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Health Care

State Net Capitol Journal: State and Federal Governments Struggle Over Health Care

By Lou Cannon  

The Affordable Care Act, the Obama administration's vaunted plan for overhauling the nation's health care system, will cost more, insure fewer people and probably take longer to implement than originally planned.

States and the federal government are struggling to meet the deadlines for creating on-line marketplaces, known as exchanges, in which individuals and families will be able to purchase affordable health insurance policies. The exchanges are supposed to begin enrolling customers by Oct. 1, 2013, and be fully operational next January. According to the Kaiser Family Foundation, states are facing "serious challenges" and some may be lagging in their efforts to meet these deadlines.

"These deadlines are ambitious and challenging," said Martha Salazar of the National Conference of State Legislatures. "They always have been. States were saying that two years ago but now the deadlines are upon them."

The deadlines are even more challenging for the federal government. When the ACA was passed in 2010, and especially after the Supreme Court upheld its constitutionality two years later, the Obama administration anticipated that most states would choose to run their own exchanges. It has not turned out that way in the face of persistent GOP opposition to "Obamacare."

The District of Columbia and 17 states, most of them controlled by Democrats, have decided to operate their own exchanges. Seven other states are planning to partner with the U.S. Department of Health and Human Services (HHS). Twenty-six states, predominantly under GOP control, have left operation of the exchanges entirely to the federal government.

There is a certain irony to this outcome. One of the principal Republican objections to Obamacare is that it puts too much control in the hands of Washington. By refusing to create state exchanges, Republicans have opted to give the federal government even more control of health care in their states.

Democrats can take scant comfort from Republican inconsistency. The Obama administration from the beginning low-balled the costs and underestimated the complexity of the new health care law, which among other things did not provide funds for HHS to set up the federally run exchanges. In his current budget the president seeks $1.5 billion for this purpose; congressional reaction to the request has been cool. The budget also diverts money to the exchanges from a fund meant to support preventive health care, a maneuver denounced as "totally illogical and self-defeating" by U.S. Sen. Tom Harkin (D-Iowa), a liberal who voted for the ACA.

The price tag on the total costs of the exchanges, federal and state, is elusive, but skyrocketing. Budget documents the administration submitted to Congress in April said HHS expected to spend $4.4 billion this year on grants to help set up the state exchanges. Last year HHS estimated the cost at $2 billion.

Nor are cost overruns the only concern. The exchanges were supposed to stimulate competition among insurance companies. This may happen in states such as California, Colorado, Minnesota, New York, and Oregon, which already have such competition. But Linda Blumberg of the Urban Institute told the Pew Center on the States that "there are still going to be states with virtual monopolies." She cited 10 states - Alabama, Hawaii, Michigan, Delaware, Alaska, North Dakota, South Carolina, Rhode Island, Wyoming and Nebraska - that she said have been and will continue to be dominated by a single insurance company.

The ACA is beset with other problems. When the law was passed, it was envisioned that states would expand Medicaid, the federal-state program that provides health care for the poor and disabled, to cover everyone up to 138 percent above the poverty line. (This is $15,415 for an individual and $26,344 for a family of three.) The exchanges would then make insurance available for persons or families with incomes up to 400 percent above the poverty line. If Medicaid is not expanded, there will be a hole in the coverage for the working poor who may not be able to afford to buy even heavily subsidized policies on the exchanges.

But the Supreme Court decision upholding the law gave states the option of rejecting the Medicaid expansion without penalty and many GOP-controlled states have taken this escape hatch. According to data from the Kaiser Family Foundation, 28 states and the District of Columbia have decided to expand Medicaid, with Kentucky becoming the latest just last Thursday. Kansas and South Dakota are still weighing their options, while 20 have opted to reject expansion. But the precise data is tough to nail down. The Center on Budget and Policy Priorities, using different methodology, confirms only 19 Medicaid expansion states (prior to Kentucky's decision), with the rest either opposed or undecided (See Bird's eye view in this issue).

Regardless, when it comes to Medicaid expansion, GOP-run legislatures have been the primary obstacle. Earlier this year, Republican governors Jan Brewer of Arizona and Rick Scott of Florida announced that they had changed their minds and were accepting the expansion. They were rebuffed by Republican-controlled legislatures.

There have been other setbacks for the ACA. One of the law's attractive features for small businesses was that it enabled them to offer their employees a choice of several insurance plans, a program known as SHOP. In March, HHS acknowledged that this was beyond its reach in 2014, when employees will have to make do with a single plan.

Another provision of the ACA requiring large employers to offer health insurance to part-time employees working 30 hours a week or more may be backfiring. Many employers are reducing hours to avoid having to purchase insurance for part-timers. The city of Long Beach, California, for example has 1,600 part-time employees and recently decided to limit them to 27 hours a week on average. City officials defended their action by saying that providing health care benefits to these employees would cost $2 million annually and require layoffs and reductions in city services.

All told, the various glitches in implementing the ACA have reduced the number of uninsured projected to be covered from 32 million to 27 million, according to a February report by the Congressional Budget Office. In addition, up to 8 million people will lose health care plans now offered through their employers, three times the original CBO projection, leaving them to acquire health insurance through the exchanges or other means.

To be sure, delays and shortcomings were probably inevitable for a law that seeks to overhaul the most expensive health system in the world. What worries many health economists and the HHS more than any other issue is the formidable task of enrolling millions of uninsured persons on line in light of polls showings that most of them don't even know what an exchange is.

An April poll commissioned by the Kaiser Family Foundation found that four in 10 Americans (42 percent) were unaware that the ACA was the law of the land. Six in ten (58 percent) of the uninsured said they did not have enough information to make a decision about a health care policy.

The more advanced state exchanges, such as those in California, New York, and Maryland, recognize the problem and plan massive advertising campaigns to acquaint people with the law. Dana Howard, a spokesman for California Covered, the California exchange, said that $236 million would be spent to reach the uninsured in media advertising and grants to community organizations. Howard said that California, the first state to create an exchange after the ACA was passed, is on track to meet the October deadline.

But HHS lacks the funds for similar campaigns in states with the highest percentage of uninsured, notably Texas and Florida, where the federal government will operate the exchanges. As the law requires, however, HHS and the state exchanges are training "navigators" to help people with the web sites. The task is daunting. Some of the prospective applicants have never had health insurance; others may never have used a computer.

Even so, among the ACA's supporters, a sense of cautious optimism remains that the exchanges, both state and federal, will eventually function even if the original deadlines are missed. Medicare had its share of start-up problems after its creation in 1965 but within a few years became woven into the fabric of American life.

"It's important to remember that people can sign up on these exchanges at any time," said Richard Cauchi, director of health services for NCSL.

The health exchanges, or most of them, may take longer than anyone would like to achieve liftoff, but the Affordable Care Act is not going away.

States currently split on Medicaid expansion

As of May 2, governors, Medicaid directors or legislative leaders in 19 states had indicated their states will participate in the expansion of Medicaid next year as prescribed by the Affordable Care Act, according to the Center on Budget and Policy Priorities. That is one fewer than SNCJ reported in February in part because Missouri's GOP-controlled Legislature appears to have scuttled Democratic Gov. Jay Nixon's Medicaid expansion plans. The CBPP said another six states are leaning toward participation, while 12 are leaning against. Policymakers in the remaining 13 states have made no clear statements one way or the other. Note: Kentucky Gov. Steve Beshear (D) announced last Thursday that the Bluegrass State would go along with the Medicaid expansion.

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