States slow to adopt health-care transition

By Amy Goldstein and N.C. Aizenman,

As many legislatures around the country have finished their work for the year, fewer than one-fourth of states have taken concrete steps to create health insurance marketplaces, a central feature of the federal law to overhaul the U.S. health-care system.

A total of 43 states, meanwhile, have made fresh cuts to Medicaid, even as lingering unemployment and diminishing access to private coverage continue to drive up the number of Americans turning to the public insurance program for the poor.

Taken together, these trends highlight the ground-level challenges that health care poses to states. A year after Congress passed the biggest revisions to the health-care system since the 1960s, states are grappling with their own versions of the fiscal and ideological battles that still are roiling Washington.

States that have moved gingerly so far on health exchanges have not necessarily rejected the idea outright. Only one, Louisiana, has told the federal government it does not intend to build an insurance marketplace for its residents. In states that refuse, the law allows the federal government to step in.

An exchange must be available in each state by 2014. The idea is to help a slice of the public for whom insurance traditionally has been especially expensive: Americans who buy coverage on their own or as part of small companies. The exchanges are supposed to make it easier for them to compare health plans while creating pools of customers large enough to slow rising prices.

States have a deadline of January 2013 to prove to federal health officials that they are on a path to be ready.

The furthest along are seven states that have adopted laws establishing their exchanges. California did so last year, followed this year by Colorado, Hawaii, Maryland, Vermont, Washington and West Virginia. Two others, Virginia and North Dakota, passed laws expressing their intent to form an exchange, without spelling out details of how it should be run. Both states have Republican governors who oppose the federal law but maintain it would be worse to entrust an exchange to the federal government.

Seven other states, including some with GOP leadership, have not passed any relevant legislation but have accepted federal grants to prepare key components of the exchanges, including systems to determine which residents are eligible.

Elsewhere in the country, there has been less progress. Nearly a dozen legislatures have defeated or allowed to expire bills that would have created an exchange, according to analyses by the National Conference of State Legislatures and the Center on Budget and Policy Priorities. At least 13 other states have not even considered such proposals.

In many such cases, lawmakers oppose the federal law. But in Kentucky, where Democrats control the governor’s office and the House of Representatives, Rep. Tom Burch (D), who heads the Health and Welfare Committee, said his party was simply waiting for the Obama administration to issue regulations spelling out federal requirements in more detail. “So much of this stuff is still speculation,” he said.

Paul Dioguardi, the Health and Human Services Department’s director of inter-governmental affairs, said he was confident states that have been slow so far will be able to catch up, in part by borrowing the models of states that move more quickly.

Also starting in 2014, the federal law will expand Medicaid to Americans with incomes higher than most states have allowed until now. For now, the number of people on Medicaid under states’ existing eligibility rules is straining the ability to pay for them.

Medicaid is a shared financial responsibility of federal and state governments. During the past few years, the nation’s economic crisis has simultaneously depressed states’ revenues and increased Medicaid caseloads. In 2009, to help stimulate the economy, the federal government began giving states extra money for Medicaid. That temporary help runs out this month.

A new report by the National Governors Association and the National Association of State Budget Officers makes clear that the burden of Medicaid on states remains heavy. For the current fiscal year, 43 states have taken action to contain their Medicaid costs. Two dozen have reduced payments to doctors, hospitals or other providers of care; 23 have sought to lower spending on prescription drugs; and 20 have restricted certain services that the program covers.

For the coming year, 45 governors proposed further cuts, the report says, without specifying which reductions were adopted by legislatures. Thirty-three governors proposed to reduce provider payments, 25 to restrict benefits and 21 to require Medicaid patients to pay more for their care.

For instance, in Maryland, where Medicaid enrollment has grown by 11 percent in about the past year to nearly 920,000, the General Assembly has just ordered cuts to the program’s $7 billion budget totaling about 1 percent, according to the state’s Medicaid director, Charles Milligan. The state will reduce by 2 percent its payments to managed-care organizations — the way most of Maryland’s Medicaid patients get care. It will cut by 1 percent the program’s pay to doctors, private-duty nurses and home care aides. And hospitals and nursing homes will be charged a new fee of 2 percent to 3 percent to take part in the program.

Donald Berwick, administrator of the federal Centers for Medicare and Medicaid Services, noted that his agency has been trying to help states find ways to cope with their Medicaid budgets. But, he said, “I think they will be under pressure for some time.”