A Bipartisan Health Care Fix? Governors Have Some Ideas

This article was originally published at Stateline, an initiative of The Pew Charitable Trusts, and was written by Michael Ollove.

The apparent demise of the Republican drive to scrap the Affordable Care Act may open the door to bipartisan fixes to the law. If it does, some of the proposals being touted by a bipartisan group of governors may get a hearing on Capitol Hill.

The seven Democrats and six Republican governors who crafted the proposals want federal money to stabilize the ACA’s health insurance marketplaces, and greater power to manage them. They argue it should be easier for states to customize Medicaid, the joint federal-state health insurance for the poor, and they want new tools to curb fast-rising drug prices. And they insist that states should continue to regulate the health policies sold within their borders.

“We didn’t intend this to be a political statement, other than to say to Washington, ‘Here’s information, look at where there is agreement,’” said Paul Edwards, deputy chief of staff to Utah Republican Gov. Gary Herbert, one of the governors who helped devise the health care proposals.   

Not all the proposals are new, but they are likely to carry weight because of their source. The National Governors Association assembled the group in March and it released its ideas in June.

The group plans to continue to meet over the next 18 months to refine its ideas into specific policy proposals. Congress would have to make some of the changes through legislation, but the Trump administration could enact others through regulation.

While a number of health policy analysts say the governors’ proposals could bring about positive change, some wonder if they are too modest to make a big difference in controlling the rise in health care premiums or drug prices.

“It looks like these are a group of governors trying to take a moderate position,” said Jack Hoadley, a health policy research professor at Georgetown University. “Whether these ideas would have a substantial impact or only have a marginal effect—that is going to be hard to answer until the details begin to emerge.”

Separate from the proposals, some Republican and Democratic governors were vocal in their opposition to the various health care bills that emerged from the Senate GOP leadership in the last weeks. Twice, bipartisan groups of governors issued joint statements protesting a bill, including an open letter to Senate leaders on the eve of last week’s vote on the so-called skinny repeal bill.

“Congress should be working to make health care more affordable while stabilizing the health insurance market, but this bill and similar proposals won’t accomplish these goals,” they wrote. “The bill still threatens coverage for millions of hardworking, middle class Americans.”

There may have been broader disapproval among governors, as some of those who declined to sign the statements were conspicuously silent about the GOP’s proposals as they surfaced.

Help for Low-Income Patients

The governors behind the joint health care proposals come from states that are red and blue, small and large, and far-flung geographically: California, Delaware, Kentucky, Minnesota, Montana, Pennsylvania, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, and Wyoming. With vastly different constituencies and political ideologies, the governors sought to identify common concerns that could be addressed with solutions agreeable to all. As leaders of their states, they also believed they understood their own markets and populations better than Washington policymakers.

“From my perspective if you set aside partisanship or ideology for a minute, you can find agreement on many of these issues,” said Tom Forslund, director of the Wyoming Department of Health. “We’re supportive of sitting down with people with different ideas and figuring out where we can come together.”

One area of agreement is that the federal government should continue to help needy Americans afford health insurance.

For example, the governors want the federal government to continue to provide subsidies to low-income Americans so they can afford to purchase insurance on the marketplaces. In 2017, the federal government is expected to give tax credits totaling $38 billion to about 9 million people.

The governors also insist that at least through 2018, the federal government should continue to make it easier for lower-income Americans who purchase coverage on the marketplaces to afford out-of-pocket expenses.

In 2017, the federal government is expected to pay $7 billion to insurers so they can lower deductibles and copayments for people who purchase insurance on the marketplaces.

President Donald Trump has suggested he might eliminate those payments to “let Obamacare fail.” States would be hard-pressed to make up for the loss of those federal dollars.

In some parts of the country, insurance carriers have abandoned the marketplaces, limiting the choices available to consumers in those areas. The Centers for Medicare and Medicaid Services (CMS) estimates that next year, no insurers will offer marketplace policies in 47 U.S. counties, and residents could have only one company to choose from in as many as 1,200 others.

To reverse that trend, the governors want the federal government to create a “reinsurance” fund that would compensate insurers for expensive medical claims from the sickest patients who require the most care. Under the ACA, those patients cannot be charged higher premiums because of their pre-existing health conditions. Insurers say they cannot sustain those losses without charging higher premiums to those patients or getting financial help.

The ACA offered that help by creating a federal fund to compensate insurers for their losses, but the fund wasn’t authorized after 2016. The 13 governors say restoring that fund would stem the tide of insurers leaving the marketplaces and encourage others to return.

John Holahan, a fellow at the Health Policy Center of the Urban Institute, a research organization, said that while the fund would be useful, it does not address the larger problem of drawing more customers to the marketplaces, which he said would do more to attract insurers and moderate premium prices.

The Freedom to Customize

A number of the governors’ proposals are intended to make it easier for them to customize their insurance marketplaces and Medicaid programs. They want the federal government to overhaul the process by which states receive permission from the federal government to adapt those programs. That process entails states applying to the federal government for a waiver, a time-consuming, expensive procedure that can take two years or longer.

Waivers are used for all sorts of reasons. Seven states, including Arkansas, Iowa, and Indiana, expanded Medicaid under waivers that allowed them to adapt their programs, to, for example, use Medicaid funds to purchase private insurance for beneficiaries or charge beneficiaries premiums or copays. Four states (Arizona, Arkansas, Indiana, and Kentucky) currently have waiver applications before CMS that would allow them to require certain able-bodied Medicaid recipients to work in order to be eligible for benefits. And many states, headed by both Republican and Democratic governors, have received waivers allowing them to test new models to improve the delivery of health care while reducing costs.

But state officials say the application process is punishing and the permissions don’t last long enough.

“It’s so cumbersome and so expensive. It requires a lot of time, the hiring of consultants, and a lot of travel back and forth to Washington,” said Diana S. Dooley, secretary of the California Health and Human Services Agency under Democratic Gov. Jerry Brown.

“Everyone — Republicans and Democrats alike — feels the process is micromanaged by the federal government. Democrats thought that was true under George W. Bush and Republicans felt the same under President Obama.”

The governors are calling for the waiver process to be simplified and streamlined, particularly when one state has already received permission on a similar proposal or the requested changes are minor. They want waivers to last for longer periods of time, and they want a pathway for making waivers permanent if the models prove successful. They also ask that Medicare, the federal health plan for seniors, participate in state reform efforts. That partnership, the governors say, would make improvements in health care more far-reaching and maximize savings.

One of the governors’ primary concerns is stemming the steep rise in the cost of drugs. By law, manufacturers must give rebates to state Medicaid agencies. In return, all states must make all drugs approved by the Food and Drug Administration available to their beneficiaries.

The governors want the option to refuse to put certain high-priced drugs on their formularies, particularly when those drugs do not perform significantly better than other drugs. That authority, the states argue, would moderate some of the high prices they have seen recently in drugs treating cancer, hepatitis C and autoimmune diseases.

“States feel very frustrated by our inability to address these rising prices,” said California’s Dooley. She admitted though, that without giving states the authority to negotiate drug prices, the proposal from the governors is “just tinkering around the edges.”

Some health policy analysts say that giving states the power to omit drugs from their formularies could also deprive beneficiaries of needed medication, putting a state’s financial concerns above medical necessity.

The governors insist that any changes to the federal health care law or to Medicaid should “not shift costs to the states,” but they are vague about what level of federal support is sufficient.

For example, the governors’ statement says any changes “should maintain adequate federal support for Medicaid,” but it does not define what “adequate” means.

“It’s fair to say that on the issue of what is adequate funding, there was no consensus,” said Edwards, deputy chief of staff to Utah’s governor. “Where you see squishy language like that, that’s probably an indication that there wasn’t consensus on that point.