve infrastructure. This approach is essential so that each state can understand its current and future measures of coverage, cost, and quality. The provision of information infrastructures and electronic health records for all individuals may help to improve safety (medication errors), effectiveness (attention to evidence-based practice guidelines), and efficiency (time-saving). Valid indicators of health information technology system performance are needed to demonstrate progress on any information technology goals.

In the 109th Congress, Sen Russ Feingold (D, Wis) introduced a similar bill (S.3776) that has yet to be reintroduced in the 110th Congress, but that provided for $32 billion in funding to states over 10 years. One estimate¹⁵ suggests that to cover 50% of the uninsured in a state with a population of 7 million entirely through employers would cost approximately an additional $488 million per year (not including the employer contribution of $50 per month per worker and a net employee contribution of $59 per month). If the final bill by Feingold provided for 50% cost sharing by the state, $3.2 billion per year would provide funding for 12 states. The final authorized act must include significant funding to get state participation. Finding the dollars will be difficult at a time when the federal budget deficit is increasing.

These federal bills will provide grants to states to extend health care coverage and promote quality and efficiency, highly worthy ends in themselves. However, the United States may not want to have 50 (or more) separate health care systems in the future; therefore, the bills will be a means of identifying preferred approaches that could potentially be melded into a national program. Whatever else happens, promoting state-based reform has the potential for informing national discussions when and if the political will for reform emerges. In the meantime, especially with a presidential election coming up, promoting state initiatives may improve the equity, quality, and efficiency of a troubled health care system for an important fraction of the US public.