View from Washington: States’ Rights

States are leaders in healthcare reform.

In August, the U.S. Census Bureau announced another 1.3 million people were added to the list of Americans living without health insurance, the fifth consecutive year of increases. From coast to coast, state legislatures and governors are trying to grapple with this growing number and its associated financial and social costs.

Massachusetts and Vermont have passed legislation to provide universal health insurance to its residents. State panels have been established to make recommendations on how these new systems should be administered and funded. Sixteen other states are pending consideration of legislation to help address the uninsured as well. In early September, Blue Cross and Blue Shield of Minnesota unveiled a universal healthcare proposal to the state.

The approach to provide universal health insurance generally falls into two categories: a single-payer system or a multi-prong approach that expands existing programs to fill coverage gaps. Most importantly, health policy experts are in agreement that no-single approach will work in every state due to the varying uninsured rates and regulations governing health insurers.

Many efforts to address healthcare costs have been seen in California. Legislation was introduced this year to cap the profits of health insurers. Most significantly, a controversial bill (AB 840) was adopted by the Democratic-controlled legislature to create a state-run single-payer health insurance program for all residents. Tucked inside this California bill is a provision to allow the state to use its purchasing power to negotiate discounted rates for drugs and durable medical equipment for all California healthcare providers; an estimated $2 billion in savings.

With a looming veto threat by Gov. Arnold Schwarzenegger for SB 840, the California legislature passed a separate bill (SB 2911) on August 30 that has the potential to force drug manufacturers to offer dramatic reductions in the cost of prescription drugs to 5 million residents in return for participating in Medi-Cal, the state’s Medicaid program. The bill would use three separate benchmarks for negotiating drug prices, including: Medicaid best price; the lowest price offered to private payers; and, the average manufacturers’ price minus 15 percent. Drugmakers are offered a three-year transitional period in which they can volunteer to enter into price negotiations. Manufacturers that fail or choose not to successfully negotiate a discount by mid-2010 are likely to see their drugs removed from the Medi-Cal formulary. Gov. Schwarzenegger is expected to sign this bill.

Seen in the context as a laboratory for innovative health policy development, California’s consideration of a single-payer system and the governor’s support for the drug pricing bill are two of the clearest examples of the frustration that state leaders have with Washington over an issue that their constituents are increasingly pressuring them about. The political viability for such approaches to control costs will likely gain momentum among other states and could force Washington to consider critical reform. The earth may be shifting for the impetus for health reform and it looks like the tremors for change are coming from the states.

About the Author

Robert Betz Ph.D.
Robert Betz, Ph.D., is president of Robert Betz Associates, Inc. (RBA), a well-established federal health policy consulting firm located in the Washington, D.C. area. Additionally, Dr. Betz is an adjunct professor teaching at The George Washington University where he specializes in political science and health policy. For more information about RBA, visit