Testimony of Alan R. Weil, J.D., M.P.P.…

                               Testimony of Alan R. Weil, J.D., M.P.P.
                    Executive Director, National Academy for State Health Policy
              Before the U.S. House of Representatives, Committee on Ways and Means,
                                   Subcommittee on Health
                     Hearing "State Coverage Initiatives: Lessons for the Nation"
                                       July 15, 2008 at 10 AM


        Chairman Stark, Ranking Member Camp and other distinguished Members of the Ways

and Means Health Subcommittee, my name is Alan Weil and I am the Executive Director of the

National Academy for State Health Policy (NASHP). NASHP is a non-profit, nonpartisan

organization that has worked with state leaders for more than two decades helping them to

identify emerging issues and address challenges in state health policy and practice. NASHP

seeks to amplify the voice of state health officials and support interstate learning ­ roles that we

believe will be particularly important as health care rises on the national agenda.

        This is an exciting time for states and our nation as the call for significant health care

reforms grows louder. States are considering and implementing innovative and promising

strategies to reverse our nation's trend of an increasing number of Americans without health

insurance. Yet, states face substantial limitations in what they can accomplish in the absence of

further support at the national level. States have demonstrated critical leadership and hold great

promise for the success of any major coverage reforms, but states cannot do this alone. States

need a national framework in order to achieve the promise of health reform ­ a framework of

federal support, assistance, and guidance. I will discuss each of these points in my testimony 1 .


1
 Much of this testimony draws from my article "How Far Can States Take Health Reform?" which appeared in the
May/June 2008 issue of Health Affairs at pages 736-747.
   1. States are leading the way addressing major health system challenges.

       In the absence of federal action, states are leading the way in addressing many of the

major challenges facing the American health care system. States are responding to the concerns

raised by families, businesses, and health care providers and have made progress in improving

access to health coverage, containing health costs, and improving quality.

       A broad array of states in all regions of the country representing quite varied ideological

perspectives is pursuing health reforms. Some state efforts are comprehensive in scope; others

focus on particular problems facing the health care system. Although Massachusetts has received

the most attention recently for its groundbreaking reforms that have already cut the number of

people without health insurance in their state by half, many other states are also making real

progress toward this goal. Iowa recently passed legislation to improve enrollment and retention

for children in public programs and strengthen consumer protections in the private market.

Wisconsin has taken advantage of options available under the Deficit Reduction Act to expand

coverage to parents and children and simplify and modernize its Medicaid and SCHIP programs.

Louisiana is a leader in providing coverage for low- and moderate-income children.

       States long ago learned that they cannot afford major coverage expansions if they do not

also improve the quality of health care and contain the growth in health care costs. Efforts to

address quality, cost, and the demand for health care services are too many to count. Minnesota

recently passed landmark legislation to establish a unified, statewide system of quality-based

incentive payments and to help consumers and other purchasers compare providers on overall

cost and quality of care. Pennsylvania has taken a comprehensive and innovative approach to

reducing medical errors. North Carolina is a recognized leader in improving care for Medicaid

enrollees with chronically illnesses. Arkansas is celebrated for its innovative approach to




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reducing childhood obesity. South Dakota has focused on ensuring that the elderly receive oral

health care. Vermont's health reform efforts include a state-wide system of care to address

chronic conditions.

       While ideological differences exist around the country, states have demonstrated that it is

possible to find middle ground on health care. They have overcome partisan and stakeholder

differences to adopt reforms designed to address the real challenges and problems their residents

face. The middle ground generally includes some combination of expanding public programs,

subsidizing families and businesses to make insurance coverage more affordable, and

demonstrating a real commitment to controlling program and overall system costs. States have

eschewed policies at either extreme: avoiding approaches that rely on a single payer approach or

that expect unregulated markets to solve the problems of the health care system.

       State political leadership and successes have ignited hope across the nation that solutions

can be found to problems in our health care system. While many of these problems continue to

get worse, it is state experience that allows us to have optimism about the future.

   2. States' ability to address major health care system challenges is limited.

       Despite some successes, the states' ability to address the health care challenges our nation

faces is limited. States are constrained for many reasons. They face statutory, market, financial,

and structural constraints that will always prevent them from achieving the broad-based, system-

wide reforms we need.

       States lack the authority to affect many of the health care activities within their borders.

About half of a typical state's residents are completely outside the reach of state authority

because they are enrolled in Medicare, have coverage through an employer that self-insures, or

obtain services through the Department of Veterans Affairs, Indian Health Service, or other




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programs. Medicare acts independently of state policy in exercising its dominant role as a

purchaser of health care services. The Employee Retirement Income Security Act of 1974

(ERISA) preempts state laws that relate to private employer-based health plans. National and

multinational insurers, hospital systems, pharmaceutical companies and medical supply

companies operate beyond the reach of state legal authority but have a significant effect on

health care costs within a state. Although it is possible for states to design reforms that fit within

their current authority, these boundaries foreclose a series of options that might be more

effective.

       States also face important budgetary constraints. Current federal policy is that state

reforms must be budget neutral with respect to federal Medicaid and State Children's Health

Insurance Program (SCHIP) costs. Expecting states to address the many vexing issues in health

policy on their own is unrealistic and severely limits the number of states that can even make

such an effort. In addition, unlike the federal government, all but one state operates under a

balanced budget requirement. Any successful health coverage plan must be able to operate

through all phases of the economic cycle ­ a particular challenge for state-based reforms. This

fiscal year, as many as 28 states are reporting budget shortfalls, creating pressure for states to cut

services and government spending even as they are seeking opportunities to expand coverage.

   3. Federal Leadership is Needed.

       Given the challenges noted above, we should not be surprised that only three states--

Maine, Vermont, and Massachusetts--have adopted comprehensive approaches to health care

reform within the last decade. Meanwhile, reform efforts remain stalled in larger states such as

California, Illinois, and Pennsylvania. While state efforts make a real contribution, federal

leadership is needed to make substantial, sustained progress in health reform efforts.




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        Federal leadership could take several forms including one that provides a substantial role

for states to operate within a national framework. Indeed, approaches that combine the

resources, stability and uniformity of federal involvement with the dynamism, local involvement,

and creativity of states can foster excellent results. The federal government can bring its clout as

the largest purchaser, stable funding that can weather economic ups and downs, and standards

that can assure all Americans they will have meaningful access to needed health care services.

States can design the details of any plan to conform to local market and medical practice

conditions, develop various models that enable us to learn what works and what does not, and

assure that program operations reflect local values.

        A "joint venture" approach between the federal government and states would enable

states to continue to serve as the laboratories of democracy. But if states are to serve as

laboratories, they need to be afforded the resources necessary to achieve the high hopes we have

for them. All credible national proposals for health reform come with a price. States cannot

pursue comprehensive health reform without substantial and reliable financial participation by

the federal government. Medicaid provides a solid platform on which states can build, but

coverage expansions are generally dependent on waiver negotiations, which are time-limited and

subject to much discretion on the part of the federal government. Some grand redistributive

scheme might theoretically allow for the provision of insurance coverage to everyone for the

amount of money already in the health care system; however this is not a realistic approach when

limited to a single state.

        A serious endeavor to support state efforts would have to build in a long-term financial

commitment proportionate to the share of the problem states are expected to address. In

addition, a serious state-based effort would need to anticipate the challenge of providing quite




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variable amounts of money to different states, given the tremendous disparity in the scale of the

problem each state faces.

       A genuine commitment to having the states function as laboratories would require

revitalizing the research and demonstration component of Section 1115 waivers, expanding the

commitment to evaluation in all program waivers, and moving away from budget neutrality as

the guiding principle of waiver approval. Despite the fact that Medicaid Section 1115 waivers

provide states with flexibility for "research and demonstration," these waivers are often granted

primarily to enable states to make budget neutral program changes with a very small research

component. A commitment to experimentation would include a willingness to spend money on

ideas that might yield improvements along a number of dimensions other than short-term

program spending, including improving the quality of care patients receive and lessening the

likelihood of more expensive interventions.

       Federal waivers, while helpful in some instances, are no substitute for a clear federal

commitment. Some have suggested that federal reform proposals include "ERISA waivers" that

would allow a federal agency or group of federal officials to waive provisions of ERISA on a

short-term basis. These waivers are just another form of uncertainty--for businesses and for

states--and they grant excessive authority to federal program administrators. By contrast,

carefully crafted federal safe harbors--policies that states can adopt that would be defined as

permitted under federal law--would provide clear guidance and could be designed to avoid

undue burden on multi-state employers while also enabling true state experimentation. For

example, states should have the authority to adopt uniform "pay-or-play" strategies to finance

broad-based coverage initiatives. States should be able to require self-funded employers to

participate in premium assistance programs. And states should be able to mandate participation




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from all public and private payers in state-wide data collection and system performance

improvement projects.

        Finally, federal leadership is important as a means to bring down unwarranted variation

across the country in health care practice and costs. A recent Commonwealth Fund report

describes interstate variation across dimensions such as appropriate use of antibiotics to reduce

the risk of infection during surgery and the incidence of deaths amenable to health care. 2

Variations across states in the share of the adult population without health insurance has existed

for decades; in 2004-05, these ranged from a high of 35 percent of adults uninsured in Texas to a

low of 11 percent of adults uninsured in Minnesota. National requirements, resources, and

benchmarks can all serve to close some of these gaps.

        By contrast, when states operate entirely on their own, they are likely to yield increased

variation in health coverage, access and quality across states. States tend to build on their own

successes, pushing the leaders farther ahead and leaving others behind. Diffusion of policy

innovations both among states and from states to the federal government is slow and sometimes

does not occur at all. A desirable reaction to high levels of variation in health care is to set

national goals based on best practices. State and national policy efforts can then be focused on

raising the bar for everyone and reducing the degree of variation through strategies that bring

those farthest behind closer to the front of the pack.

        Ultimately, federal leadership matters. Consider the example of adults' and children's

health insurance coverage. Compare the change in health coverage status of adults and children

in the United States over the past decade. For adults, there is no national strategy. Medicaid,

which represents the nation's primary commitment to meeting the health needs of the poor,


2
 J. Cantor et al., Aiming Higher: Results from a State Scorecard on Health System Performance (New York: The
Commonwealth Fund, 2007).


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explicitly excludes non-elderly adults from coverage unless they have a disability or have

children living with them. For children, there is a national strategy. Despite some important

exceptions and limitations, the combination of Medicaid and SCHIP extends coverage to almost

all children living in families with incomes up to twice the federal poverty level. The contrast is

stark: between 1999-2000 and 2005-2006, the overall percentage of uninsured adults increased in

43 states while the percentage of uninsured children decreased in 32 states. The combination of

a national priority with the resources to support it and state flexibility in the methods for

achieving national goals can yield tremendous results.

    4. States Can Be Effective Partners in Meeting Health Care Needs.

        In my job I have the opportunity to speak to a broad array of state health officials. Their

message to me is surprisingly consistent regardless of their job title, political affiliation, or state.

They are doing what they can to address issues and problems that are bigger than the resources

they have to respond. They are eager for federal leadership and they feel its absence. But they

are also nervous about a heavy-handed or one-size-fits-all approach.

        Recent experience, particularly related to state coverage efforts in Medicaid and SCHIP,

has been dispiriting for states. A number of developments at the federal level have disappointed

state expectations of funding or frustrated state efforts to move forward with coverage initiatives

funded in part with federal funds. The inability of Congress and the President to agree on SCHIP

reauthorization presents states with tremendous uncertainty regarding how to finance coverage.

The Centers for Medicare and Medicaid Services (CMS) issued a letter on August 17, 2007,

without any prior consultation with states, the terms of which undermined a variety of state plans




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to cover children. 3 New citizenship and identity documentation burdens in Medicaid have

increased administrative costs and resulted in the disenrollment of eligible citizens. Additional

limitations on available Medicaid funds through regulations and sub-regulatory initiatives have

undermined federal support for the most vulnerable populations and shifted burdens to states

even as state budgets are tightening. 4 All of these events have served to limit state progress and

squelched enthusiasm for federal-state partnerships.

        A true, federal solution to our health care problems requires a more cooperative approach

between the federal government and states ­ one that respects state investment and provides the

tools and resources states need to be an effective partner in achieving health reform goals.

Conclusion

        I conclude with the same words I used in the article I wrote on this subject:

        "In the absence of federal action, states will lead, and states will accomplish as much as

they can, given the constraints they face. But piecemeal state action will not add up to what the

nation needs. A national response that honors the history of American federalism would include

a series of national commitments that frame and support what states can do--indeed, what they

are eager to do."




3
 See J. McInerney, M. Hensley-Quinn and C. Hess, The CMS August 2007 Directive: Implementation Issues and
Implications for State SCHIP Programs (Washington, DC: National Academy for State Health Policy, April 2008).
http://www.nashp.org/Files/shpbriefing_cmsdirective.pdf
4
  See S. Schwartz and J. McInerney, Examining a Major Policy Shift: New Federal Limits on Medicaid Coverage
for Children (Washington, DC: National Academy for State Health Policy, April 2008)
http://www.nashp.org/_docdisp_page.cfm?LID=C7DE48DC-68F8-46B2-A56741E6A8F6EFEE


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