White House eyes giving states flexibility in designing healthcare programs

The Departments of Health and Human Services and Treasury have proposed new rules to help states receive a State Innovation Waiver under the Affordable Care Act.

The ACA's State Innovation Waiver process had been scheduled to become available in 2017, with the intention of allowing states the flexibility to design their own strategies to ensure access to high quality, affordable health insurance. Under the proposed rules, that date would be pushed up to 2014.

"Innovation waivers empower states to take the lead on implementing the Affordable Care Act," said HHS Secretary Kathleen Sebelius. "(This) announcement demonstrates the flexibility available to states as they continue to move forward on fixing our broken health insurance marketplace."

Last week, President Barack Obama told a meeting of the National Governors Association that he now supports moving the date for states to design their own systems to 2014, as long as they meet a handful of key provisions. The shift in policy is likely a nod to increasing pressure on the administration from states that are grappling with Medicaid budgets and their desire to have more leeway in how they provide care to their citizens.

"Alabama is not going to have exactly the same needs as Massachusetts or California or North Dakota," Obama said. "We believe in that flexibility."

[See: HHS offers states advice on achieving Medicaid savings]

Under the proposed rules, a State Innovation Waiver would allow states to implement policies that differ from the Affordable Care Act so long as these policies:

• Provide coverage that is at least as comprehensive as the coverage offered through health insurance exchanges – new competitive, private health insurance marketplaces;
• Make coverage at least as affordable as it would be through the insurance exchanges;
• Provide coverage to at least as many residents as otherwise would hbe covered under the Affordable Care Act; and
• Would not increase the federal deficit.

By proposing to move the innovation waiver date up three years, the administration is also signaling its support for efforts underway in Vermont, where Governor Peter Shumlin has proposed legislation aimed at creating a single-payer system in the state as early as 2014.

[See: Vermont governor proposes single-payer health plan]

Under the current proposal, Vermont would likely need a number of different waivers from the HHS. Those waivers would cover such changes as cost containment measures for Medicare and Medicaid and allowing the state to apply individual tax credit subsidies – which the ACA targets to individuals – as a lump sum payment to the state that would provide a portion of the funding needed for the single-payer model.

"On Medicaid and Medicare, there is reason to be optimistic about the (federal government) letting us include those payer streams in what we are doing," said Anya Rader Wallach, a special assistant to Gov. Shumlin. "Whether we can get an ACA waiver is harder to predict because it is many years out there and we don't know who the administration would be who could grant that waiver."

Even if the administration is able to pass a measure to move the waiver date to 2014, it won't help states that cumulatively are facing deficits of roughly $170 billion. Many governors have begun pushing for more flexibility in how they spend not only Medicaid money, but all federal funding.

"What the federal government can do for us is not money, but flexibility," Maine Gov. Paul Lepage told the New York Times at the NGA meeting. "We can slow down layoffs in a lot of private and public sector jobs if the states are given more flexibility."