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The Keckley Report

Why States will be the Battleground for the Future of Healthcare

By May 13, 2019March 1st, 2023No Comments

The national discussion about the future of healthcare is predictably mired in the rhetoric of the race for the White House pitting 22 Democrats promising universal access vs. the incumbent promising market-based solutions buoyed by increasing transparency. It’s a classic match-up.

Federal policymakers in HHS and CMS have set a course that’s premised on four pillars: price transparency, market-driven consolidation, value-based purchasing and state autonomy. That assures that many of the major issues in healthcare will be resolved by the states at least in the near term. That also puts added pressure on the industry’s key stakeholders to make their cases to state legislators and Governors effectively. It’s a huge challenge.

Historically, states have controlled oversight of health insurance plans, licensing of health professionals including scope of practice limitations, medical malpractice requirements for clinicians and facilities, funding and administration of services to populations in Medicaid, Children’s Health Insurance (CHIP), prisons, state employees, public health and schools. They administer these responsibilities within parameters set by the federal government using a variety of state agencies and private sector task forces. Collectively, they represent a third of the average state’s spending, with Medicaid alone at 29.7% and growing.

The expanding role of states in health system transformation is evident in last week’s news cycle:

  • Lawmakers in Alabama took up a challenge to Roe v. Wade criminalizing abortions where a heartbeat can be detected joining 3 other states proposing similar constraints.

  • Lawmakers in Tennessee passed a billordering Governor Bill Lee (R) to submit a waiver application to the Centers for Medicare & Medicaid Services (CMS) to become the first state to convert its Medicaid program to block grant funding

  • Lawmakers in Florida passed a law authorizing drug importation which Gov. Ron DeSantis (R) is expected to sign. Lawmakers in Colorado and Vermont led by Democratic governors are pursuing similar bills.

  • Lawmakers in Washington passed and Gov. Jay Inslee signed into law legislation creating Cascade Care, a public option similar to legislation passed in Colorado. CMS is conducting a pilot program testing capitated payments for dual eligible in 9 states.

  • Lawmakers in Maryland passed and Gov. Larry Hogan (R) signed legislation creating a drug pricing review board.

  • Officials in New Hampshire, Arkansas and Kentucky advanced their legal arguments defending the work requirements enacted for Medicaid eligibility and approved by CMS. Beneficiaries in all three states have challenged the requirement.

  • Friday, on behalf of 44 states, Connecticut Attorney General William Tong filed suit against several major generic drug manufacturers alleging price collusion for more than 100 generic drugs dating back more than a decade.

  • And so on.

So, regardless of how the national races play out, it will be left to Governors and state legislators to resolve increasingly complicated healthcare issues. Timing is important:  the fiscal stability of states has improved: last year, 40 states saw revenue growth ahead of their forecasts. Rainy day funding increased to 7.3% from 1.6% in 2010 and 7 also cut their operating costs further, strengthening their long-term financial stability. But the numbers of those lacking health insurance coverage have increased 4 million in the last two years and affordability ranks as the biggest household concern among voters. And many economists anticipate an economic downturn in 2020, which means tighter spending for healthcare services and added pressure on states to do more with less.  


For the 27 Republican and 23 Democratic Governors, healthcare poses a unique challenge. They’re conscious of its complexity and fiscal significance, and sensitive to the political risks of flawed policies. They understand health costs are going up, insurance coverage is going down, the constituents are worried about affordability and industry stakeholder wants states to protect them from disruption. But their biggest challenge is policymaking with the 7383 state legislators who serve part-time for compensation ranging from nothing (NM) to more than $107,000 (CA), plus per diems. Almost 20% are freshmen new to the role and all observe that the role is more challenging and politicized than in prior years.

State legislators base their views on their personal experiences as patients or enrollees. They learn from their constituents and lobbyists and, on occasion, participate in national meetings hosted by academic organizations or trade groups. For instance, in August, the National Conference of State Legislatures will host its annual Legislative Summit in Nashville. The 5-day agenda is packed: health and human services topics are two of more than 100 offerings on the program.

But the gravity of healthcare issues facing states, and their preparedness to develop cogent policies and laws that address balance short and long-term fiscal responsibility is problematic in many state legislative chambers.

This week, I will be in Illinois, Maine, Texas and California. Healthcare is a major issue in each state. Each is advancing policies they believe necessary to the future of healthcare in their state. Their solutions differ widely, but the pressure to address healthcare costs, access and quality is at a tipping point.

Are state legislators adequately prepared to address these issues constructively based on objective facts? It’s the nagging question that should be asked.

It’s clear that states will play a large and growing role in transforming the health system. They’re not only labs for innovation:  they’re the front line for every major challenge facing the system.