Is State-Level Health Care Reform Doomed?

It’s a waste of breath to say that health reform is a big issue in the states. But is it also the case that health reform in the states is a waste of time?

With health reform experimentation popping up across the nation, conventional wisdom has become, as Massachusetts State Senator Richard T. Moore put it in a blog post for the Commonwealth Fund, that states are “critical laboratories for quality and innovation.”

Yet while Moore is right to say that “common elements of success will serve as a useful learning experience for other states and national leaders in considering more comprehensive health care reform,” there’s another side of the issue to consider: there may be some states that can’t sustain universal coverage without more comprehensive federal reform—no matter how insurance programs are designed. There’s also a danger that failure at the state level could be used to argue that comprehensive health reform is simply an impossible goal.

Among the biggest problems with universal coverage is cost: how can we afford to insure everybody? One answer is to require that everyone buy coverage.  By mandating insurance, a state can spread the cost across a larger pool of people that includes low-risk individuals who can help share the burden of insuring high-risk individuals.

Without a mandate, no one would buy insurance until they were sick or elderly; the pool would be made up of people who are expensive to insure, and soon coverage would become unaffordable. The only alternative would be to pass laws saying that if you don’t sign up before you become sick, insurers have the right to refuse to cover you –or to charge you five times what they would charge a healthy person. This is what happens in many states today, which is why one serious illness can send a family into bankruptcy. If we want to say that insurers can’t leave anyone out in the cold—even if they are very sick –then we also have to say that everyone must participate in the system.

The question remains:  will mandates work at the state level?

Consider Maine. In 2005, Maine launched the nation’s first experiment in universal health coverage through the “Dirigo Health Act,” named after Maine’s state motto, “Dirigo,” Latin for “I lead.” Dirigo is entirely voluntary, and as a result only 18,800 people (most of which already had private sector insurance) have signed up for DirigoChoice, the main arm of the program devoted to small businesses and individuals. Meanwhile, some 130,000 Maine residents remain uninsured.

A big reason people aren’t signing up for Dirigo is because it’s expensive. Expensive coverage is unattractive coverage, especially in Maine where most of the uninsured are single, half are between 18 and 34, and 44 percent make less than $25,000. In other words, a lot of Maine’s uninsured are young, independent, and poor—the people least likely to pony up for health insurance.

Click around the Dirigo website and you begin to get a sense of what a typical uninsured person in Maine will have to shell out for coverage. A single male with an annual income of $23,000 could end up paying as much as $3,600 a year (15.7 percent of his pre-tax income) in out-of-pocket costs. Nation-wide, folks of comparable income levels are only spending 9 percent of their before-tax income on health care, according to the Consumer Expenditure Survey.

Certainly coverage would be cheaper if Maine were to impose a mandate on its entire population, thus spreading the burden. But even then, Maine would a tough state to insure. Its population is one of the oldest in the nation and it has a large number of seasonal laborers, rural workers, and mom-and-pop businesses that can’t afford to shoulder health care costs. Sure, a mandate would ensure that everyone in Maine had health care; but the affordability of that care is still in question.  The state would have to come up with large subsidies to make the plan work.

Many states are in a worse position. Consider West Virginia. The state is the 4th poorest state in the nation and ranks last in median household income. Just 15.3 percent of the population has a college degree. Given the fact that socioeconomic status is the best predictor of health, you’d expect West Virginia to be an unhealthy state and sure enough, it has some of the highest rates of cancer mortalities in the U.S. alongside other impoverished states like Mississippi (the poorest in the nation), Kentucky (second poorest), Tennessee (no. 5), Arkansas (no. 6), and Alabama (no. 7).

It’s not just poverty and poor education that’s the problem. By 2010 16 percent of West Virginia’s citizens will be over 65, making it the second oldest state in the union. While West Virginia is comparable to other states in the proportion of its population that is under 18 (21 percent) it’s just that—comparable. There is no surplus of youth to offset the aging population. Worse still, West Virginia also has the highest percentage of people who are disabled of all the states. This is perhaps not surprising, considering West Virginia’s economy is so dependent on farming and coal-mining, both high-risk occupations.

By now the picture should be clear: even if West Virginia were to mandate coverage for all of its residents, it would still be a risky and very expensive state to insure. As in Maine, even with a mandate, comprehensive insurance would not be affordable for many of the state’s residents—and West Virginia just doesn’t have the resources needed to provide huge subsidies. 

Hard to insure states like West Virginia and Maine need to be part of a larger pool. A federal health care system would provide the number of people needed so that poorer, riskier states could benefit from spreading the risk.

Even if we found the perfect state-based model for health care the cost of reform in a state like West Virginia would be much higher than in a state like Connecticut, which has a population almost twice the size of West Virginia’s, the fifth highest median household income in the nation, and an educated population (31.4 percent of Connecticut residents have a bachelor’s degree).

While state-level experimentation should continue and we should eagerly take stock of the mistakes and successes that it generates, we also need to keep in mind the inequality that exists across the states. For many states, adapting the blueprint that might work in a wealthy state isn’t an option. And we haven’t even really discussed other issues that would contribute to uneven health care such as state budgets, local politics, and corruption.

Without a broader federal system pulling the nation into one insurance pool, it’s likely that states like Maine will find themselves hitting speed bump after speed bump on the road to universal health care—and states like West Virginia will simply be left behind. In the meantime those who oppose health reform will point to the failures as a reason why Congress shouldn’t even try for national health insurance.

In the end, it may be that focusing on state-level health reform is somewhat counter-productive. After all, isn’t the goal of universal coverage to ensure that health care is there for every American who needs it, regardless of where they live?

Comments

[BobMan]

How to pay for it? That is the crux of all the "universal health care" programs.

States are trying the mandatory enrollment tactic. Healthy citizens are saying, "No Way! Too expensive. Go ahead, lock me up!" States, correctly calculating they don't have nearly enough prison space for all the "law breakers," declines. Bzzzzzt. Failed. And if the state allows insurance to decline coverage to sick people as an "incentive," EMTALA trumps that. Bzzzzzzzt. Failed.

The only way "universal health care" will be funded is via the income tax. Some pay so all are covered. (Go to the IRS website to see the breakout of who pays what in regards to income tax.
http://www.irs.gov/taxstats/
indtaxstats/article/
0,,id=129270,00.html)

The other side of the coin is the government will have to have total control over the health care system. Cost containment via rationing will be mandatory to keep the health system budget under control.

[hoppy]

Neither a state nor national system will work if they are optional, unless it is made obvious that those enrolled in it spend less on health care than those who don't. And, that is impossible, because the people who won't opt in are largely those with very low health care costs now. So, a universal care system has to be universal, not optional.

It is also pointless for anyone to advocate a specific health care coverage program without discussing its cost to individuals, and the savings to individuals at the same time. There is a small chance that such an openly discussed program would be accepted by those with minimal current health care costs, but there is no chance at all without a discussion of costs and benefits.

Our country is not currently an altruistic country. Voter sentiment is heavily slanted towards "what's in it for me". We have to simultaneously move a big percentage of the voters toward "what's in it for all of us" while also promoting a mandatory universal coverage system.

[Niko Karvounis]

Joe,

I'm not sure they're impossible either. But I think the other side of the issue shouldn't get lost in the flurry for trying new arrangements.

In Massachusetts, for example, we're finding that the only reason reform worked is because the state has a $610 million "free care pool" to fund coverage for the uninsured (you can read about this at http://www.boston.com/news/nation/articles/2007/11/03/romney_health_plan_difficult_to_copy/ ) Few other states have this pool of funds.

I certainly understand the logic that there can be a sort of chain reaction of trial-and-error,where states tweak and adjust models. But we also need to accept that we're seeing state health care reforms in some of the wealthiest states that are best positioned to give it a shot, like Massachusetts and California--even New Hampshire and Vermont are among the richest half of all states. We haven't scratched the surface for states like West Virginia or Mississippi.

And while I applaud your suggestion that once we find something that works for states we'll model national reform on it, I think there's a bunch of people who would spin things differently by saying that once states get it right, we don't NEED a federal system. These are the same people who, if state reform collapsed, would then say that all major health reform is a fool's errand and should be abandoned.

So if for no other reason than political pragmatism, we need to keep thinking about the federal component of health care reform to pre-empt the partisan Chicken Littles who are eager to write off the whole endeavor. If we keep ourselves too tightly focused on the states, we may risk losing the perspective we need to maintain health reform's momentum.

[joe blow]

I dont agree that its impossible for a state-based solution to work.

If a particular state-based solution fails, then its moronic to think that the same plan will work on a national level.

All plans for national health reform should be vetted in a state process first. The nation will be better off when we get to see these state by state solutions go head to head against each other, and it would give us enormously valuable comparison info to craft the best nationwide plan we can get.