With health-care reform stalled, debate heats up regarding state approaches

By Alec MacGillis
Washington Post Staff Writer
Sunday, February 14, 2010; A04

Proponents of leaving health-care reform to the states have gained momentum as national legislation stalls in Congress, setting off a new debate over who is best able to tackle one of the nation's thorniest social issues.

Advocates of a state-by-state approach are invoking welfare reform, which originated in the states, and education, an area in which the federal government goads states to improve but lets them choose their own approaches. Imposing national health-care reform, they argue, ignores local variations in health-care markets and politics.

"Let's let the states come up with the solutions," said Missouri state Senate President Charlie Shields (R). "There's a lot of solutions out there, but the solutions vary state by state."

Supporters of a national approach counter that relying on states would mean accepting the status quo for years to come. A state-by-state approach makes it harder to rein in health costs with systemwide reforms. And cash-strapped states are in no position to launch new initiatives. Shields acknowledges that Missouri won't be expanding insurance coverage to more people anytime soon, saying, "Other than just doing the right thing, there's not much incentive financially to do that right now."

And even in brighter times, the states with the highest rates of uninsured -- mostly in the South and West -- have shown little interest in expanding coverage.

"There just isn't the political will" in many states, said Jon Kingsdale, who runs the agency overseeing the Massachusetts health-coverage program. "To leave this to the states is not realistic -- it's what we did for the last 40 or 50 years."

The national legislation appeared on the verge of passage before the election last month of Sen. Scott Brown (R-Mass.) erased the Democrats' filibuster-proof majority. Brown has endorsed the federalist approach, saying he opposed the national legislation, even though it is modeled on the law that he supported in his own state. People in Massachusetts, he said, should not have to pay for coverage elsewhere when they already have near-universal coverage at home.

In another declaration of state prerogative, the Virginia Senate earlier this month voted to ban a mandate that individuals carry insurance, which is part of the national legislation.

But there are few major state initiatives on the horizon. California's Senate passed a universal-coverage bill last month, but Gov. Arnold Schwarzenegger (R) said he plans to veto it. The few health-related proposals in states tend to be narrow, such as requiring coverage for certain conditions. In fact, many states are reducing coverage for low-income residents.

Advocates for a federalist approach say states have been holding back to see what Washington will do. They argue that with the national reform efforts in doubt, President Obama and congressional Democrats should scale back and pass legislation that would set a few targets -- offering rewards to states that expand coverage by certain amounts, for example.

The proponents imagine a range of policies: Some states might copy Massachusetts, for example, mandating that people carry insurance and creating a regulated marketplace where they can buy it with income-based subsidies. Others might adopt a "single-payer" model, or use tax credits to help people buy coverage. The approaches that work best could be taken up by additional states.

"If you want a system that's continuously improving over time . . . that's less likely to happen if you lock in something at the national level," said Stuart M. Butler of the Heritage Foundation, a conservative think tank.

Henry J. Aaron of the center-left Brookings Institution co-authored an article with Butler in 2008 envisioning a state-based approach. But he now favors national legislation, saying that Congress has gotten closer than he expected possible, and that post-recession, the prospects for state reforms are bleaker than ever. It would be better, he said, to scale up nationally the Massachusetts approach, the only one that has achieved near-universal coverage at the state level.

"There's not going to be any other game in town," he said.

He and others point out that states must balance their budgets, forcing them to reduce coverage in hard times, as Massachusetts did last year in trimming legal immigrants from its rolls. The federal government has more flexibility in running deficits in recessions, albeit not without qualms about rising federal debt.

It is also difficult to fully reform health insurance at the state level because large employers are allowed by law to offer their own insurance plans without following state insurance rules.

Above all, the argument goes, is the question of political will. Many states sharply limit Medicaid eligibility, even though the federal government bears most of the cost, a reminder that financial incentives go only so far.

In Texas, for example, one quarter of the population, or 6 million people, are without insurance -- the highest rate in the nation. The state ties with Virginia, Missouri and Alabama for the country's toughest Medicaid eligibility rules -- parents qualify only if they earn less than $5,500 a year. State regulations in Texas are loose, allowing insurers to charge higher-risk customers 25 times more than healthier ones.

Far from seeking a state overhaul, Gov. Rick Perry (R) has held up the Texas system as a national model. He has also spoken out against the Medicaid expansion proposed in the national legislation, even though the federal government would cover nearly the entire cost of newly eligible people, which would disproportionately benefit states with tighter eligibility, such as Texas.

"The general feeling of folks in Texas is that there won't be any progress in Texas without national health-care reform," said Anne Dunkelberg of the Center for Public Policy Priorities in Austin.

In Missouri, Gov. Jay Nixon (D) came into office vowing to expand Medicaid. But the Republican-led legislature blocked an effort to expand coverage using federal money hospitals receive for uncompensated care. Nixon also backed off his push to enroll more eligible children.

The legislature has focused on bills requiring coverage of autism in private plans and banning a federal mandate to purchase insurance. Rep. David Sater (R), chairman of the Missouri House's health-care appropriations committee, said he supports banning a federal mandate, even though it's "probably not a bad idea" to lower insurance costs overall by expanding the pool of insured. He opposes the Medicaid expansion in the national legislation despite the millions in federal funds it would bring Missouri, because he does not trust that the federal government will keep covering the cost over time.

"Every state is different, and instead of having the federal government dictate what the state of Missouri should do, it should just give us the money," he said. "Let us go in certain directions, and others go in other directions."

To Ruth Ehresman of the Missouri Budget Project, this is a recipe for inaction because it is "not in the realm of possibility to suggest that Missouri would have the political will to expand [coverage] to low-income people."

"I guess this is how federalist democracy works, but we also have to think of ourselves as part of larger union, the United States," she said. "We're linked in so many ways, and we rise and fall on the well-being of all of us."

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