How I would design a state single payer law

After providing an analysis of all the issues facing the pushing for single payer health care this country, I thought it was important to provide details for how I would personally design a state-based health care effort. Several states are talking about moving towards a single payer system but for any plan to work it needs to deal with the unique legal and financial hurdles a state would face. I don’t feel the need to do this at the federal level, since a federal single payer system would legally be much easier to implement.

My state plan for affordable universal health care is not what I think would be the absolute “best” policy possible, but the best I’ve been able to piece together that would have a reasonable chance of success given the political and legal hurdles. This strategy is based on four criteria that should be used to judge any proposal:

1. It needs to, on net, make most people better off.
2. Any step forward should weaken or at least not strengthen those institutions opposed to real reform. This is what I consider to be a major failing of the Affordable Care Act. Forcing people to buy subsidized insurance from poorly regulated private insurance companies only increases their power.
3. It should still create a clear path for better improvements even if part of it is struck down by the courts or denied by the federal government. You don’t want a plan that would completely fall apart if one federal waiver is denied or if a court ruling goes the wrong way. If there is a single weak point, that is where it will be attacked.
4. It should keep direct disruption to a minimum. Any real reform is going to need to take on the health care industry, and given the industry’s size there is no way to make this omelette without breaking eggs. That said, there is a big political reason to try to minimize the negative disruption it would cause to regular people.

The plan should be insulated as much as possible from potential political, financial, legal and federal attacks. I think it is important to start with the assumption that any state health care plan for real reform will face a hostile federal government and federal courts. First, history shows it likely will. Second, it is easier to add to a plan that's designed to be built on than it is to take away from a plan where all the pieces were crafted to fit together.

If facing a hostile president and federal courts: A state run public insurer that directly covers many and is open to most everyone

Even if the state can’t get any waiver from federal law or new federal funds, it should be able to build a Medicare-like public insurer, according to a Rand analysis. In addition, the state could automatically sign up most people or give them the option to join this new public insurer.

The state would first set up some type of insurance company. It could be a direct government program, like Medicare, or a corporation owned by the government, like the North Dakota Mill and Elevator.

This public insurer would operate as much like Medicare as possible, to reduce administrative work for providers. This state-based public insurer would offer three plan tiers. Tier one would have benefits, co-pays and out-of-pocket costs equal to roughly what the state currently provides state employees. Tier two would have benefits roughly equivalent to the average plan provided by middle-size private employers. Finally, tier three would be an ACA silver plan for legal reasons.

Auto-enroll state and local employees in tier one

To make this public insurance plan work well, the state would then leverage the health care dollars it does control. The public insurer would handle the state’s Medicaid program. It would also start by gradually transferring basically all state and local employees to the public insurer's tier one plans. This would minimize disruption in coverage for public employees. This large pool would give the public insurer the significant market power necessary to negotiate rates with providers. I would peg provider reimbursement rates to the Medicare rate plus 5-10%. This would allow it to offer insurance at a very good price.

Open it to all employers and add a modest employer mandate

That state would allow all companies regardless of size to buy tier one or tier two coverage from the public insurer. The public insurer should be able to offer a price that would be very attractive to companies, possibly costing more than 10% less than private insurers. It is likely within a few years a significant share of companies would switch. By making the policies similar to what people already have and putting the decision to switch on employers, this also minimizes disruption.

This would be combined with as large of an employer mandate or “pay-to-play” requirement as would likely serve as an ERISA challenge. What exact amount that would be is difficult to guess.

ACA exchange work around

The public insurer would have the tier three plan for one simple reason: To get all the federal ACA subsidies low-income individuals without employer coverage need to sign up for a silver plan on the exchanges.

The state would take action to ensure that the public insurer was basically the only option on the exchange and to make sure everyone qualified signed up. I would create an automatic enrollment and premium collection system for all individuals not covered by their employer.

Since an ACA silver plan is pretty terrible coverage and the subsidies are insufficient, the state would need to provide some extra money to make care truly affordable. The state could create its own cost-sharing subsidies to make tier three coverage the equivalent of tier two.

The money needed for these subsidies would be relatively modest. Some could come from savings in state employee health care spending. Some would come from the employer mandate fine. Some could come from the public insurer adding a small surcharge to the premiums it charges private companies. Some could come from general revenue.

The result

This would not create a true single payer system, but it would get us a lot closer within the constraints we face. Medicare would technically still be separate. Some companies would still give their employers private insurance, but within a few years it is easy to see how 80% of people are directly covered by Medicare or the new state Medicare-like public insurer. It should provide affordable care to almost everyone.

Compared to the other alternatives, it would need minimal new taxes and minimal direct disruption to people’s current coverage. For people with employer provided coverage, the government won’t “make you lose your current coverage.” If your coverage changes, it will be because employers realize it is so much better.

Most importantly, this foundation is easy to build off of if/when the federal government and federal courts are less hostile. The following elements can be added from the beginning if the federal government is willing to provide the waivers or later when a new president is elected.

If the state can get an Obamacare 1332 waiver

The Affordable Care Act does allow the HHS to grant State Innovation Waivers. States can use all of the money that would have been spent on ACA provisions for their own plan if their program will “provide access to quality health care that is at least as comprehensive and affordable as would be provided absent the waiver.”

If a state gets a waiver, this plan could be amended to eliminate the ACA exchange work around mentioned above. Instead, the state could automatically enroll anyone without qualified employer provided coverage in the tier two plan. This would be paid for with the waiver money, the other revenues discussed above and charging these people a “mandatory premium” or new income tax.

If the state can get a Medicare waiver

It is theoretically possible that HHS could grant a waiver to let a state administer Medicare, but it is untested. If the state could eventually get such a waiver, it could just have the new public insurer also operate Medicare in the state. This should streamline administration and reduce health care overhead costs in the state. It would also allow the state to take a more holistic approach when it comes to deciding reimbursement rates.

If the state can get ERISA amended

Dealing with ERISA issues would take an act of Congress, but if Congress does change the law the next step would be fairly simple. This would make reform much easier and more efficient.

Instead of encouraging employers to use the new public insurer, the state would simply require all companies to give their employees the equivalent of tier two coverage or pay a tax equal to the cost. This technically hides the cost while getting the desired outcome. This is not the “best” way to finance health care policy, but it is by far the least disruptive and most politically tenable option. These steps would move my plan from quasi-single payer to true single-payer.

First lay the groundwork

Of course, before we can get to that point, a lot of groundwork needs to be laid. States need to be made ready. On the one hand, that means pushing for legislative changes that weaken the relative lobbying power of the heath care industry. This includes health care regulations like a higher minimum loss ratio for health insurers, a mandate that only non-profit plans can be sold on the individual market, banning surprise billing, etc… It also includes political reforms like campaign finance rule changes, lobbying restrictions, etc…

At the same time, efforts should be underway to build popular support and elect candidates willing to be cosponsors for a specific legislative plan, not a vague idea. Politicians claiming support for vague principles is not as good as public support for a bill. It is easy for cynical politicians to find an excuse for why a specific bill doesn’t apply to their promise or why a bad bill does. This happened a lot in 2009 with Democrats and is especially evident right now as Republicans scramble to figure out what “repeal and replace” means.

That is why I'm putting forward this plan outline. I’m not claiming it is the best possible plan or even the one progressives need to rally around. But it demonstrates what such a plan needs: a realistic way to deal with the legal and political hurdles to any state-based reform.