Wyden partners with Scott Brown (R-MA) to boost state flexibility on health reform

Kari Chisholm FacebookTwitterWebsite

"Federal reform shouldn’t constrain a state’s ability to do better. Some of the most innovative approaches to health policy have originated at the local level, where lawmakers have a unique insight into their constituents’ lives and the state waiver simply gives states the bandwidth to pursue those kinds of approaches." - Ron Wyden

The current health reform law includes a feature promoted by Senator Ron Wyden that would allow states to opt out of the individual mandate, the exchanges and other requirements -- if those states develop a plan that meets the coverage and cost requirements of the law. Just one problem - the individual mandate arrives in 2014, but the state exemption arrives in 2017.

Today, Wyden and Senator Scott Brown (R-MA) have introduced a bill to move up the effective date of the state exemption to 2014. From the Washington Post's Ezra Klein:

This morning, Sens. Ron Wyden (D-Ore.) and Scott Brown (R-Mass.) introduced the “Empowering States to Innovate Act.” The legislation would allow states to develop their own health-care reform proposals that would preempt the federal government’s effort. If a state can think of a plan that covers as many people, with as comprehensive insurance, at as low a cost, without adding to the deficit, the state can get the money the federal government would’ve given it for health-care reform but be freed from the individual mandate, the exchanges, the insurance requirements, the subsidy scheme and pretty much everything else in the bill.

Ezra notes that liberals may become big fans of this approach:

The GOP’s slogan on health-care reform has, till now, been “repeal and replace.” But they don’t have the votes for either. What they might have the votes for is reform that, maybe, one day, if all goes well, could lead to replacement. And, believe it or not, liberals might be able to get on board with this strategy, too. ...

One state that wants to prove it is Sanders’s Vermont. “As a single-payer advocate,” he says, “I believe that at the end of the day, if a state goes forward and passes an effective single-payer program, it will demonstrate that you can provide quality health care to every man, woman and child in a more cost effective way. So I wanted to make sure that states have that option.” Vermont’s governor-elect, Peter Shumlin, is on the same page. “Vermont needs a single-payer system,” he said during the campaign.

Single-payer, of course, is even more objectionable to conservatives than the existing health-care law. But that’s the beauty of this option: It allows the liberal states to go their way, the conservative states to go their way, and then lets the country judge the results.

Reaction from the activist left has been positive. David Dayen at FireDogLake:

This just makes sense ... Brown probably thinks it sounds good for his base, and maybe the national media would describe it as a “setback” for the Obama Administration. But this is completely sensible.

And, sure enough, earlier this week State Rep. Michael Dembrow (D-Portland) announced that he would introducing a single-payer bill for Oregon. He's supported by Health Care for All Oregon, Jobs with Justice, and others. Here's a summary of the plan from HCAO.

Obviously, there will be other plans and approaches suggested in the legislature. Sure makes me glad we elected a health policy expert to the big chair in the Governor's office - instead of a failed free-throw shooter.

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    "Sure makes me glad we elected a health policy expert to the big chair in the Governor's office - instead of a failed free-throw shooter."

    Me too, since none of us will have jobs in a couple of years ;-)

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    Now back to being serious. The plan looks great. My question is how such a plan gets funded. Will there be a new tax in place of our current premium? Any info on the funding mechanism of such a plan would be appreciated.

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      From the link Kari had:


      In lieu of premiums, co-payments, co-insurance and deductibles, the Affordable Health Care for All Oregon plan will be funded by a system of dedicated taxes, progressive in nature and based on ability to pay. In addition to payroll and personal income taxes, the Board will investigate and consider other potential revenue sources, including a transaction tax on stocks and bonds, a progressive surtax on higher incomes, and a progressive tax on gross business receipts divided by full-time equivalent employment.

      As always, the devil is in the details, but from that broad outline, it has some really strong ideas. This is basically a core care single-payer system where you can have private bolt-on coverage for more coverage. This would allow businesses in Oregon to off-load their health insurance costs form their books, but allows them to have gold-plated added coverage if they feel the need in order to recruit job-seekers who want a better benefits package than simply core coverage, etc. Of course this is just one possible plan, but this is the type of plan we need.

      The big reservation I have about a state-level single-payer system is how do you set it up so that it doesn't becomes an unintended (and unmanageable) magnet for everyone in the other 49 states with serious health issues to move to Oregon so they will be covered?

      The possible flood of high-cost new arrivals in the state could overwhelm the system if it was not structured in a way to not open such a flood-gate.

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        Time to make an appt. with the eye doctor.

        I agree with your reservation. I have heard it said that one major reason OR has such high unemployment is that when families lose their job, they stay here so their kids can get health care.

        I don't know if they could require a period in in-state residency before becoming eligible for the plan. Although, if they prohibit private insurers from offering the same benefits, I don't know how that would work either.

        As you said, the devil is in the details, but I am interested so far.

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          I'm not saying I agree with this approach, but Ireland's Social Security system (which includes health care, unemployment insurance and retirement, I believe, possibly more) requires immigrants to pay into the system for quite a while--I think maybe as long as 5 years, before they can get coverage. Of course, EU citizens are automatically covered in all other EU countries, I believe.

          Ah, civilization...

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      the funding would be via new taxes that will run the producers out of the state. The act also states, "There shall be no co-payments and no deductibles under the plan,".

      That includes emergency room, vision, ambulance transport and Rx. The closest thing to this currently in existence is the Trimet health plan which costs about $2,300/month for family coverage.

      This proposal is DOA.

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        So "producers" being able to offload their health insurance costs from their would flee the state?


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        Most business owners I know would gladly pay a per employee fee(tax) in exchange for some stability in the price. What business owners cannot deal with is the year to year volatility in premium prices.

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    As corporate insurers prove they are not viable providers of reliable health care, and prove that they can't meet the requirements to spend most of premiums on actual health care rather than management costs, CEO bonuses, and stockholders, single payer will gain in momentum as the only affordable health care delivery system. And very likely the individual states are going to be the proving ground for models of single payer.

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    Here is why it is DOA

    Funding source is increase income taxes. If the last 8 years have shown Oregonians anything it is that the state income tax is not a viable or reliable base for state services.

    Would a sales tax dedicated to such a plan be a better funding source? Would Oregonians agree to tax everyone for their use of medical care?

    State employees currently pay nothing each month for coverage. They have realatively minor co=pays and low deductibles. Telling them that their coverage will be funded via a tax on their income will just not compute. Their public employers do not pay income or business taxes so their supposed revenue is not in the funding equation.

    The businesses who employ others will be pressured to a drastic increase in pay to offset the change in health care delivery AND pay much higher business taxes. Those who are sole proprietors or LLC's will absorb a huge tax increase.

    Human nature is funny, when the user of a service is removed from the direct payment, utilization runs extremely high. There is no incentive for wellness or consumerism when it comes to use of services. Therefor cost containment is derived from the supply side, the health care providers via controls on reimbursement. Witness the 26% pay cut Medicare providers are facing.

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      "when the user of a service is removed from the direct payment, utilization runs extremely high. There is no incentive for wellness or consumerism when it comes to use of services."

      Sure. That's why countries with single-payer systems funded by general taxes have so much higher costs and worse outcomes. Oh, wait...

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      My uncle and cousins own a large car dealership. They have said on more than one occasion that they would welcome being relieved of the burden of providing health care insurance. American businesses are at a competitive disadvantage with other countries because of the employer based system, which is now breaking down, including the public employer based system. A single payer system offers more affordable insurance. Those who want their cadillac plans can still buy them if they choose in the same way that Medicare supplemental plans work.

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      Their public employers do not pay income or business taxes so their supposed revenue is not in the funding equation.

      That will be news to my sister who is a public employee who paid Oregon income taxes for well over 20 years.

      That you think public employees don't pay income tax is astounding.

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        I believe he said "employers" not employees

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          Thanks for pointing that out I misread that, but that makes even less sense as an issue in this context. The premiums for public employees would be paid by the employees based on their individual (employee income).

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            Thanks for making my point. Ste employees currently pay nothing in monthly premiums. Zilch, nada, niente. Try telling SEIU and AFSCME that their members will begin picking up the health insurance tab via their income taxes.

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              Can easily be offset by increased wages, which was why it was negotiated for in lieu of higher pay in the first place. Also, no co-pay and deductible under this plan would tamp down opposition.

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    I don't think states can constitutionally require minimum residency requirements to qualify for social programs

    GRAHAM v. RICHARDSON, 403 U.S. 365 (1971)

    "State statutes, like the Arizona and Pennsylvania statutes here involved, that deny welfare benefits to resident aliens or to aliens who have not resided in the United States for a specified number of years are violative of the Equal Protection Clause and encroach upon the exclusive federal power over the entrance and residence of aliens; and there is no authorization for Arizona's 15-year durational residency requirement in 1402 (b) of the Social Security Act."

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      I was checking on state insurance programs and many have a 30 day residency req. to apply.

      This is going to have to be figured out before anything could be implemented.

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      That seems to be because Social Security is Federal, not state level program/authority, and not about the actual residency waiting periods in and of themselves.

      As Michael points out this is going to have to be figured out before anything could be implemented or any system would simply be swamped by every seriously ill person in the country with chronic health issues to move to Oregon.

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    Reply function isn't working...

    "when the user of a service is removed from the direct payment, utilization runs extremely high. There is no incentive for wellness or consumerism when it comes to use of services."

    Yes because people just looove going to the doctor. I grew up in Canada and most people go to the Dr for checkups and when they need to (ie get sick, need a blod draw to get thier cholesterol RX renewed).

    I take it you support metered parking everywhere then?

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    I appreciate this article, Kari. I had been wondering how Wyden and Dembrow would come together. I was worried that Wyden would be pushing his exchanges and that would not be my preferred course.

    One of the commenters said the public employees would never agree to paying taxes to have single payer. Where do you come up with this? Do you think public employees get a kick out of the continuous put down by the private sector guys? Like they are some sort of pigs at the public trough? And why does everyone say people would not tax themselves progressively to get health care? But then say, OMG, it would be such a blessing that everyone would come to Oregon, especially the sick, who, of course, would be unemployed and otherwise a drain on the "productive." (What is that whole "productive" thing about?) My vision got blurry with all those businesses going in and out of the state over health care costs. I thought the whole tax cut extension argument was about business in such anxiety and doubt over the amount they would have to pay. Wouldn't setting to rest insurance costs help?

    This clearly is one of the most hopeful things I have heard in a really long time and I feel good that we have a guy like Dr. Public Health Policy Kitz as governor who surely will be of assistance in making this happen.

    Please, folks, let's get a positive attitude here, instead of no, no, no, we are all such anti-social pigs, can't figure it out, cost too much, too hard, too awful, too whatever. We could do this and should, right away.

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      I’m pessimistic about the single payer concept from HCAO because it doesn’t acknowledge the major challenges of restructuring healthcare delivery.

      First is funding. Healthcare spending in Oregon from group and individual policies is on the order of 7 billion per year. That’s about what the entire personal income tax will bring in, after the economy recovers. I don’t see any plausible way of getting that in new taxes no matter how they’re spread. The trick is getting money that businesses currently spend to subsidize health policies into the new pool. That isn’t a simple thing, and it’s not clear from the HCAO document that they’re even trying to figure it out.

      Second off is the problem of rising cost. Even if you do get the funding mix to work, how do you deal with costs rising 5 – 10 points faster than income every year?

      I want to see health care reform work, and I want people to have a right to necessary care. But such a right is meaningless without the money to pay for it. That is the challenge, and I don’t see it being met.

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        Well that is the thing about a single-payer. That is the leverage to not let costs escalate disproportionately vs. income.

        I do agree that there needs to be a fully worked out structure to be able to effectively facilitate transferring business spending on health insurance over into the single-payer pool. How that is done with national, and multinational companies who have workers in this state, but are charted and/or headquartered out of state is a a real issue which also needs to be solved.

        For instance, I work in a Fortune 500 company whose headquarters, HR and payroll all operate of to New York (and is incorporated in Connecticut).

        How do I and the other 2,000+ workers for that company who live and reside here in Oregon have our coverage costs added back into my paycheck or transferred into the single-payer pool form my employer who is out-of-state, etc.?

        It can certainly be solved, but as BJ points out, it isn't even touched on in the outline document linked to here.

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          Opps, meant to say "but as you point out".

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          “Well that is the thing about a single-payer. That is the leverage to not let costs escalate disproportionately vs. income.”

          It’s true that adopting a monopoly system gives considerable leverage, but using that leverage to force lower, or even just not-rising costs on providers is not easy. See MA for an example of how this can run off the rails. http://www.boston.com/news/health/articles/2010/07/04/health_payment_overhaul_shelved/

          That isn’t to say that it can’t be done, only that it requires a lot of effort to bring enough parties around to make it work. I’d like to see the single payer supporters start there, building a system (and a political coalition to support it) that can effectively regulate provider pricing. That has nothing to do with funding which can be dealt with afterwards. Politically I think it’s much more possible- who doesn’t want to spend less on health care?

          On a philosophical level I want to start there because provider pricing, that is the decisions about procedure pricing, discounts and revenue mix, are the darkest corner of healthcare finance. That's where I expect the most bodies are buried.

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      But then say, OMG, it would be such a blessing that everyone would come to Oregon, especially the sick, who, of course, would be unemployed and otherwise a drain on the "productive."

      Not sure if that was a dash of sarcasm or not, but I don't think anyone is saying that would be a blessing. I was pointing out it would be a problem that must be solved before this plan would be viable. If this were a national single-payer, it wouldn't be the concern since all 50 states would be in it, so there would be no inducement for people with serious medical problems to move from one state to another for coverage.

      I am all for single-payer, but it has to be made sound on a state-level.

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    The only thing missing from Senator Wyden's proposal that I'd really like to see is a provision for interstate compacts in the formation of single payer structures or insurance exchanges... so that states with small populations could jointly negotiate for coverage for their residents if they chose.

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    Clearly the state is not going to keep giving public employees a free ride on health care. I think what Wyden is getting at here is piggy-backing his Health Care proposal on to the ACA at the state level. You basically free up the existing health care benefit from public or private employers and give the individual a choice whether they want to buy into a public or private plans through the state exchange. Hypothetically the Oregon Health Plan could be enhanced and expanded to become the public option for the state of Oregon. So I'm not convinced that this is about bringing on some gigantic new tax to bring the public option on line, except to the extent that those individuals who wish to buy into the new public option could have their premium paid out of a state withholding tax. As I understand it the low income people are already going to be folded into the Oregon Health Plan through ACA and the subsidies provided through that legislation.

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    If California passes a single-payer bill in the next couple of years -- a real possibility, since Schwartzeneggar is no longer around to veto it -- maybe Oregon could simply buy into California's system instead of reinventing the wheel. If Washington did so too, we could see a unified single-payer plan along the entire west coast.

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