Monday, February 28, 2011

Administration Talks Past Governors on State Flexibility

The President this morning endorsed proposed legislative changes to the state innovation waiver program, allowing it to begin in 2014 (when the coverage expansions under the health care law begin) rather than in 2017 as currently scheduled under the law.  The most important point about the announcement is this:  By avoiding the multiple requests by governors for IMMEDIATE relief from the Medicaid maintenance of effort requirements included in the health care law, the President’s statement IGNORES the severe fiscal problems that Medicaid presents for many states’ budgets between now and 2014.

More broadly, some have expressed concerns that the state innovation waiver program does not go far enough, and would still restrain states’ flexibility.  Section 1332(b)(1) of the statute specifies that the Secretary of Health and Human Services can grant state innovation waivers “only if…[the state] will provide coverage that is at least as comprehensive” as the coverage mandated under the essential benefits package, “will provide coverage and cost-sharing protections…that are at least as affordable” as the coverage mandated by the statute, and “will provide coverage to at least a comparable number of its residents” as the statute, all without increasing federal deficits.

While states can request waivers for flexibility, those waivers will only be granted if the overall benefits provided, and total coverage expansions, meet Washington’s standards.  As previously noted, Section 1302(b) of the statute makes clear that “the Secretary” – i.e., not states – “shall define the essential health benefits,” and shall set other standards for the required health insurance package, standards that states CANNOT avoid with a waiver.  CongressDaily’s article this afternoon regarding the standards admitted that “states must meet a high bar” to receive a waiver.  The White House’s fact sheet on the state innovation waiver says that “an increase in the number of benefit levels…could qualify” for a waiver.  What the fact sheet implicitly acknowledges – but doesn’t say outright – is that providing a simple, catastrophic policy that doesn’t meet all the Washington-mandated benefits will NOT receive a waiver.

Earlier this month, Republican governors wrote to ask that the Administration “waive the bill’s costly mandates and grant states the authority to choose benefit rules that meet the specific needs of their citizens” and “waive the provisions that discriminate against consumer-driven health plans, such as health savings accounts (HSAs).”  As we’ve previously noted, the Administration’s responses have avoided answering the governors’ request – as does today’s announcement.  The President’s endorsement of state innovation waivers does NOT address the fact that states will still be forced to comply with benefit levels and mandates set by federal bureaucrats, not by the states themselves.  Some may argue that, instead of tinkering at the margins of how states may comply with Washington-imposed mandates, the federal government should waive those mandates entirely, giving states much more flexibility to innovate without federal officials looking over their shoulders.