Federal efforts to expand public coverage may be restricted for now, but several states have been active on the issue. This year, at least nine states have considered Medicaid buy-in or public option legislation during their 2019 legislative sessions. While most bills have stalled, Washington State, Colorado, and New Mexico have all, to varying degrees, moved the needle toward state-level public options. Even if just one of those states gets a public health insurance plan up and running in the next two years, it could provide significant new coverage options for residents of their states, and, importantly, teach federal reformers a lot about how to create new and expansive public coverage options.
Even if just one of those states gets a public health insurance plan up and running in the next two years, it could provide significant new coverage options for residents of their states, and, importantly, teach federal reformers a lot about how to create new and expansive public coverage options.
Here’s a breakdown of the new legislation in these three states, followed by an assessment of next steps.
In Washington, the state will contract with private companies to create a state-backed “public option” plan. After much debate, the bill sets aggregate medical provider reimbursement rates at 160 percent above Medicare rates, with differences across service types and rural areas. This entails a trade-off: while it may entice providers to participate (it does not require participation in the plan), it will also limit the cost savings that the plan would have attained by lowering reimbursements rates even further. The Inslee administration projects a cost savings of 5–10 percent. The plan also creates, but does not yet fund, premium discounts for middle income people earning just above the current threshold for federal subsidies.
About 45 percent of people currently in the individual market, and about 30 percent of the currently uninsured, earn incomes such that current ACA discounts do not apply, and the discounts and lower rates resulting from the new law (both for a public option and in response to new competition from that public plan) could have an immediate impact on rates. Other participants who already receive federal discounts on their premiums may also benefit from a plan with more reasonable out-of-pocket costs, and from competition that influences the plan structure of private plans (other provisions in the bill designed to standardize all plans will likely help with out-of-pocket costs as well). Moreover, expanding the risk pool of participants in the private market could further drive down rates over time.
Colorado and New Mexico
In Colorado, the legislation was a more detailed version of the study bill that New Mexico passed (which simply asked for a study of Medicaid buy-in options utilizing federal waivers).
The Colorado legislature tasked their relevant state agencies to develop a public insurance option by November of this year that covers “essential health benefits” required under the ACA, taking into account affordability at various income levels. The agencies will need to provide recommendations on how to set provider rates to save money but also ensure that providers participate; how to administer the plan, and whether to offer it on the exchange or not; figure out whether they need a federal waiver to make the plan work, and if so, whether they are likely to get one; and set affordability standards in the state, which would presumably drive any additional financial assistance the state would provide.
The cautious steps taken reflect the critical nature of decision points facing these states:
- How can new financial assistance be structured in a way that best brings down costs for consumers? Part of this question may be answered by whether and how the Trump administration allows states to obtain a 1332 waiver, capture savings resulting from lower cost plan availability, and restructure the distribution of subsidy dollars to increase the discounts available. The Colorado analysis will consider how to utilize such waivers, and the New Mexico study will explicitly hinge on such as waiver. But it is unclear how the administration would respond to any 1332 waiver request related to a public option. The administration reversed Obama-era guidance that, among other changes, emphasized a focus on expanding access to private coverage as a part of 1332 waiver processes. Washington State does not rely on such a waiver in its design, but may, as a result, have less revenue to bring down costs, and will need to appropriate dollars for additional discounts.
- How will providers respond to initial state-run, or at least state-led, health insurance coverage that reimburses doctors and other health care providers at rates below private insurance (but, at least in the case of Washington State, above the rates set by other public coverage programs)? The above-Medicare rates, and flexibility in rates, provided by the Washington plan minimize the chances it will struggle to gain participation from doctors, hospitals, and other providers, but ultimately limits the cost savings that would be passed onto consumers. Colorado and New Mexico will soon need to make similar determinations if they move forward on the policy.
Answering these questions will be a high-stakes affair. Last month, during the first congressional hearing on Medicare-for-All, skeptics highlighted the unsuccessful state-level efforts to stand up a single payer system: Vermont attempted to craft a state-level single payer system but were unable to do so, and advocates in Colorado were unable to build the coalition necessary to pass a ballot initiative.
State efforts present enormous opportunities to test and build a path forward toward universal coverage, but the political pressure will also be on to get these foundational questions right.
Such critiques ignore the challenges that the project of setting up a state-level single payer system face, but serve as a broader reminder for public coverage reforms: state efforts present enormous opportunities to test and build a path forward toward universal coverage, but the political pressure will also be on to get these foundational questions right—namely, in these cases, how much the state pays doctors and other providers, and how much people will pay for the plan. It’s no surprise, then, that states are being very deliberate as they move forward with the next generation of health care reform.