Intersection of Policy and Politics in State Coverage Expansion Campaigns

1. Intersection of Policy and Politics in State Coverage Expansion Campaigns Walter Zelman Professor, Director, Health Science Program California State University, Los Angeles wzelman@calstatela.edu 323. 343.4635

2. Study Goals • Better understand the political dimension of coverage expansions • Provide value to those seeking such expansions • Increase research interest in that dimension, and provide starting points for more political analysis

3. Scratching the Surface • Study involves 5 states and multiple issues, options, and variables • Many could be the focus of a full study • Given limited number of states, often unclear what is an exception and what is trend • Result: Findings here as likely to be questions as answers

4. Study Methods and Sources • Review of public information: • Monitored newspapers • Web sites of interests and others • Reports, press releases, and other publicly available documents • Interview about 5 individuals per state: participants and observers

5. Outline of Presentation I Systemic Factors II Processes of Policy Development III Financing Reform and Cost Control IV The Interests V Strategy VI Leadership

6. Systemic Factors: Complexity and Interconnectedness • The redistricting analogy: interrelated nature of the parts • Public and private sector connections • Multiple interests, major economic impacts likely to be involved in almost any issue • Hard to take one issue or opponent at a time

7. System Factors: the Institutions and the rules • Supermajority votes: the California problem • 60 votes in the US Senate • Political Science 101: the Madisonian model • Rules may favor the status quo, especially when interests are numerous and powerful: Thumbs on the checkerboard • Unlimited need for campaign funds, mostly from the interests

8. Systemic Factors: Federal Issues and Funding • ERISA • Federal financing: Medicare, Medicaid, SCHIP, disproportionate share, tax code, etc • Do states have tools to limit cost growth, and especially the major technological drivers?

9. Systemic Factors: Economic Cycles and Budgets • Best opportunities for reform may come when capacity to address the problem is low • Hard economic times raise visibility of the issue, but put pressure on state budgets: higher spending, lower revenues

10. Concerns and Economic Opportunity

11. Policy Development: Private Processes • Governors and private processes • Good staff talent • Largely private • Appreciation of complexity: led to expanded concepts to reform, more focus on cost • Romney: came to individual mandate • Rendell: moved from fed to state focus and more focus on small business and economy • Schwarzenegger: all connected • Spitzer: need to move incrementally: kids first

12. Policy Development: Public Processes • Varieties of public processes and outputs • Road maps: MA, NY • Task forces: hearings, reports, differently constituted: IL, PA, NY • All states except California • Varied purposes and value: • May reflect emphasis on search for evidence-based, consensus solutions

13. Financing Options: Employer Requirements • Trend may be to modest levels: • Low percentage requirements • Perhaps a sliding scale • Demands on employers may be limited by concerns about economic impacts • Particularly true for small employers who barely seem to even need organized lobbying power: others use them to make the case

14. Financing Options: Employer Requirements

15. Financing Options: Employers • Chambers, like most associations, may continue to reflect lowest-common denominator positions • There is evidence of some employer willingness to accept some “shared responsibility” • But, support may require protection in out –years • Apparent, sizable reluctance to break ranks • Individual business supporters or coalitions can reduce appearance of across-the-board business opposition • May even be possible to win appearance of small business support

16. Financing: Individual Mandate Logic for mandate seems strong: • May increase number of offering employers • Probably needed to fix individual market • Politically, may be required to win business, insurer support • Is possible to protect low-income families • Eventually accepted in MA; limited version in CA; IL task force accepted it

17. Financing: Individual Mandate But opposition still considerable: All states • Slippery slope away from employer responsibility: Uncertainty trumps economics • Large deductibles may make it affordable, but also less attractive • It is a hard sell for unions and to consumers • Politically, support may require imposition of requirements on employers

18. Financing: Federal Funds • State reform as federal reform • All states report funding as the central challenge: especially in lean years • States still wary of imposing broad taxes • Successful state efforts will probably require more access to federal funds • States with great disproportionate share funds may have greater capacity

19. Let’s Not Forget… Public Debates Matter Percent who support a universal health insurance system, in which everyone is covered by a program like Medicare that is gov’t-run and financed by taxpayers Percent who support the current system, in which most people are covered through private employers, but some people have no insurance Percent who say they would support a universal health insurance system even if it… Meant they would pay either higher premiums or more taxes Meant there were waiting lines for non-emergency treatments Limited their choice of doctors Meant some treatments currently covered would no longer be covered Source: ABC News/Kaiser Family Foundation/USA Today Health in America Survey (conducted September 7-12, 2006)

20. Financing: Cost Control • Policymakers clearly see tie they once did not see: costs rising faster than wages • Public concern on costs also high • Some see cost control, improving system, as key to framing: not uninsured • But public appears unwilling to deal with hard choices here

21. Pennsylvania’s Employees and Businesses Cannot Keep Up with Health Care Inflation % Increase in Family Health Insurance Premiums vs. Inflation and Increase in Median Wages in PA Between 2000 and 2006 WalterZelman Presentations

22. Projected Average Annual Growth in Illinois Health Care Spending Without Reform, Gross State Product and Wages 2005 - 2015 WalterZelman Presentations

23. American Views on Most Important Issue for Government: % Saying Issue is One of Two Most Important Source: AP, 2006

24. Factors seen as “Very Important” Reasons for Health Cost Increases Ca Field Poll Jan 2007

25. Financing: Cost Control Two conflicting themes • Cannot achieve or sustain reform without cost control • Cannot achieve reform with cost control • Conflict: easiest way to reduce interest group opposition is expanding, not contracting the pie

26. The Interests: Organized Labor • Much of labor may lack enthusiasm for centrist approaches • Traditional labor position: employer required to pay 80% of defined benefit • Mixed reports on labor support in 2007-08 • Issues with labor in MA, IL, CA • SEIU more supportive than AFL: health care workers, lower wage workers • AFL more concerned on costs than SEIU • Purchaser, provider conflict?

27. The Interests: Organized Labor • Concerns about individual mandate and slippery slopes • Concerns about level playing fields • Concerns about loss of union benefits as a recruiting tool • Concerns about paying higher costs/taxes so that non-union employers can get subsidized coverage

28. Hospitals • Provider and leader in business community • Have been important supporters: Mass, Ill • Can be major force for reform: sees benefits, can lead in some business communities • Ideal interest group: a leader in virtually every district; Boards are who’s who of community

29. Hospitals Multiple problems in hospital leadership • Trade associations may not lead: reform may produce winners and losers • Safety net, DSH hospitals will demand protection even as fewer dollars are needed • Multiple concerns about changes, reductions in revenue streams; inherently conservative • Support of hospitals may require a larger pie

30. Physicians • Not reported to be playing major roles • Negative in some states: insignificant in others • Primary care and family physicians different; can they fill the void? • Perhaps with public: but not with inside political leverage

31. Health Plans • Some supportive of coverage expansions: Can be sizable business asset • If insurance model unchallenged, regulatory elements limited and market rules acceptable • Support may require individual mandate • Those with underwriting models may be vigorous opponents

32. Consumers • Need much more study • Broad coalitions appear effective: but capacity to mobilize public may be limited • Religious ties effective in several cases: produce real credibility • Role of labor in these coalitions needs study

33. Consumers • Little evidence of significant public pressure • Public attention to state issues way below that of federal • Single payer leverage down: consumer groups support it, but more in theory than practice • But may still maintain capacity to undermine other reform efforts (California)

34. Strategies: Partisan and Centrist • Consensus-building strategies seem dominant: • Republican votes rare; but Democrats need business and provider allies • Public, stakeholder processes may reflect that perceived need • Cost control now central to strategy

35. Leadership: Some Findings • Systemic forces may be most important in long run, but leadership and specific decisions matter • Many leaders made major efforts • But many reports of major animosity between key players: NY, CA, ILL • Significant input re Governors not maintaining positive, respectful relations with legislators

36. Leadership in Massachusetts • More recognition of leaders and leadership in Massachusetts? • Is it just the result of success? • Or, did leadership really emerge and why? • Greater perception of shared need to succeed

37. Five States: a Positive View • Massachusetts succeeded • Illinois has made progress, might have made more: tax proposal hurt, Governor’s relations with Speaker hostile • Pennsylvania: some progress made, issue still in doubt • California: came close • New York: has potential

38. Five States: an Alternative View • Massachusetts Unique • No new successes in 2007 • Obstacles vary, but always substantial: costs, complexity, multiple interests • Primary problem is finding a political coalition that will support the cost reductions or new financing needed • Creating, sustaining state reforms may require major federal assistance

39. Some Future Research Needs • Analysis of interest group positions. What might change, what won’t: hospitals, labor, physicians • Processes for seeking input and building support: on costs and coverage

40. Premiums and Poverty Levels WalterZelman Presentations

41. What is Affordable? Need to subsidize to higher levels of poverty • Cap on family spending 15% of income • Premium is $11,879 • Income needed: $79,193 • % of poverty: 383 WalterZelman Presentations

42. A Tale of Two States WalterZelman Presentations

43. A Centrist Strategy: Core Premises • Must minimize widespread interest group opposition • Accept coverage before effective cost control • Accept up-front, additional cost: consider use of incentives for additional federal $ • Primary reliance on expansions of federal programs for new dollars

44. A Centrist Strategy: Core Elements • Modest, individual mandate with adequate protections on affordability • Coverage would have to be broad: deductibles or co-pays might be middle range • Modest, scaled employer mandate (ERISA flexibility or safe harbors may be required) • Some mechanism to protect against near-automatic increases in employer fee

45. A Centrist Strategy: Core Elements • Reliance on expansions of federal programs for additional state funds • May need to include higher provider payments • Builds on current programs • Does not create new programs • Assumes a national strategy: federal requirements with state flexibility

46. A Centrist Strategy: Core Elements • Connector, pool, FEHB-type mechanism to ease subsidy, individual market, and “pay” employee mechanisms • Capacity of pool to expand may prove critical • Potential to gain single payer support • Framing: security (keep what you like, won’t lose insurance), affordability, prevention • Revenue: federal tax exclusion change?

47. A Centrist Strategy: Core Elements • Visible public process to seek input from stakeholders and public and craft policy • Runs counter to traditional honeymoon strategy: right choice may depend on margin of victory • High level commitment or commission to address long-term strategy for cost control • Alliances with sub-groups of major interests: Physicians, large and small employers, insurers