The Commonwealth Fund Blog

How State Leaders Can Guide Health Reform

May 23, 2011

Tags: Affordable Care Act payment reform Medicaid

James DouglasBy James H. Douglas, former Republican Governor of Vermont

In early 2009, I decided that my Chair's Initiative for the National Governors Association (NGA) would center on improving our system of delivering health care to the American people. We didn't know then whether the Congress would pass a comprehensive reform bill and, if so, what it would include. What we did know was that the rapidly rising cost of health care was outstripping the ability of states to afford it. This was exacerbated by the recession and recovery, and by government's previous efforts to expand coverage during better fiscal times. The same pressures drive up the cost of insurance for public employees and retirees as well. Medicaid alone is approaching a quarter of the budget in many states and, because it's an entitlement, it squeezes out other essential programs, principally education, which is a similarly large expenditure.

Much of the national debate has been about coverage, specifically expanding Medicaid to larger segments of the population, but that can't be the only focus. If we simply add more Americans to the ranks of the insured, we'll make the system even more unsustainable. We need to find ways to bring costs down, regardless of how we pay for them. States have shown a lot of creativity, as laboratories of democracy, to design health care reform initiatives that suit the unique needs of the people they serve.

A report prepared for NGA, with generous support from The Commonwealth Fund and others, suggests five key areas for state-based reform:

    1. Quality Improvement. Ultimately this is what it's all about. We need to ensure that all Americans receive the care they need when they need it. But we don't want inefficiency. A study concluded that one doctor in six ordered a test that had already been done and one in four provided treatment that was unnecessary. We need to define quality, measure it, provide the IT support to assure its delivery and pay for it appropriately.
    2. Care Coordination and Disease Management. Chronic illnesses account for the overwhelming majority of health care costs; those with a chronic disease must be identified and treated. Diabetes is the first chronic condition that some states have addressed, as there's a real opportunity for successful intervention and cost savings.
    3. Primary Care and Prevention. We need to encourage everyone to have a medical home with a team of caring professionals to coordinate care. We must think of health care as a strategy to keep people well, not just to intervene when someone gets sick. Furthermore, many chronic diseases can be prevented or their effects mitigated through timely diagnosis and early intervention.
    4. Payment System Reforms. We need to pay for health care based on quality, not quantity. Most payment structures compensate providers for each test, procedure, or visit. We should instead pay based on performance and perhaps combine payments to groups of providers to ensure the kinds of coordination needed.
    5. Medicaid. No system reform can ignore the large and expanding program that offers care to those with modest resources. It's the largest item in many states' budgets and will crowd out other important expenditures unless costs are contained. It can serve as a platform for improving the delivery of care.

States have many important responsibilities under the new federal health care reform law. States must implement insurance reforms, such as the prohibition on refusing coverage for preexisting conditions; they need to decide whether to establish an insurance exchange; they'll have to enroll significant numbers of new Medicaid participants, unless the courts rule otherwise. They've already determined whether to implement a high-risk pool; some states are pursuing this more aggressively than others.

States should regard this time of heightened awareness as an exciting opportunity for reform, even in the context of these requirements. State leaders can take advantage of the Department of Health and Human Services' Center for Medicare and Medicaid Innovation to try out some new approaches; they can explore the value of medical homes, accountable care organizations, and health information technology. They can work with the Medicare-Medicaid Coordination Office to determine how best to care for those who qualify for both Medicaid and Medicare. They can bolster their public health programs to encourage fitness, healthy eating, personal safety, and disease prevention. And they can join in efforts with private sector payers to make these improvements systemwide.

Every governor has established a leadership team to implement the federal reform law and to pursue initiatives at the state level. Whether the teams are cabinet-level task forces or assigned to a specific agency, clearly health care reform has assumed a more prominent role in state governments than in the past. Policymakers hold widely varying philosophical views on how health care should be regarded, structured, and financed, but there is universal agreement that it is the crisis of our time. Entitlement spending at the federal and state levels threatens the prosperity of future generations. Obesity looms as a greater killer of Americans than tobacco. Employers and even our armed forces are concerned about whether there will be sufficient candidates fit enough to maintain the nation's strength.

The path of least resistance is to do little or nothing, to kick the can down the road and defer the tough choices to another era and other officials. Now is the time for state leaders to guide America along the path to reform in health care delivery and payment. There are many resources and a lot of smart people willing to help.


This blog post is a commentary published in conjunction with the  Commonwealth Fund/Modern Healthcare Health Care Opinion Leaders Survey on health reform and the role of states.