NCSL TRENDS FOR 2009: Health Costs and Reform

Health summary -- excerpt from NCSL news release, December 2008.

Health costs keep rising at the same time that state budgets are in trouble. An immediate challenge for states in 2009 will be to maintain and retool current health programs, especially Medicaid and diverse programs aimed at covering the uninsured. As the numbers of unemployed increase, Medicaid rolls will grow. State legislatures will face competing demands such as helping those without health insurance coverage, investing in prevention and wellness, and adopting health information technology such as exchangeable electronic medical records and “e” prescribing.

States already striving to provide near-universal health care coverage, Massachusetts and Vermont, worry that shrinking state revenues will become a real obstacle. At the same time others with future health reform proposals, including California, Pennsylvania and New Mexico, may have to defer action due to budget constraints.  Meanwhile renewed federal funds for children’s health (SCHIP) and “stimulus” funds for Medicaid are important to states, while they also seek a strong voice in the national discussion of comprehensive reform.

Commentary, excerpted from NCSL Webinar
(provided by Richard Cauchi, Program Director, Health, December 16, 2008)

These are both hopeful and turbulent times for health policy. 

Although many eyes may be on Washington, states face some immediate health challenges.  Falling tax revenues mean fewer funds for all health programs, including Medicaid, state employees, retirees and an array of state-funded projects.  At the same time, rising unemployment means more residents on the Medicaid rolls. 

On the immediate agenda will be the possibility of a children’s health or SCHIP renewal, and some federal Medicaid “recovery” funding, both of which have broad and bipartisan support among states.

One thing is a near certainty – by July 1 the states will commit some $400 billion [32% of state budgets] of annual state & federal funds to keep residents in better health, to help some uninsured and get the best values they can. * 

Meanwhile, 47 Million Americans remain uninsured.  Comprehensive health reform is back in the headlines, and states can take much of the credit for putting it there, and for providing several bi-partisan blueprints and actual track record examples of implementation.  These include large-scale “universal” strategies from Massachusetts & Vermont,
 incremental ones like the small-business solutions in Montana and Oklahoma, and free-market approaches in Indiana and Florida. 
The 2008 elections and the selection of Senator Tom Daschle for HHS Secretary  ramp up the discussion and the stakes for action on universal health.

On a different note, states like CA, PA and NM intended to again tackle comprehensive reform and coverage. (47 million uninsured)   But with the economic downturn we anticipate that most states will instead look to cost effectiveness or cost containment as ways to improve health without major expenditures.   The theme of a “high performance health system” probably will be heard in more places – looking to several cost examples enacted in 2008 in states like MA, MN and VT.

With family health insurance coverage now averaging about $13,000 annually for 2009 there will be more efforts to control costs by trying state sponsored insurance connectors or exchanges, or by expanding tax free cafeteria plans and by guiding patients toward community-based medical homes, community clinics, and even retail store based clinics.

Expect to see more attention to chronic disease prevention and wellness – prolonging lives at lower costs instead of simply paying endlessly for rising insurance premiums and more costly treatments. 

Similarly, expect more action on Health Information technology – from instant, exchangeable medical records to electronic drug prescribing – popular with state policymakers because they improve quality, safety, create jobs and should save money within a few years.

So in summary, stay tuned to see if  “this will be the year” to transform the health system, or mostly work to keep our heads above the wave of red ink.

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*  Total state spending in fiscal 2006 was more than $1.3 trillion, including both operating and capital expenditures.  Medicaid is the largest category of state spending, accounting for 21.5 percent of total or $279.5 billion.  Total state health spending is (32%) or $416 billion.