How the Affordable Care Act empowers states

By Kathleen Sebelius
Thursday, February 10, 2011; 8:00 PM

As governor of Kansas, I saw up close the urgent need for health-care reform. I heard it when factory owners told me their biggest concern was not manufacturing costs but rising insurance premiums, and when families said they felt like hostages to insurance companies that could deny or cancel coverage with little accountability. I saw it in our state budget, where rising health-care costs prevented investments in our future.

The Affordable Care Act puts states in the driver's seat because they often understand their health needs better than anyone else - and that is why it is so frustrating to hear opponents of reform falsely attack the law as "nationalized health care."

The truth is that states aren't just participating in implementation of the law; they're leading it.

Consider the state-based health insurance marketplaces that will be created under the law in 2014. These marketplaces, called exchanges, will allow individuals and small-business owners to pool their purchasing power to negotiate lower rates. They'll also serve as a one-stop shop where insurers must compete to deliver the best deal. Starting in 2014, members of Congress will have to purchase health coverage through these marketplaces as well.

Although the law gives states the option to design and run their own exchanges, some critics have claimed this could burden states if they're not given adequate resources and flexibility.

I agree. But what these critics miss is that the law already gives states most of the resources and flexibility they're asking for.

States have discretion, for example, to offer a wide variety of plans through their exchanges, including those that feature health savings accounts. Utah and Massachusetts already operate exchanges but take very different approaches: Utah allows all insurers to participate; Massachusetts has stricter standards. Under the law, both approaches could work.

States also have the flexibility to decide what benefits plans must offer. They can choose to require basic protections, based on the typical benefits people get through their jobs, or set higher standards.

And states' costs of designing their exchanges will be fully funded by the federal government through 2015, with additional funds available to help determine which residents are eligible.

Some critics have said there has not been enough analysis of how exchanges would affect employer-based insurance. But the nonpartisan Congressional Budget Office (CBO) has closely studied this and estimated that only 24 million Americans will be insured through these marketplaces in 2019, compared with 162 million covered through the workplace.

The law gives states new flexibility in Medicaid, too. Beginning in 2014, states will be able to offer more affordable Medicaid benefits that resemble typical employer plans. Because costs of long-term care are driving the growth in Medicaid budgets, there are new options and federal support to help states bring down these expenses, such as through cost-effective care models like health homes.

The law does make Medicaid available to more working families. But the federal government will cover 96 percent of this expansion, and nonpartisan experts suggest that states will save money overall through reductions in the "hidden cost" they pay for uncompensated care provided to the uninsured.

The Affordable Care Act gives states incredible freedom to tailor reforms to their needs. The one thing the law does not permit is going back to the broken health insurance system we had a year ago.

Since the law was passed last March, our department has worked with states to keep premiums down, hold insurers accountable and give Americans more freedom in their health-care choices. Americans have gained the protection of a Patient's Bill of Rights that outlaws many of the insurance industry's worst practices. After years of decline, the number of small businesses offering health coverage is ticking up, partly because of tax credits available under the law. And the CBO has said that the law will reduce the deficit by $230 billion over the next 10 years.

I look forward to working with governors to build on these achievements. States are the laboratories of our democracy, and I will continue to welcome their ideas about how to improve the law or implement it more effectively. What we cannot do is allow this progress to be blocked or reversed by overheated rhetoric about a "government takeover of health care" - a claim that has now been so thoroughly debunked that it was named PolitiFact's 2010 "lie of the year."

The writer is secretary of health and human services.

© 2011 The Washington Post Company