Better Off With a Federal Exchange

As the December 14^th and February 14^thdates draw near for states to say whether they will create Affordable Care Act health insurance exchanges and what they will look like, the world seems upside down.

Traditional “states’ rights” advocates such as South Carolina, Georgia, Alabama, Louisiana, and Texas all say they will let the federal government set up their exchange.  Historically “strong federal government” allies like Connecticut, Massachusetts, California, New York, and the District of Columbia are setting up their own exchanges.

In all, sixteen states so far have said they want the federal government to set up their exchange, while eighteen states and the District of Columbia have decided to run their own.  The rest are either undecided or looking to partner with the federal government.  No states are considering a multi-state exchange – so much for “selling insurance across state lines.”

The states that are deferring to the federal government cite a number of reasons.   Cost, uncertainty, and too-tight deadlines are the most common.

Politics is also a factor.  Of those sixteen states, only two – Missouri and New Hampshire – have Democratic governors.

But there’s another reason why people living in those states should be pleased that they are deferring to the federal government.  Historically, reluctant states don’t make the health and mental health of their citizens a governmental priority.

In this year’s list of the ten Best States for Your Health, five – Connecticut, Massachusetts, Minnesota, New York, and Vermont – are moving forward with state exchanges.  Three – New Jersey, Pennsylvania, and Utah, are still undecided.  Only two – New Hampshire and Maine – are opting for a federal exchange.

However, in this year’s list of the ten Worst States for Your Health, the results are subtly reversed.  Four – Texas, Alabama, Oklahoma, and Louisiana – are opting for the federal exchange.  Only three – New Mexico, Nevada, and Mississippi – are planning for state-run exchanges.

That may not seem like a big difference.  But when you look at all the states that have decided, those currently opting to run their own exchanges have an average ranking of just over 20^th in protecting the overall health of their citizens.  Meanwhile, states deferring to the federal government have an average ranking of over 29^th in protecting the overall health of their citizens – over nine places worse.

The difference is just as clear when it comes to spending to protect the mental health of their citizens. 

States opting to run their own exchanges also have an average ranking of just over 20^th when it comes to funding mental health services.  States deferring to the federal government have an average ranking of almost 30^th – nearly ten places worse.

Keep in mind that if all 50 states chose one or the other and divided equally, the best possible average ranking would be 13^thand the worst possible 38^th.

You can view all the states in two new tables here.

Where health and mental health are concerned, “states’ rights” often means state-sanctioned neglect.

There are individual exceptions, of course.  Maine and Alaska historically spend well on mental health, but are opting for a federal exchange.  Nevada and New Mexico do poorly on protecting the overall health of their citizens, but are embracing state-run exchanges.

The take-home lesson, however, is clear.  If your state doesn’t want to create its own exchange, then you are probably better off with the federal exchange.

And if your state is still undecided, be careful about what you wish for.  Floridians, for example, would probably be better off with a federal exchange.  The state ranks 33^rd in overall health and 49^th in mental health spending.

On the other hand, undecided Pennsylvania is 8^thin overall health and 4^th in mental health spending.  There’s a much better chance that a Pennsylvania exchange would be better for its citizens than any the federal government could offer.

The reason for worry in the reluctant states has to do with the flexibility all states will be granted in setting up exchanges. 

Last week, the federal government published a new set of proposed rules governing the “essential benefits package” – the key components of all health insurance plans to be offered through the exchanges beginning in 2014.  States running their own exchanges will be given a great deal of latitude in determining just how rich these benefits will be.

And as the clock ticks toward the Valentine’s Day deadline, it’s hard to imagine new love coming from the states that have rejected our health and mental health so many times before. 

If you would like to schedule Paul Gionfriddo to speak to your group or meeting, please email gionfriddopaul@gmail.com.

A Little Compromise Will Save Medicare

A person who was unhappy with the outcome of the election suggested that the voters gave President Obama a “Mulligan” on election day – a second chance to do things right.  That’s one way to look at it.

But if you belief that, then you also have to say the same thing about the divided Congress – it, too, was being given at least one more chance to get things right.

That means agreeing to the surprisingly little compromise on which the future of Medicare will depend.

It’s hard to understand how two sides looking at the same reality and sharing the same goals could be so far apart in coming to an agreement about what to do.  Nowhere is this more evident than in the Medicare program debate.

Both sides acknowledge that Medicare is as popular as any entitlement, is as well run as any health insurance program, and addresses a need that is only going to grow in the coming years.

They also agree on certain facts.  The first is that Medicare hasn’t yet contributed to our debt.  The second is that it won’t for at least another 12 years, because there are enough reserves in the Medicare Trust Fund to offset any program deficits for that long.  The third is that the size of the program deficit last year was $19 billion. 

They also agree that on its present course, Medicare will eventually become too expensive to maintain.

There are two down-the-road problems with the Medicare program. 

The first is related to Medicare and healthcare inflation.  On its current inflationary trajectory the cost of Medicare will grow as the cost of healthcare in general grows.  Medicare alone will consume 6% of our GDP by the time today’s young adults become Medicare-eligible, and up to 7% of our GDP by the time babies being born today become Medicare-eligible.

The second is related to the current $19 billion Medicare deficit.  If this deficit isn’t closed, then it will grow over time, wipe out the Trust Fund, and undermine the entire Medicare program.

We need Congressional action to address both of these problems.

Congress has already taken some actions to address the first problem – the long-term inflationary growth in the Medicare program.  

The $716 billion in rate cuts included in the Affordable Care Act reduced Medicare’s long-term projected share of GDP from 10% to 7%.  This is a significant difference, accomplished without cutting a single benefit because the time horizon is so long.

If that were all we needed, Congress could recess before it even convenes.

But $716 billion isn’t enough to prevent the Medicare share of GDP from growing from 4% today to 6% twenty-five years from now.  And one part of that cut – an immediate 30% reduction in some provider rates – will likely be “fixed” at least in part by the new Congress as it has every year since 2002.

So we need another strategy, one that involves compromise. 

And the beginning of that compromise could be in two small steps that Congress and the President might take to address the second problem – closing the $19 billion deficit today. 

One step involves taxes and the other step involves spending.

In 2011, according to the Medicare Trustees 2012 Annual Report, Medicare revenues were $530 billion and Medicare expenses were $549 billion. If that gap were closed moving forward, then the Medicare Trust Fund would remain solvent.  And the Medicare program would be secure no matter what Medicare's share of future GDP is.

Closing a $19 billion gap in a $549 billion program shouldn’t be an insurmountable problem for governmental leaders.  It shouldn’t demand much political posturing.  And it doesn’t require a “grand bargain.”

If it were to be done just through a Medicare tax increase, it would cost every Medicare taxpayer (typically under the age of 65) an average of less than $10 per month.

If it were to be done just through a reduction in Medicare benefits, it would cost each Medicare beneficiary (typically over the age of 65) just over $30 per month.

What if we all shared the burden together?  That might mean an average $7 per month tax increase and an average $10 per month benefit reduction.

The American people might well agree to such a Medicare bargain.  And be thankful for the compromise. 

Happy Thanksgiving!

President Obama and Governor Christie: A Model of Cooperation for Protecting Public Health

It took Super Storm Sandy to remind us how much we need our government. And how rarely we see government leaders truly cooperate.

Cooperation has been a dirty word in politics for close to two decades.  But in responding to the crisis caused by Sandy, President Obama and Governor Christie showed us that political adversaries are at their best when they work together to meet our needs.

It took an environmental holocaust for this to happen.  But as the pictures of destruction in state after state circulated throughout the media, no one talked about privatizing FEMA.  No one complained that the government was spending too many taxpayer dollars rescuing people from death. 

It was a fine way for the President to end his first term in office – one that may ultimately have won him his re-election.  And also won him a new opportunity to collaborate with the states.

In the storm’s aftermath, we understand that one of the prices of having the freedom to live where we desire – Queens or Greenwich, Staten Island or the New Jersey Shore, Hoboken or New Orleans, the West Virginia mountains or the central plains – is that we must protect our living environment.

We understand that no place is safe from sudden destruction.  So we need all levels of government – and they need our support – to build better flood berms, hire more first responders, and put in place pumps and sewers to get polluted water more rapidly out of streets, subways, and homes.

And to prevent such catastrophes in the future.

God only knows if Sandy itself was caused by preventable climate change.  And it’s not really worth arguing anymore with people who deny what they see with their own eyes – that our weather has changed dramatically over the past few years.

What no one can deny is that we have been lax in our preparation for catastrophe.  We have been lax in investing in the infrastructures needed to clean up and repair the devastation.  And we have been lax in investing in the infrastructures that can prevent such catastrophic damage in the future.

This time, the crisis was in the northeast.  In recent years, the central plains and gulf coast have experienced similarly horrifying environmental catastrophes. 

No one knows who will be next. But we all know someone will be next.

So we need to prepare.  And this means strengthening our public health infrastructure.  That infrastructure:

• Prepares for and organizes our response to natural disasters.
• Makes certain we have access to emergency services.
• Handles pollution control and abatement, decreasing our negative effect on our environment.
• Enforces our building codes.
• Prevents environmental and health disasters every day.

We have let this infrastructure go during the last few years, with deadly consequences.

• Local and state health departments have lost over 55 thousand workers to budget cuts.
• In New York and New Jersey alone, over half of local health departments lost jobs due to budget cuts in 2011.
• Almost one-quarter (23%) of local health departments nationwide have reduced or eliminated emergency preparedness functions. 

Robert Pestronk, Executive Director of the National Association of County and City Health Officers (NACCHO), predicted what would happen  almost a year ago, when he said “at this critical juncture of dwindling funding and difficult choices, health departments are now doing less with less.  Budget cuts and a declining public health workforce challenge their ability to protect the health and well-being of all people in their communities.”

How well the people of Staten Island and scores of other communities understand this now!

Despite the closeness of the election, Barack Obama has a mandate as he enters the next four years.  It is to continue the bi-partisanship that served us so well at the close of the campaign season.

And governors like Chris Christie have a new mandate, too – they need to rebuild public health infrastructures in partnership with the federal government, no matter what their Congressional representatives may say or do. 

As we continue to pray for our most recent victims, let us hope – for the good of all – that in the coming years our leaders heed these needs, and tackle together all the real crises that command our attention as a nation.

And let us hope that rebuilding the infrastructure that has been devastated as much by budget cuts as it was by Sandy will be at or near the top of the list.

If you would like to arrange for Paul Gionfriddo to speak to your group or organization, or have questions about this column, please send an email to gionfriddopaul@gmail.com.

President Obama's New Health Policy Road

Newly re-elected President Barack Obama may now have a new road to health policy-making after three years of defending the Affordable Care Act.  And even if the Congress does nothing to help in the months to come, his road may be a whole lot easier than it has been.

Even with the Affordable Care Act in place, our health policy debate has been dominated by the belief that health care Armageddon is just around the corner.

But some recent data suggest that Armageddon may still be down the road.

Just how far may well determine how our health policy debate shakes out over the next two years.

First, let's look at the Armageddon scenario.

The candidates accepted the scenario that health care costs are out of control when they made the future of Medicare and Medicaid a centerpiece of the campaign.  Governor Romney’s proposed solution was to clamp down on federal funding for these programs.  President Obama advocated managing state and local costs by expanding the federal role in both programs.

But neither strategy leads to lower projected Medicare and Medicaid spending in the near future.  Both will become trillion dollar programs in the next few years.  There’s no turning back; this is already written in stone as the baby boomers age.

The $716 billion Medicare rate cut in both the Affordable Care Act and the Ryan Budget will help.  But it won’t be enough to stop Medicare from growing to 6% of GDP over the next generation.  And at least part of that cut – the physician payment cut – is likely to be overturned by the new Congress. 

So if policy leaders want to save Medicare, they will have to do more.  But there is no consensus about what this should be.

Medicaid spending is even more contentious, because the program is so expensive for the states. 

Romney’s solution – to change it to a block grant – only addressed this problem on the surface.  This is because the increase in projected Medicaid costs represents the actual projected costs of the actual projected Medicaid-eligible people using today’s eligibility standards. 

To put this more simply, there will be a trillion dollar bill to pay, no matter what.  Block grants will only change who pays that bill. 

Obama’s choice – to have this burden shouldered equally by everyone through the federal government – will help states immensely, but won’t make the program any cheaper.

The cost of healthcare for returning veterans will also drive health care costs upward during the next few years. 

In 2010, the CBO estimated that this could mean another $30 billion in VA spending over what we are paying today.

In this Armageddon scenario, all the pressure on governmental health care spending pushes upward.  And we have no clear policy solutions.

Limiting the growth in Medicare spending to 5% per year, instead of 5.7% is something for which most of the members of both parties have voted during the last two years.  That is already in place through the Affordable Care Act, and one potentially bipartisan option. 

But we need to go much lower than this to reduce the GDP burden of health care, and more aggressive rate-setting and regulation may do irreparable harm to certain safety net providers.

So President Obama’s hands may be tied – unless our healthcare future is tied to the second scenario.

In this scenario, healthcare inflationary growth declines rapidly.  And the information from 2010 and 2011 suggests that this is exactly what is happening.

Health care inflation was under 4% per year for two straight years in 2010 and 2011 for the first time in fifty years.  This may well have been recession-related.  But if health inflation stays low for even a little while longer, this will change the trajectory of health spending projections for years to come.

That may be why President Obama and Vice-President Biden made this a centerpiece of their campaign message in the closing weeks of the campaign. 

Even if the new Congress does nothing, low inflation changes the health policy picture dramatically.

Low health care inflation will add years of life to Medicare, absorb the 2.8% projected increase in state Medicaid spending attributable to the Medicaid expansion, and eventually drive down the price of health insurance even as Affordable Care Act consumer protections remain in place.

That puts the President in a position of strength for the next two years.  President Obama just won a tightly contested re-election.  The next few months will decide with just how easily his health policy agenda moves forward now.