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White House and GOP Governors Spar over Health Insurance Exchanges

By Jane Norman, CQ HealthBeat Associate Editor

February 10, 2011 -- The White House pushed back at Republican governors who are demanding more flexibility in setting up health insurance exchanges. But GOP Gov. Gary R. Herbert of Utah, in turn, is slamming the administration for failing to respond to states' concerns over the new health care law.

"I think it's time for states to stand up and assert themselves more aggressively." Herbert said in remarks at the conservative Heritage Foundation, where he complained about a lack of clarity from Health and Human Services officials about implementation of the state high-risk pools required by the law.

States need to run the exchanges as they see fit, Herbert said, and what works in Utah might not work in other states. "We need to get away from this one-size-fits-all mentality," he said. "The states are not dumb. They want to keep their people happy."

The back-and-forth represented a rising level of tension between administration officials defending the law (PL 111-148, PL 111-152) and a cadre of Republican governors who have taken over statehouses and are also involved in the multi-state lawsuit challenging the constitutionality of the overhaul. It comes as state legislatures begin working on measures to implement the exchanges, but also as the lawsuit casts a veil of uncertainty over whether the law will survive its journey through the courts.

In a document circulated by the White House, administration officials say that state-based exchanges created by the health care law "will give states substantial flexibility to establish exchanges that meet the needs of their residents."

The document surfaced three days after 21 Republican governors, including Herbert, wrote Health and Human Services Secretary Kathleen Sebelius saying states need "complete flexibility" in operating their exchanges.

The administration says in the document that states will determine which insurers will offer products in the exchanges, choose benefit rules that meet the needs of citizens and exercise discretion over the Medicaid package structure. They will receive planning funds to cover the costs of establishing exchanges and can get money to update antiquated systems that determine eligibility for public health programs.

The document specifically refers to Utah, saying that while its already-established exchange system is different from the one in place in Massachusetts, "both models could meet the goals of the law."

Sebelius also wrote an op-ed published in the Washington Post that said the law puts states "in the driver's seat" when it comes to fulfilling the law. "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," she wrote.

Herbert, however, expressed frustration. For example, Utah officials waited for eight months to find out if the state would be allowed to use e-mail rather than paper to communicate with Medicaid recipients and save $6 million a year, he said.

"They sent us a denial by e-mail," Herbert said. "The irony is rich." The state is continuing to pursue that Medicaid waiver and several others.

Herbert said governors were not invited to the table while the federal law was being written but are expected to remain partners with the federal government and carry out the law. Utah already has responded to concerns about health care costs and access by setting up its own exchange prior to enactment of the federal law, he said. Utah allows all insurers to participate.

He also said the state is struggling with so-called "maintenance of effort" rules that prevent states from dropping Medicaid enrollees, "taking away my ability to manage the budget."

States must step up or "the federal government will see a vacuum out there and in fact will intrude and usurp the states' responsibilities," Herbert said. "Democrats and Republicans need to understand states' rights. It's not supposed to be master to servant."

But Sebelius said she's frustrated to hear opponents of the law refer to it as "nationalized health care" and a top-down mandate.

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

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