The Great State v. Federal Health Care Reform Debate

By Jeanne Lambrew, Avinash Kinra, Laurie Seremetis, Melissa Shannon, Margaret Thompson | March 17, 2008

Health Care Reform: No State Left Behind

By Jeanne Lambrew

In his State of the Union address this year, President Bush proposed to send health reform back to the states—just as he did the year before. The idea was no better then than it is today.

The president’s “Affordable Choices” initiative would collapse several federal programs into state block grants. As he explained, “These grants would give our nation’s governors more money and more flexibility to get private health insurance to those most in need.” Bipartisan legislation has been introduced that follows this path.

But both efforts overlook a simple fact—an effective and efficient U.S. health system cannot be constructed one state at a time. States can and have reformed their health systems to improve access, affordability, and quality. Their myriad small successes and a few major ones shatter key myths. Special interests are not the unstoppable assassins of reform. Partisan divides can be bridged. And policy solutions can be found through a hybrid of public and private insurance as well as shared responsibility.

Yet, encouraging an assortment of state reforms will not add up to a solution to our systemic problems. The lessons from one state tend to be just that—applicable to one but not the rest. The idea that reform comes easier at the state level rather than the national level ignores structural barriers, such as balanced budget requirements among the states and federal laws that pre-empt states ones. This state-by-state approach tolerates inequity in the system. Poor states have more uninsured and can’t afford to do much about it. And 50 separate reform efforts complicate our already complicated health care system and inhibit efforts to simplify it.

No national policymaker should relegate health reform to the states. Hubert Humphrey’s exhortation on solving racial injustice 60 years ago—“get out of the shadow of states’ rights and to walk forthrightly into the bright sunshine of human rights”—also applies to health inequities today. States can illustrate the framework and feasibility of solutions. But it is time for our national leaders to step up to the challenge at the federal level to enact nationwide universal health care.

Jeanne M. Lambrew is a Senior Fellow at the Center for American Progress and an associate professor of public affairs at the Lyndon B. Johnson School of Public Affairs at the University of Texas.

To learn more about the Center’s universal health care proposals please see our “Progressive Prescriptions for a Healthy America.”

To learn more about the debate over state vs. federal health care options please see the following articles:

• E. Klein, “Over Stated,” Washington Monthly, July/August 2007.
• J. W. Thompson, “HEALTH REFORM: Rich vs. Poor States: Arkansas Surgeon General On How Income Affects State Innovation,” Health Affairs Blog, December 21, 2007.
• S. Butler and H. Aaron, “How Federalism Could Spur Bipartisan Action On The Uninsured,” Health Affairs, March 31, 2004.
• New York Times Editorial, “Growing Pains of Universal Coverage,” February 9, 2008.
• Boston Globe Editorial, “The health law is working,” February 10, 2008.

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Interactive Map: Uninsurance Rates

The American health care system faces a crisis. Costs are skyrocketing, and more than 47 million Americans are now uninsured. And uninsured Americans have worse health outcomes.

In the absence of a federal response, many states have enacted their own reforms, which have met with varying levels of success. Still, inequalities in insurance rates by state persist. States with a higher percentage of their population living below the poverty line tend to have higher rates of uninsurance.

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State Health Care Reform Basics

The arguments in favor of leaving health care reform to individual states would at first glance seem compelling and perhaps even persuasive. After all, some states have become fertile testing grounds for new approaches to health care reform. Efforts in Massachusetts, Maine, and Vermont, to name a few, lead some policymakers to suggest the states should play a leading role in covering the uninsured and improving the health care delivery system. States do seem to have a closer “finger on the pulse,” exhibiting a better understanding of the demographics and delivery systems needed to serve their citizens. And states also have had success in certain areas, among them concerted efforts in Minnesota to increase screening and other preventive services to reduce overall mortality rates.

Yet high expectations of what individual states can achieve in health care are often tempered, if not shattered, by formidable obstacles. Because of state balanced-budget requirements, states face challenges in raising the up-front investment often required for change. This is especially true in states such as Arkansas with high need and low income. Median household incomes—a marker for state economic vitality—range from $35,261 in Mississippi to $64,169 in New Jersey. Not surprisingly, states with low median income tend to have high uninsured rates but fewer state resources with which to tackle the problem.

Indeed, uninsurance rates are inversely related to income, making state-only financing difficult. And with the prospect of a sharp economic downturn now before us, the Kaiser Commission on Medicaid and the Uninsured warns that existing state insurance programs may be stressed or even scaled back.

States also face challenges in policy related to employer-based health coverage. Some states have attempted to implement “pay-or-play” strategies, by assessing employers who do not provide coverage to fund state-sponsored insurance expansions. Maryland, for example, enacted a law requiring employers to spend a minimum amount of their payroll on health care for their employees. But the federal courts determined the Maryland “Fair Share Act” to be invalid, preempted by the “Employee Retirement Income Security Act. “

On the West Coast, however, the U.S. Court of Appeals for the Ninth Circuit in a unanimous decision granted a temporary stay of a district court’s suspension of San Francisco’s “pay or play” law, allowing its health reform plan to move forward. Such legal uncertainty poses challenges to states as well as to multi-state employers trying to navigate different state health care systems.

States can use policy tools such as options and wavers in Medicaid and the State Children’s Health Insurance Program to access federal funding for health system change. Affordable Choices, President Bush’s budget initiative, was designed to encourage state efforts to expand coverage. Yet the Bush administration has veto authority over state-proposed changes to these programs, and has recently turned down several state expansions. What’s more, the Bush administration has, since 2005, issued new federal regulations that may, paradoxically, severely restrict the overall availability of funds for states.

Despite state creativity, innovation, and desire, these barriers likely preclude comprehensive reform at the state level exclusively. That’s why national leadership from the next administration and Congress is the only practical way to bring affordable health insurance to all Americans, including our nation’s 47 million uninsured.

For additional reading on the promise and problems of state-level health care reform, please see:

• J. C. Cantor, C. Schoen, D. Belloff, S. K. H. How, and D. McCarthy, Aiming Higher: Results from a State Scorecard on Health System Performance, The Commonwealth Fund Commission on a High Performance Health System, June 2007.
• C. Havighurst and B. Richman, "Distributive Injustice(s) in American Health Care," Law and Contemporary Problems 69, (4) (2006): 7–82.
• J.E. McDonough, M. Miller, and C. Barber, “A Progress Report on State Health Access Reform,” Health Affairs Web Exclusive, January 29, 2008.
• State Coverage Initiative (SCI) is a national program of the Robert Wood Foundation (RWJF) publishing State of the States

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Point-Counterpoint: State v. Federal Health Care Reform
 

Point	Counterpoint	The Bottom Line
States can’t wait for national reform	States can’t achieve comprehensive reform	Fiscal concerns present from California to Massachusetts will make state reform unworkable because states must have annual balanced budgets Limited state authority and funding mechanisms will undermine state reform efforts due to ERISA.
States are the laboratories of innovation	One state’s lesson is one state’s lesson	Without national will and leadership, state-level lessons won’t be translated into national change, as is clear from S-CHIP reform efforts. The barrier to health reform is not a lack of knowledge of what works; it is lack of political will to make sensible reform happen.
States can lead the way	The sum of state reform does not equal national reform	Without federal support and redistribution, health care will become less equitable from state to state The need for health insurance is universal, not state specific—containing health care costs cannot be achieved solely through state actions.

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In the News

With more states taking the initiative to enact health care reform, will business support change? Is employer-mandated insurance the answer? An article by Julie Appleby in USA Today attempts to shed some light on these difficult questions. Read more.

Governor Arnold Schwarzenegger's quest for universal coverage for the residents of California came to end on January 29th 2008. The plan was criticized for its effectiveness and its application considering an enormous state budget deficit; Aurelio Rojas of The Sacramento Bee reports. Partisan and interest group politics also played a part in its demise, according to a report by Daniel Weintrob, also from The Sacramento Bee. Read more.

President Bush has proposed a new budget that cuts funds to health care and state funded programs such as Medicaid. Are the poor and elderly of Pennsylvania on the losing end? Brett Lieberman of Pennlive.com reports. Read more.

While Massachusetts has made great strides toward universal health care, original budget estimates fell short. This raises concerns about reform sustainability, for it and other states, such as California, according to an editorial in the New York Times. Read More.

According to a recent editorial published by the Boston Globe, those who believe Massachusetts’ attempt at universal health care reform is a failure are wrong. Find out why.

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The Last Word

“The responsibility for bringing coverage to more than 40 million uninsured Americans almost certainly lies with Washington, which has vastly greater power to raise revenues and curb escalating medical costs.”
    —New York Times

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