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Federal Leadership Needed to Support State Coverage Initiatives

New York's Gov. Spitzer recently announced that New York intends to join the ranks of states that are planning to make quality affordable health care accessible to all their residents. Gov. Spitzer's approach rightly recognizes the need to tackle the thorny issue of the high cost of health care early on, while phasing in expanded health insurance coverage, beginning with low-income children.

Noting that New York has the highest Medicaid spending rates per capita of any state, Gov. Spitzer said he would begin to rationalize the Medicaid payment system with selective freezes in payment rates for costly hospital and nursing home care. His plan would lower the cost of pharmaceuticals by strengthening a preferred drug list and reducing prices. And, it would reform payment plans for training new physicians and institute measures to reduce Medicaid fraud and abuse.

In Pennsylvania, Gov. Ed Rendell's new "Prescription for Pennsylvania" plan also places emphasis on controlling costs by reducing waste and medical errors, while requiring coverage for most uninsured residents. The plan proposes cutting costs by better regulating hospital purchases and other investments and holding hospitals accountable for the costs of covering hospital-acquired infections, among other strategies. The plan would also offer incentives to encourage physician practices to offer after-hours care to reduce emergency room use and create training programs for nurses to enhance access to care. Improved coverage would be achieved by expanding the Cover All Kids program to uninsured adults; creating a new program that would provide affordable coverage to small businesses and individuals through the private insurance market; requiring that universities offer student coverage; and imposing penalties for employers that do not offer health insurance.

California Gov. Schwarzenegger's plan would reform the health insurance market itself, requiring insurers to cover the sick as well as the healthy and to devote at least 85 percent of health insurance premiums to medical care services. Given that health insurance premiums have risen faster than medical care outlays for the last six years, closer scrutiny of insurance premiums is certainly warranted.

Under most of the current state proposals, nearly everyone—employers, households, insurers, hospitals, and doctors—would share responsibility for extending health insurance coverage to all. In Massachusetts, individuals are required to have health insurance, just like automobile insurance. In Maryland, Gov. O'Malley has called for employers to cover young dependent adults under their parents' health insurance policies until age 25. In California, employers would either have to provide coverage or pay a fee of 4 percent of payroll into a plan for subsidizing the uninsured in the state. In California, hospitals and doctors are being asked to contribute a percentage of revenues as well.

A recent New York Times/CBS News Poll finds that a majority of Americans says the federal government should guarantee health insurance to every American. And they are willing to make tradeoffs for a better health care system, including paying more in taxes. Eight of 10 thought it was more important to provide universal access to health insurance than to extend the tax cuts of recent years.

Extending insurance to all and achieving a high-performance health system must be priorities for everyone involved in health care, including the federal government. Unfortunately, the plan President Bush announced last month to tax employer-based comprehensive health insurance will do little to cover the low-income uninsured, or solve the health care cost problem.

What we need is federal leadership that builds on what we are learning from state innovations. One opportunity would be for the federal government to provide matching funds to states that cover low-income children. More states could afford to act if the federal government would match state coverage of children up to 300 percent of the federal poverty level. This could be considered this year as the Congress takes up reauthorization of the State Children's Health Insurance Program (SCHIP), which now provides matching funds for children up to 200 percent of the poverty level, or in the case of states like New York, up to 250 percent of the poverty level. New Jersey covers children living at up to 350 percent of the poverty level. The New York Times/CBS News Poll found overwhelming support for the SCHIP. Eighty-four percent of those polled said they supported expanding the current program to cover all uninsured children, now estimated at eight million.

Yet, in his budget, President Bush said he would like SCHIP to cover only children in families with incomes less than twice the poverty level or lower. And, the National Governors Association has pointed out that that they consider the extra $5 billion over the next five years the president recently pledged for SCHIP inadequate even to cover the rising health care cost of the children now covered, much less expand coverage.

The president expressed his commitment to supporting state-based solutions in his State of the Union address. It is critical that he follow through, because federal funding is required for any state program to succeed—particularly those in states with high uninsurance rates. So far, all of the broad coverage initiatives under way are in states with relatively small uninsured populations. But reducing the number of uninsured will prove more challenging in Texas, which has a 30-percent uninsurance rate among nonelderly adults, than in Minnesota, where 11 percent of nonelderly adults are uninsured. Federal matching funds for coverage of low-income adults would permit states to build on the success of the SCHIP program.

Let's hope that the Administration and Congress pursue their pledge to support state coverage programs with meaningful bipartisan action that leads to improved care and greater efficiency.

As always, I'm interested in your feedback. Please e-mail me at [email protected].


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March 2007


Written with the assistance of Christine Haran, web editor.