Last week Iowa Governor Terry Branstad confirmed that Iowa will pursue a “partnership” health insurance exchange next year, rather than setting up its own insurance exchange for implementing the 2010 health care reform law, or letting the federal government set up an exchange for Iowa.

In addition, the governor again signaled that he is against the now-optional Medicaid expansion for states, because he believes it would become too expensive for Iowa in the future.

Links and recent news about health care reform in Iowa are after the jump.

Insurance exchanges

The Affordable Care and Patient Protection Act calls for a system of state-level health insurance exchanges to be up and running by 2014, when the mandate for uninsured Americans to purchase health insurance will go into effect. If a state declines to create a fully state-run exchange or a “partnership” exchange with the federal government, the federal government will create an entirely federally-run exchange for them.

Iowa Senate Democrats, led by Health and Human Services Appropriations Subcommittee Chair Jack Hatch, have been pushing for more than a year for Iowa to start the work of creating an insurance exchange to fit our state’s needs. However, Branstad and Iowa House Republicans resisted that call, hoping that either the U.S. Supreme Court would strike down the 2010 law, or that the 2012 elections would lead to its repeal.

Since last month’s election, it has been clear that the Affordable Care Act won’t be repealed anytime soon. Hatch announced on November 13 that Senate Democrats would propose an Integrated Health Care Delivery System Act of 2013 during the legislative session and immediately seek to bring stakeholders together to work on this progress. Near the end of this post, I’ve enclosed Hatch’s statement, containing more details about his proposal.

As a November 16 deadline for states to declare their intentions approached, the Obama administration extended the deadline to December 14. Meanwhile, Governor Branstad submitted 50 questions about the insurance exchanges to U.S. Health and Human Services Secretary Kathleen Sebelius. You can read Branstad’s 50 questions here. Hatch accused Branstad of “playing partisan political games” instead of “helping improve Iowa’s health care.”

Last Friday Branstad announced that he has decided a state-federal partnership would be the least-bad option, allowing the state “to retain autonomy over Iowa’s healthcare system and minimize costs.” Excerpt from the governor’s December 14 press release:

In the letter [to Health and Human Services Secretary Sebelius], Branstad outlined the reasons for his decision stating, “…I continue to have concerns that an intrusive Federal exchange would raise costs on individuals and businesses, making it harder for them to create jobs and raise family incomes in Iowa. The State of Iowa intends to minimize the Federal government’s intrusion into the regulation of insurance. We will continue to regulate insurance plans in Iowa and retain control over our Medicaid and Children’s Health Insurance Plan eligibility.

“If our State loses control of the costs of these programs, other funding priorities like education, public safety and workforce development may be threatened. Maintaining responsibility and operational control will also enable our efforts to modernize health care and to change our payment methods to reward quality and improve Iowans’ health instead of procedure volume.”

Branstad could choose one of three options: A state-built, state-funded exchange; a state-Federal partnership model; or a full Federal takeover of Iowa’s health insurance system.

* A full State-built, State-financed exchange would cost $16 million annually. Additionally, the Federal government has yet to put forth clear parameters on what would be expected of a state-built, state-financed exchange. For example, Utah already has a state exchange, but it is doubtful regulators will approve it under the Affordable Care Act. Even Massachusetts, whose system was modeled when crafting the Affordable Care Act, is unlikely to meet the requirements put forth by the Federal government without changes to its design. Gov. Branstad believes it would be irresponsible to put the state in this kind of financial and regulatory limbo.

* A State-Federal partnership will allow the Federal government to pay for initial exchange set-up costs and administer the cumbersome web portal, a federal call center and expensive web interfaces. However, the State would still be able to administer its own health care programs, oversee and regulate the insurance industry in Iowa, and put in place measures that will expand Iowans’ ownership of their own health through the Healthiest State Initiative. Gov. Branstad assures Iowans that Iowa will not be forced or bullied into significant costs that sink our budget, and we will continue to maintain the high quality of health care access in Iowa that covers more than 90 percent of our residents.

* Gov. Branstad believes a full Federal takeover of our insurance, regulatory and health care systems doesn’t meet our needs. A quick look at the dysfunction in Washington, DC, underscores concerns of opening the door to the Federal government. Gov. Branstad does not believe it is in Iowans’ best interests to have the Federal government interfering in their lives from thousands of miles away.

“Iowa is well positioned to meet the standards outlined by HHS thus far and maintain control of our insurance regulation and Medicaid eligibility responsibilities as allowed under PPACA. Iowa will partner with the Federal government in these areas of a Federal exchange,” Branstad concluded.

Iowa is one of seven states that are planning for a partnership exchange. Meanwhile, 18 states and the District of Columbia are building state-based insurance exchanges, while 25 states are defaulting to the federally-run exchange. The Kaiser Foundation website includes a helpful map and chart showing state decisions.

In an ironic twist, most of the Republican governors who are enraged by the so-called “federal takeover” of health care are giving the federal government total control over the new insurance exchanges available to their state’s residents. Some people who opposed the Affordable Care Act think this is a brilliant maneuver. The idea is that the federal government won’t manage this task competently, exposing to all the foolishness of Obamacare.

I’ve heard health care reform supporters claim that it’s just as well these Republican governors are opting out of state-run exchanges, because their constituents will be better served by a federal exchange. I’m not optimistic that any of the new exchanges will work well.

The Des Moines Register’s Tony Leys reported on reaction to Branstad’s decision:

At a health-care forum this morning, Sen. Matt McCoy, D-Des Moines, said a joint federal and state exchange could be acceptable. “We can work with that plan,” said McCoy, who is chairman of the Senate Commerce Committee. He urged that discussions be open on how the exchange is implemented. “We need to put together a model that all Iowans can be proud of,” he said.

Sen. Jack Hatch, a D-Des Moines, said the Legislature would work to convert the exchange to being run solely by the state by 2015.

David Lyons, a former Iowa insurance commissioner, praised Branstad’s decision. “I think the partnership approach is excellent,” he said. Lyons is now chief executive officer of CoOportunity Health, a health-insurance co-op that intends to sell policies on the exchange. He said his company could work with any form of the new system, but the joint state and federal model is better than a strictly federal version. The hybrid model should provide more flexibility to respond to specific conditions in the state, while still taking advantage of federal expertise and resources.

Medicaid expansion

Meanwhile, Branstad has long opposed expanding Medicaid to cover more low-income Americans, as foreseen in the 2010 federal law. The U.S. Supreme Court made that Medicaid expansion optional for states.

Branstad was among 11 Republican governors who asked for permission to increase Medicaid eligibility in their states, but not to the full extent outlined in the Affordable Care Act. However, last week

The Health and Human Services Department (HHS) said the law does not allow for a partial expansion – at least not with the level of federal funding available to states that participate in the expansion.

The Affordable Care Act expands Medicaid to cover people at or below 133 percent of the federal poverty line. The federal government initially pays the entire cost of the expansion, with the federal share dropping to 90 percent by 2020.

Some states had asked whether they could expand Medicaid only partially – not all the way to 133 percent of poverty – and still get the full federal payment. HHS said Monday that it simply doesn’t have that authority.

“The law does not provide for a phased-in or partial expansion,” HHS said. “As such, we will not consider partial expansions for populations eligible for the 100 percent matching rate in 2014 through 2016.”

Branstad wasn’t pleased. Radio Iowa’s O.Kay Henderson covered his response:

Branstad says when he was governor in the 1980s and ’90s, less than 12 percent of the state budget was spent on Medicaid. Today, Medicaid “consumes” nearly 18 percent of the state budget according to Branstad.

“It is a significant burder on the taxpayers of Iowa and now we’re concerned about the federal government mandating an expansion and promising to pay a lot of it, but they are broke,” Branstad says. “And they have a fiscal cliff.” […]

“This is a Cadillac program. The problem is it’s a rusted out Cadillac,” Branstad says. “But we’d like to be able to have a sleek, new program that we could put together…where we partner with people and people contribute some to their own health and then the state also assists them as opposed to where it’s the government’s responsibility…and I have no obligation for my own health.”

In the short term, Branstad says the state of Iowa will have to come up with an extra $45 million in the current budgeting year to cover Medicaid costs, plus another $57 million in the following year.

“That doesn’t deal with expansion, that’s just the change in the mix because every year they adjust how much the federal government pays and how much the state pays, based on how well you’re doing in relation to other states,” Branstad says. “Well, we’re doing better in relation to other states and we’re proud of that, but we’re getting penalized by it to the tune of $57 million in the Medicaid formula.”

Senate Democrats say Iowa would save money in the short term by expanding Medicaid, because we wouldn’t have to pay for roughly 60,000 people to get insurance coverage through the IowaCare program. The Medicaid expansion would also cover more people than IowaCare.

The U.S. Health and Human Services Department might allow Iowa to keep operating IowaCare for two more years instead of expanding Medicaid, but Senate Democrats don’t agree with the governor’s position.

Under IowaCare, the state and Polk County pay about 40 percent of participants’ costs, with the federal government picking up the rest. Palmer estimated its total cost at $160 million, of which $8.7 million comes from the state.

Federal officials have promised to pay 100 percent of the Medicaid expansion for the first two years, and then at least 90 percent in later years.

Sen. Jack Hatch, a Des Moines Democrat who supports the Medicaid expansion, said Democrats controlling the Senate would not approve an extension of IowaCare. Hatch called IowaCare a “stopgap program” that is no substitute for Medicaid. He contends that the state would save money under the Medicaid expansion, because federal officials would pick up costs now borne by the state. At the same time, he says, the Medicaid expansion would provide coverage to tens of thousands of Iowans who now have no insurance.

The federal government has not given deadlines for when states must accept or reject expanded Medicaid, nor has it said whether the extent of the expansion can be negotiated, Palmer said. He added, though, that a decision most likely will be necessary in the coming legislative session, which convenes in January and should adjourn around May.

The deadline for requesting an extension to IowaCare is July, meaning Department of Human Services officials are likely to move forward on both options concurrently.

A consultant hired by the Branstad administration reported last week,

Expanding the Medicaid health-insurance program would save Iowa tens of millions of dollars for a few years, then cost the state tens of millions more in the future, a consultant has concluded.

The report by Milliman Inc. is the latest development in an argument between Gov. Terry Branstad, a Republican who doesn’t want to expand the program, and Democratic legislators who do.

The Department of Human Services paid Milliman $316,000 to assess the financial impact of various parts of the complicated issue. The consulting company’s report, released today, predicts that between 80,700 and 122,900 poor Iowans who don’t now qualify for the program would be added to the rolls if the program is expanded, starting in 2014.

In the first year, Iowa would save about $24 million under the expansion, the report says. The savings would happen mainly because some of the people in question are now on programs that cost the state more than the expanded Medicaid program would cost. The federal government has promised to pay 100 percent of the expansion’s cost at first, then at least 90 percent in the future. The savings to Iowa would climb through 2016, then drop, the report says. By 2020, the state would be spending $25 million to $59 million extra per year on poor people who otherwise would not have qualified for the program.

I find it strange that Branstad keeps saying he wants to make Iowa the healthiest state, yet he also wants to leave tens of thousands of people without coverage. The Iowa Hospital Association strongly supports the Medicaid expansion, in part to reduce costs incurred by health emergencies among the uninsured population. Today’s Des Moines Register includes a guest editorial by Iowa Hospital Asosciation President Kirk Norris.

Iowa, like all other states, is grappling with providing services more efficiently to high-cost populations, like those who are eligible for both Medicare and Medicaid. (In fact, the state has applied for a $2 million planning grant to improve care management for Medicaid patients – the very population that needs health insurance the most.) But the likelihood of progress is undermined when Iowa’s leaders contemplate leaving hundreds of millions of dollars on the table for an expanded Medicaid population.

It’s been pointed out that some very populous states with high numbers of uninsured (think Florida, Texas, Louisiana, Mississippi) are also contemplating passing on Medicaid expansion. However, unlike Iowa, those states have historically enjoyed both higher federal Medicaid matching rates and higher Medicare reimbursements. In other words, they are already advantaged by payment inequities within government health care programs and are primarily interested in maintaining the status quo.

For Iowa, the status quo means ceding much of our health care system’s financial stability to other states. The net consequence of refusing to expand Medicaid is familiar to anyone who knows the state’s frustrating history with unfair Medicare payments: Big states are able to enact or retain inequitable payment policies to the disenfranchisement of Iowa and other smaller states.

And let’s be clear on something else: Medicaid expansion is already paid for. The federal cuts and fees to fund it are in place. This means a refusal by Iowa to expand Medicaid would effectively send our resources to other states that choose to expand. Iowa will pay for them to improve the health of their populations. Iowa will subsidize their greater access to health services. Iowa will help inject billions of dollars into their economies. And Iowa will get nothing.

It will take a huge lobbying effort from the business community to change Branstad’s position on this issue, and even then, I don’t know whether Iowa House Republicans would go along with expanding Medicaid. Strangely, they might prefer to spend tens of millions more dollars in the next two fiscal years to keep IowaCare going.

Any relevant comments are welcome in this thread.

Statement of Iowa Sen. Jack Hatch

November 13, 2012

Good morning.  Today marks the beginning of a renewed bipartisan effort to reform Iowa’s health care system including the implementation of the federal Affordable Care Act (ACA).  The political season is behind us, and the 2013 legislative session only weeks away.  

Right now, more than 35 advocate groups representing consumers, providers and insurers are expressing interest in helping Iowa take the next steps toward reform.  This is the time for concrete ideas that will lead to action, and vigorous debate of those ideas.  

Of course, our work at the state level now focuses on implementation of the federal Affordable Care Act.  However, we should make it a priority to do health care reform the Iowa way.  We should take our cue from the conclusions of the various bipartisan commissions and workgroups that are the result of long hours of serious policy discussion.  At this time, Iowa has a ready-made toolbox of ideas that can be put in place without further study or planning.

This is the moment when Iowa has a chance to move from the complicated network of local providers and services we have used, to build a modern health care delivery system with clear entrance points and consistent rules of the road.  If we seize this opportunity, our health system will be more accessible, affordable, and efficient, while maintaining our traditionally high quality.      

There are two initiatives we are announcing today:

First, we are announcing the framework of a legislative proposal to be known as the Integrated Health Care Delivery System Act of 2013.  This act will match our obligations under the federal Affordable Care Act (ACA) with our needs as a state.

Second, we will immediately convene a “Stakeholders” working group consisting of legislators who are chairs or ranking members of the relevant legislative committees (Commerce, Human Resources, Appropriations, and Health & Human Services Budget Committees), Medical providers, Community Health Centers, Hospital Administrators, insurance executives, various consumer groups and directors of the executive departments.  We’ll pull together the interested parties and announce details of working group meetings before the end of this month, and begin holding meetings shortly thereafter.

We hope Governor Branstad and his administration will be actively involved in this process.  The Governor was an active and valuable member of a similar legislative committee in 2008-2009.  At that time, he was part of a process which resulted in better care for children and families, a better deal for health care providers and helped slow the growth in Iowa health care costs.

Governor Branstad has already asked his staff to develop policy in this area.  We hope and expect he will make these conclusions available to all the stakeholders.  As state leaders, we should all do everything we can to make sure Iowa consumers, employers and employees, insurers and health care providers have a strong voice in this process.

That’s why we are getting started now.

Policy Outline

Integrated Health Care Delivery System Act of 2013

Detailed below are the essential components of an integrated health care delivery system model for Iowa.  This proposal takes into account the existing quality of health care programming Iowa enjoys, but also acknowledges the federal ACA offers resources, direction and focus that create the potential for Iowa to have the most integrated, highest-quality system in the nation.  

Providing access to quality health care and lower costs through using the “Accountable Care Organizations” (ACO).  

We will engage the existing two ACOs in Iowa, the Iowa Health System and Mercy Network to incorporate the Medicaid population into their new structures.  The ACO is a group of health care providers who agree to be held accountable for providing value-based care:  lowering costs while improving health care quality throughout the continuum of care including acute care, post-acute care, long-term care, and behavioral and mental health care. The shared savings and global payment program that promotes accountability for a patient population and coordinates care for Medicaid items and services identified in this proposal and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.

Incorporating the Expanded Medicaid population into the new structure.

Iowa provides Medicaid coverage to an otherwise ineligible adult population through IowaCare, but that important waiver ends December 31, 2013.

We will incorporate the existing IowaCare population into the ACO structure and allow eligible adults under the ACA to participate.  The ACA affords the state an opportunity to move the majority of IowaCare members to the expanded Medicaid program, cover additional adults who were unable to access coverage through IowaCare, and provide more comprehensive coverage than was available under the limited IowaCare program to the whole population of eligible adults.  It is anticipated that 182,000 Iowans will enroll in this expansion.

Creating the Iowa Health Care Exchange, this is the first step in bending the cost curve for Iowa families.

The Insurance Exchange is an on line marketplace “store” designed to expand the market for individual & small business to purchase private health policies and to produce downward pressure on health care premiums for individual purchasers.

As the New York Times expressed in its November 11, 2012 editorial, “There are good reasons a state would be wise to set up its own exchange.  The exchanges will work best if they are carefully integrated with other health programs in the state – to ensure, for example, that there is a seamless transition between Medicaid coverage and subsidize coverage on the exchange when people bounce in and out of jobs. State officials also presumably know better than the federal government if there are special health needs among their residents or special insurance considerations that should be accommodated.”

Because we do not have any indication what the Governor will request HHS by the deadline this Friday, November 16, we propose a two step strategy.

First, it appears the Governor will miss the deadline of completing the application necessary to create a state based exchange.  At the minimum, he should request a Partnership Exchange for 2014.

Secondly, we will propose legislation similar to Senate Study Bill 1063 which the Senate Democrats proposed last year as benchmark to create a state based exchange by 2015, the earliest date we appear to be eligible.  Until the legislature authorizes all the federal requirements for establishing a state based exchange, we will draft the necessary provisions to create a Partnership with the federal government.

Integrating our 2012 mental health reform legislation into the system.

The new mental health reforms will result in better quality care in more appropriate settings for most patients. The ACO model invites integration of behavioral health, substance abuse and disability populations to have full access of health care coverage.   These areas of practice have been only loosely integrated with traditional health care in the past, when in fact patient needs dictate a more thorough approach.

Building important new infrastructure necessary to coordinate care and provide support systems to our “Safety Net Providers Network,” with the goal of every Iowan having a medical home.

Even with existing and new ACOs in place, many Iowans will continue to rely on a broad safety net of providers including Federally Qualified Health Centers, rural health clinics, free clinics, public health agencies and maternal-child health clinics.  We will expand this “Safety Net Provider Network” and coordinate it with ACOs.   This is because Iowa cannot leave out communities who do not have a market presence with the major health systems, nor can we afford for every provider to compete in assembling this infrastructure. Efforts are now in place with National Academy of State Health Policy, DHS, the University of Iowa, and the Safety Net Network (which the Legislature has funded since 2005) and other stakeholders, to analyze the work already done.  We will ask them to advance the pace of that effort so Iowa will have the benefit of their work-product in developing relevant legislation.

.Establishing an adequate workforce.

Iowa also must determine how the state’s current clinical infrastructure of providers can best be aligned and utilized to maintain an adequate provider workforce and meet consumer needs while maximizing the potential for value-based care.