“Week of November 15, 2010
State budget problems are so dire and rising health care costs so worrisome that some states are considering what may have been unthinkable just a year or two ago — opting out of the federal Medicaid program. The New York Times reported last week that Texas (see below) and a handful of other states are considering doing exactly that, especially given that federal health
care reform will expand (as of 2014) the number of residents who are eligible for the state-administered health care program. In South Carolina, state officials there are considering not paying Medicaid claims as of March 2011 unless they can secure permission to run at a deficit. Some state leaders concede dropping Medicaid could have a devastating effect on their local economies, making such a course unlikely. The fact that it’s on the table, however, speaks volumes about the growing problem of runaway health care costs, and the need to develop systematic solutions in the way that the Patient Protection and Affordable Care Act (PPACA) addressed access issues.
Health Care Reform Implementation
For more detail about the ongoing implementation of the new health care reform law and its potential impact on you, read a new edition of our Eye on Implementation feature.
With Congress on recess last week, there is no Federal summary for this week.
ALASKA: A state health commission created by the legislature this year has begun reviewing rapidly rising medical costs and patterns of health care pricing among providers. Alaska’s health care costs are rising faster than the national average. The commission held its first meeting in Anchorage October 14 and 15 after its members were appointed by Gov. Sean Parnell. Most members of the panel were on an earlier health care task force, but this panel has five new members, including two state legislators. In an effort to provide the Commission with relevant cost and quality data, Aetna has forwarded several relevant studies and documents produced by its Public Policy Department.
CALIFORNIA: The state is yet again facing a massive budget deficit — $25.4 billion projected for 2011, according to the nonpartisan Legislative Analyst Office (LAO). Governor Arnold Schwarzenegger will call a budget special session starting December 6 to resolve the current-year $6.1 billion deficit. Next year’s budget process will be impacted by two propositions passed during the November election. Voters approved Proposition 22, which limits the state’s ability to borrow money from local governments, and they also approved Proposition 26, which makes it harder to raise fees. It also rolls back fees that were passed by less than a two-thirds vote this year. The LAO estimates these two propositions will create a $1 billion hole in the budget. Democrat Governor-elect Jerry Brown, who campaigned on a pledge of no new taxes, will release his budget proposal in early January.
NEW JERSEY: Last week the Assembly Financial Institutions & Insurance Committee took up legislation that clarifies out-of-network payment responsibilities under health benefits plans, requires certain coverage and procedure disclosures to consumers, and revises procedures for changes to managed care plan contracts. After more than two hours of testimony, Chairman Schaer used his discretion to withhold formal action on the bill. In his comments the chairman noted, “The rising cost of health coverage is crowding out other socially important efforts for government and resulting in economic stress for employers.” Led by the New Jersey Hospital Association and Medical Society, the provider community was virtually unified in its opposition to the legislation. The business community, NJ Association of Health Underwriters, and a large contingent of trade unions expressed their support for the bill. Aetna, along with other commercial plans, remains concerned about provisions in the bill concerning non-participating, hospital-based physicians and the ability of out-of-network providers to waive member copayment, coinsurance, or deductibles. Aetna will continue to closely monitor the legislation.
TENNESSEE: The Tennessee Insurance Exchange Planning Initiative has announced the members of two newly created Technical Advisory Groups (TAGs). Members of these groups will provide expertise on specific analytical questions to help in the state’s insurance exchange planning process. The state is in the process of deciding whether it will operate a health insurance exchange. Mark Schmidt, Aetna Market President, Southeast, has been appointed to the Governor’s TAG for State Insurance Exchange Planning. The members of the Actuarial/Underwriting TAG and the Agent/Broker TAGs will provide expertise on specific analytical questions to help in the state’s insurance exchange planning process. The volunteer members of each TAG will meet in Nashville this fall and winter. Members of the Agent/Broker TAG will provide a detailed inventory of options for state decision-makers and then post any resulting discussion papers. Once additional information is received from the federal government, the state also intends to convene TAGs of health care providers, consumer representatives, and marketing and outreach experts.
TEXAS: Several Republican lawmakers are proposing an unprecedented solution to the state’s estimated $25 billion budget shortfall: dropping out of the federal Medicaid program. The Heritage Foundation, a conservative think tank, estimates Texas could save $60 billion between 2013 and 2019 by opting out of Medicaid and the Children’s Health Insurance Program, dropping coverage for acute care but continuing to fund long-term care services. With 3.6 million children, people with disabilities and impoverished Texans enrolled in Medicaid and CHIP, the Texas Health and Human Services Commission will release its own study on the effect of ending the state’s participation in the federal match program. Some lawmakers say not being able to reduce benefits or change eligibility to cut costs is “bankrupting our state.” State Rep. John Zerwas, an anesthesiologist who authored the bill commissioning the Medicaid study, said early indications are that dropping out of the program would have a tremendous ripple effect monetarily, and he worries about who would carry the burden of care without Medicaid’s “financial mechanism.” Currently, the Texas program costs $40 billion per biennium, with the federal government footing 60 percent of the bill. As a result of federal health care reform, millions of additional Texans will become eligible for Medicaid. Lawmakers want to examine whether Medicaid enrollees could be served more cost efficiently with better outcomes in a state-run program.
WASHINGTON: Governor Chris Gregoire says she gets the message following the recent elections, and as a result has announced that she will seek supplemental budget cuts of $55 million before the end of the year. Voters signaled a strong aversion to additional tax hikes to balance the budget by recently passing initiative 1053, which restores the two-thirds vote requirement for the legislature to raise taxes, and initiative 1107, which repeals a tax on bottled water and carbonated beverages. Also, voters rejected initiative 1098, which would have instituted a state income tax. Among the programs Gregoire is considering for possible cuts is the state’s Basic Health Plan. The Governor said she is open to the idea of a one-day special session if there is agreement with legislative leaders on quick action.”