Intersection of Policy and Politics in State Coverage Expansion

Campaigns

Walter ZelmanProfessor, Director, Health Science ProgramCalifornia State University, Los Angeleswzelman@calstatela.edu 323. 343.4635

Study Goals

Better understand the political dimension of coverage expansions

Provide value to those seeking such expansions

Increase research interest in that dimension, and provide starting points for more political analysis

Scratching the Surface

Study involves 5 states and multiple issues, options, and variables

Many could be the focus of a full study Given limited number of states, often

unclear what is an exception and what is trend

Result: Findings here as likely to be questions as answers

Study Methods and Sources

Review of public information:– Monitored newspapers– Web sites of interests and others– Reports, press releases, and other publicly

available documents

Interview about 5 individuals per state: participants and observers

Outline of Presentation

I Systemic Factors

II Processes of Policy Development

III Financing Reform and Cost Control

IV The Interests

V Strategy

VI Leadership

Systemic Factors: Complexity and Interconnectedness

The redistricting analogy: interrelated nature of the parts

Public and private sector connections Multiple interests, major economic

impacts likely to be involved in almost any issue

Hard to take one issue or opponent at a time

System Factors: the Institutions and the rules

Supermajority votes: the California problem 60 votes in the US Senate Political Science 101: the Madisonian model Rules may favor the status quo, especially

when interests are numerous and powerful: Thumbs on the checkerboard

Unlimited need for campaign funds, mostly from the interests

Systemic Factors: Federal Issues and Funding

ERISA Federal financing: Medicare, Medicaid,

SCHIP, disproportionate share, tax code, etc

Do states have tools to limit cost growth, and especially the major technological drivers?

Systemic Factors: Economic Cycles and Budgets

Best opportunities for reform may come when capacity to address the problem is low

Hard economic times raise visibility of the issue, but put pressure on state budgets: higher spending, lower revenues

Concerns and Economic Opportunity

High concern about costs and/or coverage

Low concern about costs and/or coverage

Strong or recovering economy

1993-94 1996-2001

Weak economy Current situation for states

?

Policy Development: Private Processes

Governors and private processes– Good staff talent– Largely private– Appreciation of complexity: led to expanded

concepts to reform, more focus on cost Romney: came to individual mandate Rendell: moved from fed to state focus and more

focus on small business and economy Schwarzenegger: all connected Spitzer: need to move incrementally: kids first

Policy Development: Public Processes

Varieties of public processes and outputs– Road maps: MA, NY– Task forces: hearings, reports, differently

constituted: IL, PA, NY– All states except California– Varied purposes and value:

May reflect emphasis on search for evidence-based, consensus solutions

Financing Options: Employer Requirements

Trend may be to modest levels: – Low percentage requirements– Perhaps a sliding scale

Demands on employers may be limited by concerns about economic impacts– Particularly true for small employers who

barely seem to even need organized lobbying power: others use them to make the case

Financing Options: Employer Requirements

Final or Pending Position

Notes

California 1-6% fee on non-offering employers

Compromise between Gov (4%) and Dems (7.5%)

Illinois 3% assessment on employers spending <4%

Remains unchanged; measure likely to fail

Massachusetts $295 per year per ee on non-insuring employers

Compromise between no tax and House leadership

Pennsylvania No pay or play requirement

Gov proposed 3% tax for non-insuring employers

Financing Options: Employers

Chambers, like most associations, may continue to reflect lowest-common denominator positions

There is evidence of some employer willingness to accept some “shared responsibility”

– But, support may require protection in out –years– Apparent, sizable reluctance to break ranks

Individual business supporters or coalitions can reduce appearance of across-the-board business opposition

May even be possible to win appearance of small business support

Financing: Individual Mandate

Logic for mandate seems strong: May increase number of offering employers Probably needed to fix individual market Politically, may be required to win business, insurer

support Is possible to protect low-income families Eventually accepted in MA; limited version in CA; IL

task force accepted it

Financing: Individual Mandate

But opposition still considerable: All states Slippery slope away from employer

responsibility: Uncertainty trumps economics Large deductibles may make it affordable, but

also less attractive It is a hard sell for unions and to consumers Politically, support may require imposition of

requirements on employers

Financing: Federal Funds

State reform as federal reform All states report funding as the central

challenge: especially in lean years States still wary of imposing broad taxes Successful state efforts will probably

require more access to federal funds States with great disproportionate share

funds may have greater capacity

Percent who say they would support a universal health insurance system even if it…

Let’s Not Forget… Public Debates Matter

35%

33%

28%

18%

Limited their choice of doctors

Meant some treatments currently covered would no longer be covered

Meant there were waiting lines for non-emergency treatments

Meant they would pay either higher premiums or more taxes

Source: ABC News/Kaiser Family Foundation/USA Today Health in America Survey (conducted September 7-12, 2006)

Percent who support a universal health insurance system, in which everyone

is covered by a program like Medicare that is gov’t-run

and financed by taxpayers

56% 40%

Percent who support the current system, in which most people are covered through private employers, but some people have no insurance

Financing: Cost Control

Policymakers clearly see tie they once did not see: costs rising faster than wages

Public concern on costs also high Some see cost control, improving system,

as key to framing: not uninsured But public appears unwilling to deal with

hard choices here

Pennsylvania’s Employees and Businesses Cannot Keep Up with Health Care Inflation

% Increase in Family Health Insurance Premiums vs. Inflation and Increase in Median Wages in PA Between 2000 and 2006

13.3%

17.0%

75.5%

Increase in Median Income

Inflation

Increase in Premiums

WalterZelman Presentations

Projected Average Annual Growth in Illinois Health Care Spending Without Reform,

Gross State Product and Wages 2005 - 2015

7.50%

4.80%

3.20%

0%

2%

4%

6%

8%

Wages Gross StateProduct

Health Care

Av

era

ge

An

nu

al G

row

th 2

00

5-2

01

5

WalterZelman Presentations

American Views on Most Important Issue for Government:

% Saying Issue is One of Two Most Important

43

34

1511

83

05

101520253035404550

Costs Access forUninsured

Medi/Rx Quality Gov Role IllegalImmigration

Source: AP, 2006

Factors seen as “Very Important” Reasons for Health Cost Increases

6560 57

46

36

0

10

20

30

40

50

60

70

Drug /ins profit Was te/fraud C os t of Unins Malprac L aw New tec h/pro.

Ca Field Poll Jan 2007

Financing: Cost Control

Two conflicting themes Cannot achieve or sustain reform without

cost control Cannot achieve reform with cost control Conflict: easiest way to reduce interest

group opposition is expanding, not contracting the pie

The Interests: Organized Labor

Much of labor may lack enthusiasm for centrist approaches

Traditional labor position: employer required to pay 80% of defined benefit

Mixed reports on labor support in 2007-08– Issues with labor in MA, IL, CA– SEIU more supportive than AFL: health care

workers, lower wage workers AFL more concerned on costs than SEIU Purchaser, provider conflict?

The Interests: Organized Labor

Concerns about individual mandate and slippery slopes

Concerns about level playing fields Concerns about loss of union benefits as a

recruiting tool Concerns about paying higher costs/taxes so

that non-union employers can get subsidized coverage

Hospitals

Provider and leader in business community Have been important supporters: Mass, Ill Can be major force for reform: sees benefits,

can lead in some business communities Ideal interest group: a leader in virtually

every district; Boards are who’s who of community

Hospitals

Multiple problems in hospital leadership Trade associations may not lead: reform may

produce winners and losers Safety net, DSH hospitals will demand

protection even as fewer dollars are needed Multiple concerns about changes, reductions

in revenue streams; inherently conservative Support of hospitals may require a larger pie

Physicians

Not reported to be playing major roles Negative in some states: insignificant in

others Primary care and family physicians

different; can they fill the void? – Perhaps with public: but not with inside

political leverage

Health Plans

Some supportive of coverage expansions: Can be sizable business asset– If insurance model unchallenged, regulatory

elements limited and market rules acceptable

Support may require individual mandate Those with underwriting models may be

vigorous opponents

Consumers

Need much more study Broad coalitions appear effective: but

capacity to mobilize public may be limited Religious ties effective in several cases:

produce real credibility Role of labor in these coalitions needs

study

Consumers

Little evidence of significant public pressure – Public attention to state issues way below that

of federal Single payer leverage down: consumer

groups support it, but more in theory than practice– But may still maintain capacity to undermine

other reform efforts (California)

Strategies: Partisan and Centrist

Consensus-building strategies seem dominant: – Republican votes rare; but Democrats need

business and provider allies– Public, stakeholder processes may reflect that

perceived need

Cost control now central to strategy

Leadership: Some Findings

Systemic forces may be most important in long run, but leadership and specific decisions matter

Many leaders made major efforts But many reports of major animosity between

key players: NY, CA, ILL Significant input re Governors not

maintaining positive, respectful relations with legislators

Leadership in Massachusetts

More recognition of leaders and leadership in Massachusetts?– Is it just the result of success?– Or, did leadership really emerge and why?

Greater perception of shared need to succeed

Five States: a Positive View

Massachusetts succeeded Illinois has made progress, might have

made more: tax proposal hurt, Governor’s relations with Speaker hostile

Pennsylvania: some progress made, issue still in doubt

California: came close New York: has potential

Five States: an Alternative View

Massachusetts Unique No new successes in 2007 Obstacles vary, but always substantial: costs,

complexity, multiple interests Primary problem is finding a political coalition

that will support the cost reductions or new financing needed

Creating, sustaining state reforms may require major federal assistance

Some Future Research Needs

Analysis of interest group positions. What might change, what won’t: hospitals, labor, physicians

Processes for seeking input and building support: on costs and coverage

Premiums and Poverty Levels2000 2007 Percent

Increase

250% of PovertyFamily of Four

44,007 51,625 17

HMO Family Premium

5,844 11,879 103

Premium as % of 250% of Poverty

13.2 22.9

What is Affordable?

Need to subsidize to higher levels of poverty

Cap on family spending 15% of income Premium is $11,879 Income needed: $79,193 % of poverty: 383

WalterZelman Presentations

A Tale of Two States

Massachusetts California

Percent of non-elderly population uninsured

11 19

Percent of non-elderly adults under 200% of poverty

29 39

Percent of those adults uninsured

23 44

WalterZelman Presentations

A Centrist Strategy: Core Premises

Must minimize widespread interest group opposition

Accept coverage before effective cost control

Accept up-front, additional cost: consider use of incentives for additional federal $

Primary reliance on expansions of federal programs for new dollars

A Centrist Strategy: Core Elements

Modest, individual mandate with adequate protections on affordability– Coverage would have to be broad: deductibles

or co-pays might be middle range Modest, scaled employer mandate (ERISA

flexibility or safe harbors may be required)– Some mechanism to protect against near-

automatic increases in employer fee

A Centrist Strategy: Core Elements

Reliance on expansions of federal programs for additional state funds– May need to include higher provider payments– Builds on current programs– Does not create new programs– Assumes a national strategy: federal

requirements with state flexibility

A Centrist Strategy: Core Elements

Connector, pool, FEHB-type mechanism to ease subsidy, individual market, and “pay” employee mechanisms– Capacity of pool to expand may prove critical– Potential to gain single payer support

Framing: security (keep what you like, won’t lose insurance), affordability, prevention

Revenue: federal tax exclusion change?

A Centrist Strategy: Core Elements

Visible public process to seek input from stakeholders and public and craft policy– Runs counter to traditional honeymoon strategy:

right choice may depend on margin of victory

High level commitment or commission to address long-term strategy for cost control

Alliances with sub-groups of major interests: Physicians, large and small employers, insurers