The health care reform law is expected to place a significant new financial burden on the states, many of which already are reeling from budget shortfalls caused by the recession.
The insurance exchanges will impose administrative costs on state governments. But the biggest burden will come from the law’s expansion of eligibility for Medicaid, the low-income health insurance program funded jointly by the state and federal governments.
Before health care reform was adopted, people whose income was at 100 percent of the poverty level were eligible for Medicaid. Under the new law, eligibility will be offered to those at 133 percent of the poverty level.
“I have no idea where Arizona is going to get the money for an expanded Medicaid population,” Baldwin says.
Many states are struggling to balance their budgets this year. Some, including Arizona, had planned to reduce Medicaid eligibility, but the new law bars states from cutting Medicaid before the legislation is implemented.
“Arizona is going to have to find some new ways to finance its Medicaid programs,” Kirkman-Liff says. “There are ways of doing this.”
A state assessment on hospital beds is one way to raise revenue, Kirkman-Liff says. The strategy would bring in millions in revenue, and the hospitals would eventually be reimbursed with federal Medicaid dollars, according to Kirkman-Liff. He notes that 43 other states use this revenue raising strategy.
Health care attorney Pavarini notes that at least 15 states are suing the federal government to block implementation of health care reform. Their motivations are not ideological, he says.
“They are doing it for one reason: They can barely afford Medicaid the way it is,” he says. “They are asking, ‘How could we possibly take on all of these new eligibles?’”
The precarious fiscal positions of the states presents a problem for businesses, according to Broome of GPEC. Businesses function best in states where taxes and programs are predictable.
“One of the real threats to business in Arizona is budget instability,” Broome adds.
The new law establishes a host of new rules that affect health insurance companies — from requirements to limit administrative costs to covering those with pre-existing conditions to official review of premium increases. One key feature of the bill is the establishment of state of insurance exchanges, where individuals and small businesses can purchase insurance from private insurance companies.
Major insurers in Arizona are viewing the bill’s myriad provisions with a sense of caution.
Blue Cross Blue Shield Arizona issued a statement promising to protect its customers throughout implementation of the law.
“As we have maintained, there are many worrisome provisions in the bill that will increase the costs of health care for many people,” Blue Cross Blue Shield Arizona’s statement reads. “We will work with the government and others to address these costs, as well as any unforeseen issues that will inevitably occur as the nation begins to implement these major changes.”
Humana Inc., one of the state’s largest private insurance providers, also is focusing on a smooth transition for its members and local employers, according to Mark El-Tawil, chief executive officer of commercial products for Humana’s West region.
“Currently, we’re designing a plan for implementation,” El-Tawil says. “Then, as we learn how state and federal regulatory agencies will apply the law’s provisions, we will communicate how benefits or premium rates might change.”
Eugene Schneller, professor in the School of Health Management and Policy at W.P. Carey, believes that the state’s insurers will fare well when health care reform is in place.
“I think in Arizona, many of the plans will be well positioned when the exchanges are established,” Schneller says. “I think we’ll see some very creative responses.”
When those who are uninsured now are added to insurance pools through the state-run exchanges, insurance companies could benefit, according to Kirkman-Liff.
“The population that is working with no coverage is for the most part very healthy,” he says.
Taking care of ourselves
While health care reform is mainly about expanding access, there are provisions that should improve quality of care, according to experts.
The legislation allocates resources for education of doctors and other professionals, improvements to community health centers, better access to primary care, and expansion of electronic medical records.
“There are some important pieces that people haven’t really been looking at,” Schneller says.
Kirkman-Liff adds: “There are things in the legislation that will make the system of higher quality, which will lower costs. Employers and consumers will benefit.”
Regardless of how health care reform is implemented, individuals need to take responsibility for their personal health, according to Baldwin.
“We’ve have been led to believe that our health depends on the health care system,” she says. “It’s much more important how we take care of ourselves.”
Lifestyle changes, including getting exercise and eating healthy, are the most effective ways for individuals to improve their health — and keep the cost of health care down, Baldwin says.
“People have to take ownership of their health,” she adds. “Until we do that as a population, we are not going to get the cost of health care under control.”