Could States Do Single-Payer Health Care?


https://www.healthaffairs.org/do/10.1377/hblog20190717.466249/full/?utm_source=Newsletter&utm_medium=email&utm_content=Health+Spending+Briefing%3B+Single-Payer%3B+Drug+Prices%3B+Cannabis+Patients%3B+ACA%3B+Access+To+Antidiabetic+Drugs%3B+Skilled+Nursing+Facilities&utm_campaign=HASU

 

The Affordable Care Act (ACA) transformed the US health care system by increasing coverage, expanding federal involvement in private health insurance, and changing public expectations for access to affordable coverage. Yet, the ACA did not provide universal coverage and has proven unstable under political and legal attacks since its enactment in 2010. While proposals for replacing the ACA with single-payer health care have attracted national political attention, discussions of a federal single-payer system such as “Medicare for All” remain light on specifics. At the state level, however, state legislators have drafted and introduced dozens of detailed bills to implement single-payer systems. Our study of state single-payer proposals in the ACA era highlights the extent to which states must contort their health reforms to overcome federal legal hurdles—particularly the threat of preemption by the Employee Retirement Income Security Act (ERISA) of 1974—and prompts questions about whether states can actually implement single-payer health care.

State Single-Payer Proposals (2010–19)

We define state single-payer bills as legislative attempts to achieve universal health care coverage for all residents in a state by combining financing for health care services into a single, state-administered payer. Using this definition, we collected and coded bills introduced in state legislatures since 2010, identifying the number of unique proposals by excluding substantially similar legislation introduced in different chambers or with different designations in the same session. From 2010 through 2019, legislators in 20 states have proposed 59 unique single-payer bills (Exhibit 1).

Most, but not all, of the single-payer proposals come from states that expanded Medicaid under the ACA, leaving only a small fraction of the population uninsured. Thus, it appears that beyond achieving universal coverage, state single-payer bills also seek to control health spending through expansive rate-setting authority and streamlined administration, as well as to relieve individuals of their growing out-of-pocket expenses. These state single-payer bills share many common elements: They all provided universal eligibility for state residents, and most also included expansive provider eligibility, rate-setting for health care services and prescription drugs, low or no cost sharing for patients, comprehensive benefits, and limits on the ability of health insurers (but not employers) to offer coverage that duplicates the single-payer benefits.

Legal And Financial Hurdles For State Single-Payer Health Care

To finance these universal and comprehensive benefits, state single-payer bills use several strategies to capture health expenditures from the existing multipayer system, while navigating a number of financial and legal impediments. First, the state bills would consolidate federal funds from Medicare, Medicaid, and the ACA exchanges into the state single-payer plan using waiver provisions in those federal programs. The Department of Health and Human Services has considerable discretion to deny state applications for each of these federal waivers; however, and the state bills generally lack fallback plans for capturing federal funds should the agency deny the waivers. Nor do the state single-payer bills confront financial obstacles from state constitutional prohibitions on deficit spending, which constrain state plans when tax revenues fall during economic recession.

Second, but perhaps more crucially, state single-payer bills must find ways to redirect the employer-sponsored health plans that currently cover 49 percent of Americans—a daunting legal task under ERISA. ERISA preempts all state laws that “relate to” employer-sponsored benefits, so states cannot simply mandate that employers cease offering health benefits. States do retain broad power to regulate health care providers and health insurers, but ERISA preempts the application of state insurance regulations to employers’ self-funded health plans, which now comprise more than 60 percent of all employer-sponsored health benefits. ERISA challenges states’ abilities to capture employer health spending—a source of funding that would be critical to the viability of a single-payer system.

The labyrinth of ERISA preemption has inspired creative drafting of state single-payer bills to do indirectly what ERISA prohibits them from doing directly. Our survey revealed three strategies for state bills to capture employer expenditures and move employees into the state single-payer system: levy payroll taxes on employers and income taxes on employees; restrict providers from accepting private-insurer reimbursement; and allow the single-payer plan to pay for all eligible patients’ care, then recoup those payments from other coverage a patient may have. The taxes fund the single-payer plan’s coverage of resident employees and nudge employers to cease offering private coverage. The provider reimbursement restriction further encourages a shift to single-payer coverage by shrinking provider networks for private insurance. The pay-and-recoup provision enables those employers who wish to continue providing benefits to do so without fully eroding the administrative advantages of the single-payer system.

Nearly all states’ bills include one of these strategies; most include a combination of them. Vermont is the only state that has actually enacted single-payer legislation, before abandoning its implementation largely due to the cost of its payroll and income taxes.

The Unnecessary Uncertainty For State Single-Payer Health Care

To gird against the looming threat of ERISA preemption, state legislatures have resorted to elaborate measures that may dilute their broader aims of achieving universality, solidarity, and efficiency in health care coverage. There are strong legal arguments why provisions to capture employer health spending should survive ERISA preemption. States have wide latitude to levy taxes and regulate health care in general, and providers in particular. The bills’ provisions do not require employers to alter their employee benefit plans, they merely encourage a shift to the state’s health plan. But federal appellate courts have split over the extent to which states may use financial incentives to affect employers’ health benefit decisions. In short, state single-payer plans should survive ERISA preemption, but courts’ unpredictable applications of ERISA cast a pall of uncertainty over the viability of single-payer plans.

State single-payer proposals face formidable legal uncertainties that a federal single-payer plan would not. On the other hand, health reform of this scale presents an experiment well-suited to the laboratories of the states. States’ experimentation with single-payer care could test various models and inform federal health reform debates about the benefits of single-payer over more incremental reforms, or about structuring a single-payer system to minimize disruption for health care providers and patients. The road to reform often starts with the states. This was the path for the ACA, which was first modeled in Massachusetts, and for Canada’s single-payer system, which got its start in Saskatchewan. Significant health reforms tested at the state level may pave the road to better policy at the national level.

While ERISA preemption has bedeviled state health reforms for decades, this wave of state single-payer legislation highlights the depth of the problem. At a time when states are the engines of health policy innovation, ERISA continues to unnecessarily thwart state health reform efforts. Thus, any meaningful health reform should start with ERISA reform. For example, Congress could amend ERISA to narrow its preemption provisions or add a waiver provision similar to other federal health care statutes. While states may successfully contort their health reform efforts to avoid ERISA preemption, they should not have to do so. The time has come to remove ERISA’s obstructions and to unlock states’ capacities as laboratories of health reform.

Most, but not all, of the single-payer proposals come from states that expanded Medicaid under the ACA, leaving only a small fraction of the population uninsured. Thus, it appears that beyond achieving universal coverage, state single-payer bills also seek to control health spending through expansive rate-setting authority and streamlined administration, as well as to relieve individuals of their growing out-of-pocket expenses. These state single-payer bills share many common elements: They all provided universal eligibility for state residents, and most also included expansive provider eligibility, rate-setting for health care services and prescription drugs, low or no cost sharing for patients, comprehensive benefits, and limits on the ability of health insurers (but not employers) to offer coverage that duplicates the single-payer benefits.

 

 

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