Democrats in liberal states are aiming to go beyond Obamacare with new healthcare legislation, trying to circumvent Congress in order to test out possibilities for a future overhaul of federal programs.
These state plans share the same objectives as Democratic proposals in Congress — to boost the number of people with health insurance or to make insurance more affordable to patients — but they differ in one important way: They don’t face the obstacle of a GOP-controlled Senate.
“Realistically, the gridlock in Congress is going to be there for the next two years, so to move the ball in a substantial way, states are going to have to take a strong leadership role,” said Tom Kise, spokesman for United States of Care, a nonpartisan research and advocacy organization.
At the top of the Democrats’ agenda is a state-run “public option.” Legislators in Illinois, Minnesota, Nevada, New Mexico, and Washington state are all pursuing forms of a state-operated insurance plan, which is meant to spur competition against private insurance to lower prices. The Obamacare legislation included a public option in its first draft, but the provision was removed before the law was passed.
The lessons that state lawmakers learn in the course of framing, passing, and implementing public option legislation could later prove valuable to legislators in other states or in Washington, D.C.
In addition to the public option, Democratic lawmakers are considering other ideas, such as giving more people subsidies to buy private coverage or extending coverage to immigrants who reside in the U.S. illegally. One major consideration for Democrats is the rate of uninsured people, which they believe Obamacare has not done enough to lower. Another problem that Democrats would like to rectify is that Obamacare plans are unaffordable for many people who don’t qualify for subsidies.
At least 14 states are considering letting residents “buy in” to Medicaid, the federal program, jointly funded with the states, which typically covers people with low incomes or who are disabled. Washington-state Democrats are pursuing a similar strategy, by having the state’s Health Care Authority contract with health plans to offer coverage on the exchange.
Blue-state Democrats face daunting opposition. Healthcare providers, including hospitals, would support shifting the uninsured onto a public system but are sure to oppose moving the privately insured onto a public plan. Medicare and Medicaid pay less for medical services than private insurance.
“One of the reasons why these plans will presumably be cheaper than the private insurance plans is because most of these proposals would pay providers somewhat less, either at Medicaid rates or at Medicare rates,” said Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation.
States could try to play hardball with providers, compelling them to agree to the changes or else be kept out of other healthcare programs. Alternatively, they could avoid conflict with providers by pursuing rules that would entail pay rates in line with those of private coverage, at the cost of higher taxes.
“It is difficult for a state to raise taxes too much, as they will then risk businesses and people moving elsewhere,” said Amy Lischko, associate professor of public health and community medicine at Tufts University School of Medicine.
California’s Democratic governor Jerry Brown is aiming to shore up Obamacare by funneling more money toward subsidies for Obamacare customers to aid with the cost of insurance. Currently, people making more than 400 percent of the federal poverty level are cut off from subsidies.
[Read more: Democrat proposes government-funded healthcare for all illegal immigrants in California]
While such a move would make coverage more affordable, expanding premium subsidies “doesn’t do much to address the underlying cost of care,” noted Sabrina Corlette, research professor at the Center on Health Insurance Reforms at Georgetown University Health Policy Institute. The Medicaid buy-in, by contrast, is more aimed at controlling costs.
In another move to lower the number of uninsured people, California has proposed raising the age limit to receive government-funded coverage, known as Medi-Cal, from 19 to 26 for low-income people, regardless of immigration status. The plan would use $260 million in state funds.
It will be hard for state-level Democrats to avoid dealing with the Trump administration. If they seek the administration’s help — by getting regulatory approval for new projects within Obamacare, for example — they risk rejection. If they go it alone, they risk the possibility of leaving federal dollars on the table and perhaps not being able to cover as many people as originally envisioned.
Ultimately, states don’t know what federal regulators would decide. The Trump administration has stressed it is open to a certain amount of state flexibility — within limits.
“It seems from the guidance that they will not look favorably at the Medicaid buy-in or the public option,” Tolbert said. “They make it very clear they favor private insurance.”
Lischko, who helped implement Massachusetts’ healthcare system under then-Gov. Mitt Romney, said states, whether red or blue, need flexibility.
“The biggest lesson or takeaway from Massachusetts is that reforms need time to settle in, and you need a legislature that is willing to adapt the plan as you go along,” she said. “There are always unintended consequences from a complex bill, and you need the flexibility to allow changes.”
The reward for success at the state level may be having Congress attempt to replicate what was accomplished.
“I do think folks on the Hill are going to look closely at the state experience,” Corlette said. “If there is a successful effort at the state level, it makes it easier for the federal level to make a case.”
