Mounting Tensions between Washington and the States over Health Reform

“Done right, the implementation of ACA (Affordable Care Act) can achieve the advantages of minimum national standards for coverage and greater equity among Americans without sacrificing the states’ tradition roles, responsibilities, and flexibility. Done wrong, implementation will create excess layers of bureaucracy, and delay will ensure that his historic health reform legislation falls far short of its goals.”

Christopher C. Jennings and Katherine J. Hayes, J.D., “Health Insurance and Tensions of Federalism,” New England Journal of Medicine, June 17, 2010

When the New England Journal of Medicine, which in general staunchly supports Obamacare, carries an article questioning whether the new law can be implemented, you know something is afoot. What’s afoot are mounting tensions between Washington and state capitols over the details, timing, roles, and revenue sharing required for reform.

Reasons for these tensions are straightforward.

• State budgets are severely stressed. The single most burdensome budget item is invariably Medicaid. Obamacare will shift 16 million more Medicaid recipients, and perhaps millions more, to the state, to be covered by state budgets and only partially paid for by the federal government.

• In November 2010, if current polls are predictive, political power in the states and in the House of Representatives nationally, will shift to Republicans. Republicans now stand to control over 30 state governments.

According to the authors of the NEJM piece, the realities facing implementation of Obamacare, now increasingly dubbed the Affordable Care Act (ACA), a misnomer of the first order, are:

• Many, if not most states, have little experience or expertise with high-risk pools, or insurance market reforms, which are part and parcel of the new law.

• Many states – for policy, political, and other reasons, “have little or no interest in collaborating with the federal government in implementing the ACA.” Already more than 20, soon to be 30, governors and attorney generals have filed lawsuits to block individual mandates, upon which ACA depends to succeed.

• At least 19 states have declined federal dollars to create high-risk pools, designed to provide coverage for those denied overage of pre-existing illness.

• The federal government has yet to answer questions about hoe $5 billion federal dollars will be spent to support states creating high-risk pools. What happens if the money runs out? How will the feds enforce formation of these pools? How should premiums be set? If a state declines to set up pools, how and when the federal backup be established? How will federal pools be administered?

To overcome state resistance and to answer these questions, the authors say, the administration will have to work “quickly, competently, and decisively,” or the federal government will have to pick up the total cost.

The Obama administration does not have a reputation of moving “quickly, competently, and decisively,” at least in the case of the oil spill in the Gulf.

Yet deadlines loom.

January 1, 2010 deadline

 Creation of high-risk pools
 Creation of state insurance exchanges or federal fallback exchange
 Adoption of insurance-market reforms, with the application of standards to all new health insurance plans and to many grandfathered plans (i.e., those that were in force as of the date of enactment of the reform law)


October 1, 2010 deadline.

 Permits parents to keep children on their insurance plans up to age 26.
 Prohibits lifetime limits on benefits.
 Restricts annual limits on benefits.
 Prohibits exclusion of preexisting conditions for children
 Establishes medical loss ratios by limiting percent of premiums used for overhead, marketing, and profit.
 Prohibits plans from rescinding coverage.
January 1, 2004 deadline
 Prohibits plans from denying coverage because of an individual’ heath status
 Prohibits plans from varying premiums for any reason except for family size, geographic locations, and age.
 Prohibits exclusions for preexisting conditions.
 Establishes minimum “essential benefits” that must be offered.
 Eliminate lifetime annual limits on essential benefits
 Prohibits plans from rescinding policies, except in the cast of nonpayment of premiums.

Summing Up

If I may sum up, federal-state tensions are mounting as the political landscape shifts with concerns over spending, debt, and government intrusion into private lives. Whether leaders; will have a meeting of the minds and wallets is uncertain. The Obama administration may have bitten off more than it can chew, or the states can digest.