Health Care

Why State-Based Solutions Won't Cut It

by Tim Foley

categories: State And Local Efforts, The Uninsured And Underinsured

Published June 01, 2009 @ 05:29PM PT

Yesterday, I used the example of the delays in expanding the Texas children’s health insurance program in part to illustrate how much our national health care crisis needs a national solution. Turns out I was missing out on an even worse example – California is threatening to cut its SCHIP program entirely. Still think a national approach to health care reform isn’t necessary?

Many kudos to Bob Dougherty on the ACP Advocate Blog for catching this stunning possibility. SCHIP is a joint federal-state partnership. If the state sets up its eligibility and benefit guidelines within certain federally mandated parameters, its children’s health insurance program receives matching dollars from the federal government. This gave state fairly wide latitude in setting up how one qualifies one’s child for the program and prompted some to think that maybe a state-based solution to health care could work. Between SCHIP and the ongoing experiment in universal coverage in Massachusetts, people began to think maybe reform could happen at the state level, without the need for a strong intervention from the federal government. You saw some glimpses of this in the Wyden-Bennett plan with its state-based health insurance exchanges, and other proposals for creating statewide insurance “connectors,” “exchanges” or coverage plans specifically for the uninsured.

All of that was B. E. R. – “Before the Economic Recession.”

Problem number one is that state budgets do not have the flexibility of the federal government to reliably provide coverage when times are bad. The feds are able to come up with billions out of thin air for wars in foreign lands, bank bailouts, and stimulus packages, suspending their normal budgetary rules. But when bad times hit at the state level, their budgets (for the most part) cannot deficit spend. When states lose revenue because the people in them have lost their jobs or the businesses that keep state financing go under, often their only recourse is to cut services. And as the California state finance director said, “Government doesn’t provide services to rich people… You have to cut where the money is.” (This point is debatable, but I’ll let it stand for the moment.) Yet, where the money is are the safety-net programs that an increasingly unemployed or uninsured population relies on for their families’ security. And this sudden reversal can come with little warning. It wasn’t too long ago that California was proposing its own universal coverage plan, similar to Massachusetts. Now it’s threatening to cut an existing program that the federal government pays for half of.

But problem number two is that so much of what makes health care so expensive, and so likely to bankrupt state budgets when combined with other factors, are the national cost drivers. As Bob writes, “It is beyond the power of a state to institute comprehensive reforms of payment and workforce policies to increase the numbers of primary care physicians or to provide sustainable financing when times are tough. Only the feds can do this.” When health care spending skyrockets the way it has over the past decade, California couldn’t exert pressure to slow that spending. As we've discussed at length, many of these problems -- the fee for service payment model, the primary care shortage, unnecessary and wasteful care, overuse of technology and pharmaceuticals, uncompensated care, too many people using the Emergency Room for primary care for want of better options -- all of these are national problems that require national leverage to solve.  States like Massachusetts may have come close to covering all citizens, but their costs are just as out-of-control.

The state approaches was worth trying when we knew there'd be no traction on health care at the federal level whatsoever.  But now facing an unprecedented budget crisis, California can’t afford the health care commitments it already had -- and almost a million children may be about to lose their coverage because of it.  National crisis need national solutions, and leaving it to individual states to solve just won't cut it anymore.

(Photo credit:  San Jose Library on Flickr.)