Executive Summary - Charting a Course: Preparing for the Future, Learning from the Past

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This year's State of the States will review the full range of state activity on health reform during 2008 while also looking to the future, particularly in light of the expected impact of the economic downturn and the possiblity of federal action. This is a time of both challenge and possiblity for policymakers, and the nation. The experience of states can inform the ongoing discussion.

With the election of Barack Obama to the Presidency, Congressional leaders have begun to set ambitious goals for the 111th Congress, including comprehensive coverage and systemic reforms to promote quality care and cost containment.  For this reason, this year’s report not only analyzes the experience of states in the past year, but also explores the relationship between states and the federal government.

  • The states will be watching reform efforts at the national level, first for their possible immediate impacts (for example, a short-term boost in the federal Medicaid matching rate to address the states’ budget shortfalls) and then to see how broader federal reform may impact their particular states.  In light of severe budget deficits, some states may choose not to act in 2009 in the hopes that federal coverage expansions and other reforms will be forthcoming.
  • Federal health policymakers can learn from the experience of states that have pursued innovations in both coverage expansions and delivery and payment systems reforms. Since state efforts have dominated the reform agenda recently, in part, because there has been little to no federal action, there is a wealth of experience and lessons that can inform the national discussion regarding health reform.

As the discussion continues in 2009, some critical questions will need to be resolved:

  • How can the states and the federal government best work together in the context of national reform?
  • How can the federal government provide leadership that empowers the states to be effective partners? 
  • Which tasks are best undertaken at which level of government?

Given the large variations between states in coverage rates, health care delivery system models, insurance market structures, income levels, and a variety of other aspects, federal reform will certainly impact states differently.  How can states and the federal government work together to reduce undesirable variation while still allowing for creativity and innovation at the state and local levels?

The analysis in this report explores these challenging issues.  It also provides the necessary context for readers as they learn about state-level innovations and reforms. Perhaps the two most significant themes that emerge from a review of 2008 state-level health reforms are: 1) the impact of the recent economic downturn; and 2) the emerging trend among states to address cost and quality together with access as they consider comprehensive reforms.

Surveying the Landscape. This section analyzes trends in health care cost and coverage.  It notes that while employer coverage rates have held relatively steady in the last few years, declines will be inevitable as the current recession takes hold.  While many people will lose their employer-sponsored coverage as the unemployment rate climbs, more will become eligible for state Medicaid programs.  This will further pressure already burdened state budgets. By December 2008, at least 41 states and the District of Columbia were reporting mid-year budget gaps, amounting to an estimated $43 billion shortfall[i].   Forecasters predict that these budget gaps will only worsen as states struggle with declining revenues[ii].

State Coverage Strategies
  While election year politics slowed the rate of state reforms relative to 2007, significant progress was accomplished in several states.  Massachusetts and Vermont continued implementation of their comprehensive reforms, with Massachusetts reporting that 97.4 percent of its residents are now insured and Vermont launching two of three coordinated community pilots under its Blueprint for Health.

Minnesota, Iowa, and New Jersey all passed significant health reform legislation in 2008.  Minnesota’s legislation was broad in scope and included major provisions that address improved health care coverage and affordability, payment reform and price/quality transparency, chronic care management, administrative efficiency, and public health[iii].   Iowa lawmakers expanded children’s coverage to 300 percent of the Federal Poverty Level (FPL), called for a medical homes program and several other quality and transparency initiatives, and set up a task force to develop a plan to provide comprehensive coverage to all Iowans in five years.  New Jersey also expanded health coverage for kids and passed a mandate that all kids be covered; they also expanded health coverage for parents up to 200 percent of FPL.

Several other states attempted major health reforms—most notably California and New Mexico.  While their ambitious goals were not achieved in 2008, they advanced the health care discussion in their states.

Finally, a handful of states used 2008 as a consensus-building year, putting together comprehensive plans for health care reform in the coming years.  These states include Arkansas, Connecticut, Ohio, Oregon, and Utah.  While the economic picture in each of those states has darkened considerably during recent months, there are still hopes of enacting at least some of the recommendations being proposed.

State Children's Health Insurance Program.
  Ten states passed legislation in 2008 to expand children’s health coverage, either through increased eligibility levels or stepped up enrollment efforts.  The failure of federal lawmakers to pass a reauthorization of the State Children’s Health Insurance Program (SCHIP) in late 2007 and the impact of a restrictive federal directive limiting the use of federal funds to expand coverage above 250 percent FPL had a dampening effect on SCHIP expansions.

State Reform Efforts Target Small Businesses.  Because of declining coverage rates in the small business market and the difficulty of finding affordable small business coverage, many states have developed interventions to bolster the small business market.  These include providing premium subsidies, offering reinsurance programs, restructuring benefit plans, providing tax cuts and credits, or some combination of these approaches.  

Cost Containment and Quality Improvement
The U.S. health care system has seen dramatically rising costs in recent years.  These increases have impacted the budgets of individuals, employers, states, and the federal government.  The quality of care, unfortunately, is not improving at a commensurate rate; indeed, high spending does not correlate with high quality.  There is a growing consensus that payers—including states—are not getting good value for their health care dollar.

States have undertaken a series of strategies to improve value by containing costs and improving quality.  These include: 1) investing in primary care through medical homes and care coordination; 2) wellness initiatives; 3) efforts to promote patient safety and prevent medical errors; 4) price and quality transparency initiatives; 5) health information technology and exchange; and 6) efforts to reduce preventable hospital readmissions.

Looking Forward.  The immediate future in health care policy is uncertain.  While many states have laid the groundwork for significant reform in the last few years, budget shortfalls and the potential for federal reform are likely to dampen state efforts.  Nevertheless, the coming year will put the spotlight on health reform as federal lawmakers consider the issue and more businesses and individuals feel the pinch caused by the economic downturn.  It remains to be seen whether the national discussion around health reform excites or dampens state efforts and what role states might play in a changing federal system.  


[i] McNichol, E. and I.J. Lav. “State Budget Troubles Worsen,” Center on Budget and Policy Priorities, October 24, 2008. Updated January 14, 2009.
[ii] Ibid.
[iii] Minnesota Senate File 3780, https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=S3780.1.html&session=ls85; “Minnesota Legislature Passes Historic Health Care Reform Legislation,” St@teside, State Coverage Initiatives, May 2008, available at www.statecoverage.org.