Health Care Quality and Cost Improvement: State-based approaches can’t go it alone

September 26, 2011

It is difficult to find an issue that is more politically contentious than health care; particularly the policy changes and programs that are needed to assure that Americans have access to needed care.  The liberal position tends to see health care as a right, and seeks a strong centralized public role in assuring that all Americans have access to the same kinds of benefits and care.  The conservative position sees fiscal and personal responsibility as the top priorities; tending to favor decentralized, private market solutions.

Most would agree central authority does a better job assuring equity of coverage to a defined set of benefits (best evidenced in Medicare, where there is a uniform, national benefit package). There is less agreement on whether centralized or decentralized authority is preferable in terms of health care quality improvement and effective cost control, but there is strong evidence in support of the need for centralized authority to accomplish these goals.

The case for central authority begins with a critique of state/local government authority. The problem with state based approaches is that a significant degree of decision making is delegated to each of the 50 states, making it extremely difficult to achieve uniformity unless there are strict and prescriptive federal guidelines.  Most often it creates a situation where there is success based on anecdote:  we hear about the innovation that occurred in Massachusetts through its health reform initiative, or the single payer system planned for Vermont, or Hawaii’s success in reducing its rate of uninsured.  These glowing stories of success blithely gloss over the fact that these are truly exceptions, in aggregate affecting less than 5 percent of the U. S. population with little or no chance of adoption by other states.

Even when the federal government partners with the states to meet policy objectives, states tend to take advantage of any discretion, thereby creating state to state differences based more on fiscal ability and political priority than on variations in local need.  Take Medicaid as an example.  In 2009, 17 states set eligibility thresholds for working parents at less than 50 percent of the federal poverty line.  Another 17 states set eligibility for working parents between 50 percent and 99 percent of the federal poverty line.  Lastly, 16 states set their eligibility threshold at income greater than the poverty line. What is the policy justification for these differences?  Are working families in Tennessee (greater than 100 percent of poverty) significantly different from working families in North Carolina (less than 50 percent of poverty)?

The differences from state to state in Medicaid are significant, impacting who is eligible, who gets access to care, and the quality of care they receive.  A recent study from the Commonwealth Fund highlights this issue. The study looked at Medicaid managed care and compared the performance of publicly traded health plans with the performance of non-publicly traded plans (mostly provider owned).  It found that publicly traded plans tended to devote a higher percentage of each premium dollar to administrative expense—including profit—and receive lower scores for quality related to preventive care, treatment of chronic conditions, and members’ access to care and customer service.  Again, this leads to disparities among states because for-profit plans tend to be concentrated in certain states.

The major reasons for Medicaid’s profile on cost and quality performance involve two interrelated factors:  states’ political culture and fiscal capacity.  States with the largest poverty populations tend to have less fiscal capacity than more affluent states. So when these poorer states are asked to match federal dollars, they simply do not have the tax base to afford more generous benefits and higher eligibility thresholds.

Secondly, Medicaid is not a popular program in most states.  Legislators would rather allocate incremental tax dollars to other purposes, such as elementary and secondary education, higher education, corrections and/or tax relief.  Even though two-thirds of Medicaid dollars go to pay for care for the elderly and the disabled, these dollars are generally viewed as going into the pockets of providers, who are thought to be well off and not a priority for extra tax dollars.  As a result, in most states there is not an effective political constituency to advocate for the Medicaid program.

In summary, state based accountability tends to result in programs with wide, and unjustified, disparities from state to state.  There are some success stories, but these tend to occur in more progressive and affluent states and represent the exception and not the rule.  Yes, state accountability is better than no accountability, but it is not the way to develop an equitable and effective coverage program for all Americans.  State control can be effective in cost control, but when cost control becomes the overriding policy priority, that success can come at the expense of quality, coverage, and access to care.

Healthcare consultant Kevin Seitz, MSW, is the former executive vice president for Health Care Value Enhancement at Blue Cross Blue Shield of Michigan. Seitz was a founding member of CHRT’s board of directors and served on the board from 2006 to 2010.