A Challenge and an Opportunity: Health Reform at the State and Local Level

April 26, 2010

Many commentators have noted that the success or failure of health reform will be determined by how well it is implemented by the Department of Health and Human Services – in particular, the Centers for Medicare and Medicaid (CMS).

There is no question this issue is critical, and it is precisely why HHS is quickly issuing regulations for the elements of health reform that must go into effect in the near term. But implementation is not just a federal issue. As I noted in last week’s blog post, many of the provisions of health reform rely on administration at the state level.

For health reform to be a success, implementation by the states must be effective as well. And, implementation at the state level is arguably an even bigger challenge than implementation at the federal level.

Michigan offers just one example of the complexity that implementation of health reform faces. Governor Jennifer M. Granholm has established a coordinating council and a team determine how best to implement health reform in the state. But, at the same time that that effort is proceeding, the state’s attorney general (representing himself, not the state) has joined other attorneys general in filing a brief opposing the Act. And, Michigan’s attorney general is running for governor of the state.

Governor Granholm is term-limited and will be leaving office after this year’s election, as will many in the legislature. Indeed, almost all members of the state Senate – 30 of 38 – are term-limited and cannot be re-elected. Thirty-four of 110 members in the House are also term-limited. So, with a new governor, 64 new legislators, and all the other leadership and staff changes that will ensue, it is quite possible everything that is done in Michigan this year to prepare for health reform could be undone.

Other states face similar situations of expected instability in state leadership and have many challenging issues to focus on besides implementation of federal health care reform.

The Patient Protection and Affordable Care Act is complex – with a tremendous number of moving parts – and is designed to expand coverage and make improvements in the cost and quality of care. There is little doubt that some things will go wrong in the implementation of health reform – and the Act itself has several known shortcomings.

For example, the Act relies on an individual mandate to increase health care coverage, but the sanction for lack of coverage was a politically negotiated number that was relatively low: $695 per year in 2016, up to a maximum of three times that amount per family or 2.5 percent of household income (the penalty is phased in starting in 2014 and indexed after 2016). As the New York Times pointed out, for those who are working but not high income, even the subsidies may not be enough to offset the cost of coverage. Every individual will make a calculation of whether they are better off – financially and otherwise – by paying for the coverage or the fine. Many may choose to go “bare,” which would undermine the fundamentals upon which the Act is based.

Other challenges involve assumptions and speculations about whether or not the initiatives in the Act will result in savings. Some, like Atul Gawande, are truly optimistic about what they see as exciting experiments about to begin in states and the private sector; others have more doubts. And, reports like the April 22 memo from the Chief Actuary at CMS projecting cost increases from the Act, which conflicts with the previous CBO analysis, exemplify the complexities in health reform. If these policy flaws and complexities are compounded by implementation problems at the state level, they will be magnified many fold.

Implementation success is thus fundamental to policy success. For all who want this round of health reform to work, becoming involved in what is happening at the state level and in local health care systems to implement health reform will be important.

As Atul Gawande said so well: “…the one truly scary thing about health reform: far from being a government takeover, it counts on local communities and clinicians for success. We are the ones to determine whether costs are controlled and health care improves—which is to say, whether reform survives and resistance is defeated.”

So, it’s time for all of us to turn our attention to the states and local health care communities and do what we can there. A key to the success – or failure – of health reform may be closer to home than we think.