Opt-out bill could give states more flexibility on health reform

They would have to provide coverage that is at least as comprehensive and affordable as the national law.

By Doug Trapp — Posted Dec. 13, 2010

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A bill to accelerate states' ability to opt-out of parts of the national health reform law could give states more flexibility to continue working on their own brands of health system reform.

Beginning in 2017, the little-discussed opt-out provision in the health reform law -- written by Sen. Ron Wyden (D, Ore.) -- allows states to request federal waivers to be exempted from certain requirements in the law. For example, states could opt out of the law's requirements for mandatory coverage, health insurance exchanges and penalties for employers that don't provide coverage, among other provisions.

But states must first devise a coverage program that is at least as comprehensive and affordable as the health reform law, as judged by secretaries of the Depts. of Health and Human Services and Treasury.

Wyden is co-sponsoring a measure that would move up states' opt-out date to 2014, when most of the health reform law's key provisions, including the insurance mandate and health insurance exchanges, take effect. The bill, known as the Empowering States to Innovate Act, was introduced Nov. 18.

"It doesn't make sense -- especially given the current budget environment -- to force states to put off or abandon health care innovations in order to fully implement the federal law. Bumping up the start date means that states can focus on ways to make the new health law work at its best from day one," Wyden said in a statement.

The measure's other co-sponsor is Sen. Scott Brown (R, Mass.), who campaigned in part on exempting Massachusetts from financing the national health reform law because the state had already achieved nearly universal coverage. Massachusetts' Commonwealth Connector coverage program, the model for the federal health reform law, helped provide insurance to all but 2.7% of state residents as of spring 2009.

"States shouldn't be forced by the federal government to adopt a one-size-fits-all health care plan. Each state's health care needs are different," Brown said in a statement.

Massachusetts, Oregon, Vermont and other states have spent years customizing their health systems and establishing state-directed health coverage. Passage of the new bill could spur states to maintain their health reform innovations or begin new ones, Wyden said. For example, Oregon leaders are discussing whether to create health care regions in the state with payment bundled for each region, said Alissa Robbins, spokeswoman for the Oregon Health Authority, which is responsible for most health programs in the state.

However, the health reform law has a high burden for states to opt out, said Robert Spendlove, director of federal policy for Utah Gov. Bob Herbert, who is also interested in increasing state flexibility.

Spendlove said states' true flexibility will depend on federal agencies' interpretation of the law and rulemaking. For example, how many states will provide similar coverage to as many people as the health reform law? The law is expected to reduce the nation's uninsured population to 8% by 2019, a reduction of about 10 percentage points, according to actuaries for the Centers for Medicare & Medicaid Services.

"That's a really tough barrier to put on states that want to be more flexible and provide more options," Spendlove said.

Extensive single-payer system to be considered

Vermont lawmakers are about to consider adopting a single-payer system that is even more comprehensive than the federal health reform law.

The Democratic-controlled Vermont Legislature last year commissioned the man who conceived the Taiwanese single-payer system to propose three health system plans for the state, including a single-payer system. The proposals are due in mid-January, shortly after the Legislature reconvenes.

Vermont Gov.-elect Peter Shumlin and Sens. Bernie Sanders and Patrick Leahy (both D, Vt.) support a single-payer health system and moving up the state's opt-out provision in the health reform law.

"The governor-elect made single-payer health care a large part of his campaign," said Shumlin spokeswoman Alexandra MacLean.

Sanders spokesman Michael Briggs said the senator wanted to work with the Obama administration to move up the state's opt-out date to 2014 even before Wyden and Brown introduced their bill.

The Vermont Medical Society helped draft and supported the bill authorizing the study, but has not taken a position on the single-payer option. VMS leaders have raised concerns that Medicare, Medicaid, the national health reform law and other federal laws may prevent Vermont from enacting a single-payer system, said VMS Executive Vice President Paul Harrington.

Still, VMS will work in support of any effort that increases access to health care while ensuring that physicians are fairly compensated, not subject to excessive administrative burdens and maintain a protected patient-physician relationship, he said.

California lawmakers also have supported a single-payer system. In recent years the Legislature twice approved bills that would have created such a system, but California Gov. Arnold Schwarzenegger vetoed them. However, California state Sen. Mark Leno, a leader of single-payer supporters in the state, plans to reintroduce the bill this year.

California Gov.-elect Jerry Brown campaigned for a single-payer health system when he ran for president in 1992, but he has not taken a recent public stance on the issue. A Brown spokesman did not respond to requests about the governor-elect's position before this article's deadline.

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Opt-out options

Starting in 2017, states can ask the secretaries of the Depts. of Health and Human Services and Treasury for permission to opt out of some provisions in the national reform law, including the individual mandate and health insurance exchange. But states must have their own programs that:

  • Provide health insurance coverage that's at least as comprehensive and affordable as the federal law's coverage, including limits on out-of-pocket spending and cost-sharing.
  • Cover as many people as the federal law.
  • Do not increase the federal deficit.

Source: Office of Sen. Ron Wyden (D, Ore.)

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