Medicaid costs continued to rise in 2011, consuming a greater percentage of overall state spending. This was a result of federal stimulus money, heightened health care expenses and increased enrollment, according to the latest edition of the State Expenditure Report released by National Association of State Budget Officers (NASBO) and the National Governors Association (NGA)

However, state policymakers in Louisiana and in other states will have fewer resources available to accommodate Medicaid over the next few years as the funds made available through the American Recovery and Reinvestment Act of 2009 (ARRA) “wind down” and the economy continues to experience a sluggish recovery, the report says.

This is before any of the new health care regulations are scheduled to go into effect beginning on Jan. 1, 2014. State officials who are already under pressure to cut other vital social services in an effort to meet health care demands will be even further constrained under the new federal law formally known as the Patient Protection and Affordable Care Act (PPACA), key congressional figures and policy analysts warn.

“Even without the burdens ObamaCare will place on Medicaid, we see spending estimates rising to unprecedented levels,” Sean Riley, a legislative analyst with the American Legislative Exchange Council’s (ALEC) Health and Human Services Task Force, observes.  “Now, throw the federal health law’s constitutionally questionable Medicaid expansion scheme on top of that and it’s easy to guess what will happen to already strained state budgets.  Real Medicaid reform would include private options for beneficiaries or a variation of capped allotments and block grants to the states.  Instead, Medicaid expansion under the federal health law will only serve to make a big problem even bigger.”

In Fiscal Year 2011, Medicaid spending is estimated to be $398.6 billion, an increase of 10.1 percent over FY 2010, according to NASBO. This is almost three times the rate of higher education spending, which was 3.4 percent, and much higher than the spending on elementary and secondary education, which was 2.1 percent, and public assistance at 1.8 percent, corrections at 1.3 percent and transportation at 3 percent, the report shows.

ObamaCare calls for state Medicaid programs to be expanded to the point where they cover non-pregnant, non-elderly individuals who have an income up to 133 percent of the federal poverty level. Moreover, states are required to utilize a “five percent income disregard,” which means that Medicaid eligibility actually reaches 138 percent of the federal poverty level.

“This is why the public tide against ObamaCare continues to grow,” said Rep. John Fleming (R-La.), who is also a medical doctor. “Reports like this one confirm everything we knew when Democrats were pushing ObamaCare through. It will cost much more than they claimed and give back much less than they promised, all the while undermining the best health care system in the world. We need to repeal ObamaCare altogether.”

The figures reported by NASBO link back to a series of broken promises associated with President Obama’s health care law, Fleming said.

He described them as follows:

“The broken promise that insurance rates would go down. They went up.”

“The Class Act which was designed to help finance ObamaCare has been deemed defunct by the actuary.”

“The student loan program was nationalized to use `profits’ to finance ObamaCare, but now the president wants to begin forgiving some of the loan debt, creating another loss of taxpayer money and inability to finance ObamaCare.”

“The $500 billion that ObamaCare took from Medicare.”

“At least 12 new taxes or tax increases to help pay for ObamaCare.”

Bruce Greenstein, Louisiana’s secretary for the Department of Health and Hospitals (DHH), is concerned that the federal health law could short circuit reform efforts and innovations at the state level, and further exacerbate an already challenging fiscal climate.

“The economics behind Medicaid is counter-intuitive to what really needs to happen,” he said. “If I thought that more spending was the answer to health care that I would be open to these kind of proposals. But despite all the spending, we still get bad results.”

While he was not opposed to some of the health care expenditures connected with President Obama’s stimulus, Greenstein would prefer to have more freedom and flexibility at the local level for experimentation.

“In fairness, I would say some of the investments I saw with the stimulus money went into areas that were worthwhile,” he said. “But instead of leaning on taxpayers we should let the market decide how to best allocate our dollars.”

Assuming the U.S. Supreme Court does not overturn the individual mandate included as part of the PPACA, there is good cause to be concerned about the impact the law will have on the state, Greenstein added.

Louisiana officials estimate that implementation will cost Louisiana in excess of $7 billion over a 10-year period. Moreover, between now and 2014, Louisiana health officials also expect Medicaid enrollment to grow by more than 50 percent.

Although Medicaid was set up as a federal-state partnership with an eye toward splitting the cost of the program, this arrangement exists on unequal footing, Christopher Jaarda, president of the American Healthcare Education Coalition (AHEC), said. The federal government now largely sets the rules leaving the states with very little latitude, he notes.

“States have to beg the feds for flexibility in how they run Medicaid,” he said. “With the current economy, states need even more flexibility but, with ObamaCare, the feds have expanded the states financial burden under Medicaid, making it harder for states to balance their budgets.”

Moreover, the Medicaid expansion will could force “dramatic cuts” in other areas of state budgets such as primary, secondary and higher education, he added. States face a $175 billion shortfall over the next two years, according to current projections.

“Supporters of ObamaCare call it reform but it is not,” Jaarda said. “What would reform look like? Making every American better consumers of health care dollars, giving each of us skin in the game to make smart decisions and to shop for better, more affordable care. Market forces can help reduce costs, reduced costs will make insurance less expensive, which in turn will mean more people can afford coverage. ObamaCare is not reform because the law does nothing to curb costs, it makes the system less transparent, masking the cost of health care through the expansion of existing entitlements and the creation of new entitlements which simply shift the costs from one group of Americans to another.”

Kevin Mooney is the Capitol Bureau Reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and followed on Twitter.

Even as they differ over the merits and defects of health care exchanges, state officials from across party lines continue to express concern over the regulatory uncertainty attached to ObamaCare.

This became apparent during the National Governor’s Association (NGA) two-day workshop entitled: “Timelines, State Options and Federal Regulations.” Over 120 governors’ representatives, cabinet secretaries and health department leaders took part in the session. Participants identified two key areas of concern that must be addressed before moving forward with full implementation of the Patient Protection and Affordable Care Act (PPACA), otherwise known as ObamaCare.

Gov. Bobby Jindal has already made it clear that he will resist setting up exchanges, which are meant to serve as state level conduits for the purchase of insurance. Governors Rick Scott (R-Fla.), Scott Parnell (R-Alaska), Susana Martinez (R-N.M.) and Rick Perry (R-Texas) have all expressed opposition to an exchange system in their states.

But Gov. CL “Butch” Otter of Idaho, Rep. Bill Cassidy (R-La.), and other GOP officials, disagree.
They view the exchange system as a viable tool for advancing patient-centered, market-friendly health care reforms that can lower costs and expand consumer choice.

The PPACA does allow for state discretion in how they craft and shape the exchanges. States can direct their existing health care agencies to oversee the new system, contract key functions out to private vendors, or partner with the federal government. But with implementation deadlines approaching, the federal government has failed to address key questions, according to an NGA policy brief.

“Given that the final federal regulations specifying the policies governing those activities have not been finalized, or in important instances, proposed, states are operating in a highly uncertain environment with looming deadlines,” the brief says. “Timely implementation places states in a position of needing to make basic decisions about how they will establish and implement insurance exchanges on the basis of incomplete guidance and regulations…The substantial ambiguity involving core elements of the exchange and Medicaid implementation, especially in light of the controversies associated with PPACA deadlines, which would lead to a federally operated exchange in their state.”

In many states, legislation for exchanges must be filed in November, which creates enormous hurdles in and of itself, NGA notes in its brief. In response, the various states have responded very differently. Some state officials have already moved to set up their own exchanges, while others like Gov Jindal are cutting their own path.  In August, Kansas became the second state to reject the ‘Early Innovator’ grant, a $31.5 million subsidy from the federal government awarded to seven states for implementing  ObamaCare. Oklahoma was the first.

Another major stumbling block impacting the construction of  state exchanges concerns the procurement of information technology (IT), the brief points out. For starters, the design and development requires advance notice of policy requirements, which have not been forthcoming from the federal government.  Moreover, the development of the exchange systems typically takes place over the span of several years to accommodate existing procurement rules.

Rep. Cassidy, who is a medical doctor and a vocal opponent of the federal health care law, has said that it may be advantageous for states to put their own “imprimatur” on a health care exchange before federal officials advance new regulations.  He cited the Utah system, which is already up and running, as a model for what might work in Louisiana and other states. But, at the same time, states need sufficient room and latitude to experiment with reforms tailored to fit their own unique circumstances and needs, Cassidy said.

The NGA report clearly shows that PPACA does not take health care policy in the right direction, Courtney Austin, a legislative assistant to Cassidy, said.

“The frustration with the law is bipartisan,” she observed. “Republican and Democratic states alike are awaiting federal guidance on many issues.” For example, the NGA reports that insurance exchanges must be ‘wholly created in a very short time period,’ and yet they present ‘major challenges,’ because the states must establish interconnected, automated systems to determine whether any particular citizen is eligible for subsidies and, if so, through which program. Besides the lack of direction, the states are also concerned about the costs and resources needed to implement the law.”

States also have good cause to be concerned that they may lose control of the Medicaid program, Austin said. A federal exchange could become the single point of entry to all of a state’s insurance affordability programs, she points out.

“ACA implementation requires major changes in existing Medicaid eligibility systems, which need to operate seamlessly with the yet to be detailed federal data hub and exchange systems, providing real-time, online eligibility determinations (under significantly reformed Medicaid income, asset, and eligibility rules),” the brief explains. “The challenge of contracting for IT systems services is particularly acute and mission-critical for the establishment of exchanges. Vendor capacity and the IT workforce are strained, especially as system adoption among providers has increased as a result of economic stimulus subsidies.”

Louisiana Department of Health and Hospitals officials estimate that the implementation of ObamaCare will cost Louisiana in excess of $7 billion over a 10-year period. Moreover, between now and 2014, Louisiana health officials also expect Medicaid enrollment to grow by more than 50 percent.

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and followed on Twitter.

While conservatives have vigorously opposed President Obama’s health care law, they have struggled to produce a viable alternative. However, Rep. Paul Ryan (R-WI), who previously released a bold and intelligent budget plan last April, has released a health care proposal this week which would effectively replace ObamaCare and implement more efficient, stronger policies.

As Ramesh Ponnuru notes, two of Ryan’s central ideas have been well received, for good reason. Ryan pushes for Medicaid block grants, whereas ObamaCare gives states half of whatever cost they determine will cover their annual Medicaid expenses, with little regard for how much of this money is unnecessary or extraneous.

Ryan also advocates a transition from Medicare to “premium support”, an idea which he also offered last April. Like block grants for Medicaid, premium support would be far less costly than its alternative under ObamaCare. It would also enable patients to choose their own health care plans, rather being restricted to one plan and having to purchase supplemental care not covered by Medicare.

Also central to Ryan’s proposal is reforming the current relationship between taxes and insurance, which begets inflated costs. Under the current system, employers get larger tax breaks for more expensive employee coverage. Ryan’s idea is that employees receive a credit which they can either use on employer-based coverage or seek coverage elsewhere. The freedom to choose their own plans would increase competition and drive down costs. Ideally, this would also leave employers with more money to increase wages rather than spend on health care outlays.

This scenario is clearly preferable to that which is unfolding as a result of ObamaCare’s provisions: employers unwilling to hire and dropping coverage altogether, furthering the current economic malaise.

Rep. Ryan’s plan is at this point tentative, but it does a vastly superior job of remedying the largest problems underlying health care than does the President’s law. Namely, it reforms the currently-unsustainable Medicare and Medicaid programs, and targets the inflated costs which have distorted the market beyond recognition. These ideas should be heard, and optimally implemented, and not drowned out by partisan rhetoric.

Fulfilling the prognostications of opponents of President Obama’s health care law, the cost of employer-based family health care plans has risen by 9 percent over the past year, according to a study by the Kaiser Family Foundation.

Kaiser’s report determines that the average cost of an annual premium for employer-based coverage is now $15,073. This amount is double the average premium in 2001 of $7,061. To make matters worse, while premium costs have risen by 9 percent over the last year, wages have only increased by 2 percent.

The implications for this steep increase are uncertain but alarming. As Kaiser CEO Drew Altman states in the New York Times, “The open question is whether that’s a one-time spike or the start of a period of higher increases.” Regardless, the timing of this increase could hardly be worse, as the economy is fighting stagnancy and high levels of unemployment. The Times also notes that many employers are avoiding hiring new employees because of the high costs of coverage.

While most of ObamaCare’s provisions are not activated until 2014, many are attributing this rise in cost to anticipation on the part of insurers and employers, creating market uncertainty similar to stocks dipping in apprehension of regulations. This uncertainty is crippling in a period which needs price stability urgently.

The argument that expenses will even out once the provisions take effect and the market stabilizes is a tenuous one. As long as expenses clearly outpace wage growth and employers are hesitant to hire, recovery will be suppressed. Moreover, escalating health care costs over the last decade have erased concurrent middle class growth wage growth. The specter of even more pronounced rising costs, as evidenced by Kaiser’s study, may not only keep the economy stagnant, but exacerbate the already fragile situation.

While the new health care law’s provisions have not yet fully taken effect, it is nonetheless already making a hugely detrimental impact on the economy. Increased regulations are leading insurers to raise costs, and in turn, employers are not hiring new workers, keeping American unemployment at historic levels.

When Republicans were last in control of Congress they did not move aggressively to institute free market health care reforms that could have halted the slide toward ObamaCare, some of the medical doctors who now occupy U.S. House seats have acknowledged.

A trend towards government run health care began in the mid 1960s and has accelerated ever since, laments Rep. John Fleming (R-La.). Unless the Patient Protection and Affordable Care Act (PPACA) is repealed, U.S. citizens will likely find that they need to accommodate themselves to a more bureaucratic health care system akin to what citizens in Canada, the United Kingdom and other parts of Europe now experience, he warns.

Beginning with Medicare and Medicaid, the U.S. moved toward greater “governmentalization” over the health care system, Fleming explained in an interview.

Unfortunately, his own Republicans did not move forcefully enough when they the chance to push reforms that would empower consumers and limit the role of government, he said.

“The ObamaCare bill is really the culmination of a process that has been underway for some time now,” Fleming said. “It will be an uphill battle for Congress to undo the damage that could occur with the new rules and regulations if this law remains in effect.”

However, if the U.S. Supreme Court does ultimately rule against the PPACA, Republicans should take the opportunity to push for greater “price transparency” and more consumer autonomy within the health care system, Rep. Fleming, said. Allowing the government to operate as a third party that absorbs the costs upfront opened the way to higher costs and acute inefficiencies, he added.

Rep. Bill Cassidy (R-La.) concurs.

He is considering new legislation that would insert price transparency into the health care system.

Fleming and Cassidy are both medical doctors.

“If I were to go in for knee surgery, just as an example, I don’t know what the price of that surgery is for say another two months and that is part of what is wrong with our health care system,” Cassidy said. “We need to make people more aware of what the actual costs are. There is a tendency to think of medical interventions as being very benign, but you can have unnecessary procedures with unnecessary risks and this could lead to complications. One of the benefits of making consumers more aware of the price is that you limit their exposure to actions that may not be necessary.”

The kind of advertising connected with Lasik eye surgery should be broadly applied throughout the entire health care system, Cassidy suggested. Consumers typically see up front how much the Lasik surgery will cost, he noted.

Back in the 1980s, Fleming recalls that he would charge Medicare patients some out of pocket costs for lab work. Unfortunately, this is no longer an option, he noted.

“Today I would simply order the lab and the patient is totally out of it,”  Fleming said. “The patient is totally taken out of the equation and we have trained them not to care what health care costs. We can go one of two ways, we can re-engage the patient and have them pay at least a percentage of the cost, or we can leave this in the hands of the government. But when you run out of money the government gets to arbitrarily decide who gets care and who  does not.”

If the Republicans do strengthen their hand in the 2012 elections, they cannot let the opportunity go by again to institute free market changes that could alleviate existing financial pressure, both Fleming and Cassidy said.

“People fear change and not everyone is going to be on board with price transparency,” Cassidy said. “The concept is still in its infancy, there has not been a lot of work in this area.”

Going forward, Fleming said he favors the expanded of Health Savings Accounts (HSAs) as a way to mitigate against expenditures that may not be necessary.

“When there is a higher deductible involved it gives people an incentive to save money and make wise purchases,” Fleming observed. “We now instances where company employees are saving money in their HSAs many times above what their deductible.”

Fleming also favors changes that would allow health care consumers to shop across state lines for their insurance so they are not limited to just one choice in their home area.
“Make the insurance companies compete against one another so we can have a marketplace throughout the entire country,” Fleming said. “We don’t want to see one company in one state as a monopoly.”

Twenty-six states, including Louisiana, have filed suit arguing that the individual mandate included in President Obama’s health care law is unconstitutional. In August, the 11th Circuit Court of Appeals sided with the states and ruled that Congress exceeded its authority under the Commerce Clause. Previously, Florida District Judge Roger Vinson and Virginia District Judge Henry Hudson also ruled against the individual mandate. As the Pelican Institute has previously reported, the Goldwater Institute cut its own path here by challenging the constitutionality of ObamaCare’s Independent Payment Advisory Board (IPAB).

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and followed on Twitter.

In a crucial decision for the state’s health care reform agenda, a state district court has overturned an injunction against the awarding of coordinated-care Medicaid contracts to three private providers. Under the program, Making Medicaid Better, three providers – Louisiana Healthcare Connections, Inc., AmeriHealth Mercy of Louisiana, Inc., and AmeriGroup Mercy of Louisiana, Inc.,- will offer coordinated-care to 800,000 state Medicaid patients.

State District Judge William Morvant of the 19^th District Court dismissed the injunction pushed by Aetna, Inc. Aetna has alleged errors in the awarding of funds to providers, leading to the temporary injunction.

This transition is necessary to reduce costs as the state faces an inundation of new Medicaid beneficiaries as a result of President Obama’s health care law, which raises the threshold of eligibility up to 133 percent of the federal poverty level.

Currently, Medicaid consumes $6.7 billion in annual state spending. Louisiana faces a projected 40 percent increase in Medicaid enrollment with the advent of ObamaCare, something the already overburdened economy cannot handle. Gov. Jindal estimates that transitioning towards coordinated-care will save the state $135 million annually. It would also lead to improved health care quality.

Under a coordinated-care network, patients choose providers and plans according to their costs and needs, which results in increased competition between providers and thus lower costs than under the rigid confines of government-administered Medicaid. It also facilitates preventive care, which alleviates long-term health care costs. This is especially important in Louisiana, which has one of the worst cancer percentages in the nation.

The fiscal challenges and uncertainties facing our state demand new solutions to persisting problems. A transition to coordinated-care networks is an imperative step towards securing a healthier, more efficient future for Louisiana residents.

Unelected bureaucrats could be empowered with unchecked authority to set rates for Medicare reimbursement and block access to prescription drugs, the Goldwater Institute warns in a lawsuit filed against the Patient Protection and Affordable Care Act (PPACA).

The legal challenge now pending before the federal district court for Arizona challenges the constitutionality of the 15 member Independent Payment Advisory Board (IPAB) created as part of the new federal health care law. IPAB has unprecedented authority to make public policy without any meaningful oversight from the legislative, judicial or executive branches of government, according to the suit.

Although the U.S. Supreme Court has ruled that it is permissible for Congress to create administrative agencies, it may not surrender its authority to make law, Diane Cohen, a senior attorney with the Goldwater Institute explained in testimony before the U.S. House Committee on Energy and Commerce earlier this year. The Supreme Court has established an “intelligible principles” test to determine whether a particular agency’s decision-making conforms to constitutional standards.

“IPAB fails this test,” Cohen told House members. “This agency is an unelected, unaccountable independent authority, which is ‘independent’ in the worst sense of the word: it is independent of Congress, independent of the president, independent of the judiciary and independent of the will of the people.”

IPAB is charged with developing proposals to “reduce the per capita rate of growth of Medicare spending,” according to PPACA. The Board’s authority is activated whenever Medicare’s future spending is expected to increase faster than the target rate, which is the average of the change in the Consumer Price Index (CPI) until 2018. At that point, the target rate is set to the nominal Gross Domestic Product (GDP) per capital plus one percentage point. The Secretary of Health and Human Services (HHS) must implement the Board’s proposals, unless Congress intervenes.

In reality, there are few limits on IPAB’s ability to legislate, Cohen points out. PPACA calls for a 3/5 supermajority vote in the U.S. Senate to change or repeal any proposals from the IPAB. It also prohibits administrative and judicial review of IPAB laws.

Since ObamaCare has already imposed $145 billion in cuts to the Medicare Advantage program, the IPAB will most likely target prescription drugs, the Pacific Research Institute (PRI) concluded in a recent report. IPAB’s actions could have a “chilling effect” on innovation in the pharmaceutical industry, PRI suggests. Hospitals, nursing homes and hospices are exempt from Medicare cuts until 2020.

“The way the law [ObamaCare] is written the Board has authority over Congress, not the other way around,” Rep. John Fleming (R-La.) observes. “Under the law, the Board won’t have anything to do so long as Congress meets these spending targets, but for at least 20 years now Congress has never met these spending targets. We also have coalitions and individuals in Congress who want the Board to make these decisions, which will provide an incentive to avoid solving these problems on the congressional level.”

Between 1984 and 2009, medical inflation has increased faster than the CPI in every year, with the exception of 1997, according to the Congressional Research Service (CRS). If ObamaCare remains in place, Fleming expects IPAB to be active.

“We are modeling our health care system after Europe’s,” Fleming said. “The IPAB is very similar to what has been set up in Great Britain. We are moving step by step toward a system of greater government control.” Policymakers have closely patterned the IPAB after the National Institute for Health and Clinical Excellence (NICE) in Great Britain, Fleming noted.

Unless the U.S. Supreme Court steps in and rules ObamaCare unconstitutional, he anticipates that it will be difficult to unwind the law’s key provisions including IPAB. In fact, PPACA includes language to protect against any legislative effort aimed at eliminating the board. In order to repeal IPAB, Congress must enact a Joint Resolution, but it is prohibited from introducing such a resolution until 2017, and must act no later than Feb. 1 2017. The resolution must be in place no later than Aug. 15, 2017. In the event that a resolution is introduced, PPACA calls for a super-majority vote, meaning 3/5 of all elected members of Congress, must support the resolution. Even if a resolution is passed, the Board would not disband until 2020.

“It is a maxim of representative government that one Congress does not have the power to bind the hands of a future Congress, which is precisely what IPAB’s anti-repeal provision does,” Cohen, the Goldwater attorney said in testimony. “The Constitution states that `All legislative powers herein granted shall be vested in a Congress of the United States.’ IPAB’s anti-repeal provision denies future congresses these basic legislative powers, thereby diminishing Congress’ constitutional powers via statue.”

Although a number of bills have been introduced to either repeal or amend ObamaCare provisions that relate to IPAB, Fleming is not certain this is the best long-term strategy.

“Suppose we do repeal the IPAB before ObamaCare is implemented,” he said. “This means we will have taken the fangs out of the snake and is that really what we want to do? Wouldn’t it be better to leave the legislation as poisonous as it is, so that when it comes time there will be no doubt that it should be repealed? The last thing in the world we want to do is to improve ObamaCare.”

Twenty-six states, including Louisiana, have filed suit arguing that the individual mandate included in President Obama’s health care law is unconstitutional. In August, the 11th Circuit Court of Appeals sided with the states and ruled that Congress exceeded its authority under the Commerce Clause. Previously, Florida District Judge Roger Vinson and Virginia District Judge Henry Hudson also ruled against the individual mandate. The Goldwater Institute’s suit is unique in that it challenges the constitutionality of IPAB, as opposed to the individual mandate.

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and follow him on Twitter.

Kansas has become the second state to reject the ‘Early Innovator’ grant, a $31.5 million subsidy from the federal government awarded to seven states for implementing the Patient Protection and Affordable Care Act (ObamaCare). Oklahoma precedes Kansas in refusing this grant, an action with potentially immense repercussions in the effort to repeal ObamaCare.

Kansas Governor Sam Brownback and Lt. Governor Dr. Jeff Colyer have cited the current uncertainty of Washington to meet its future financial obligations as a chief factor in their decision to return the grant.  Brownback reasons that states need to prepare for less federal resources in the future and not be dependent upon an already strained federal government.

Colyer argues that the expansion of Medicaid under ObamaCare will be untenable for the state’s finances. “Federal Medicaid mandates have cost Kansas over 400 million in the past 2 years alone. Full implementation of the mandates in the President’s health care law would cost billions more.” Kansas officials also noted that the Early Innovator grant does nothing to slow the explosive growth of health care and health care costs.

One can argue that the Early Innovator grant is an attempt to appease the states by presuming to facilitate a transition into the health care law, which requires raising the threshold for Medicaid to 133% of the federal poverty level.

Instead of accepting the conditions of the federally mandated health care law in exchange for a sum of money, Brownback says Kansas will explore flexible options which will benefit its needs the most. This is salutary advice for other states.

Reminiscent of Kansas’s decision, Louisiana was one of several states to reject an exchange system for ObamaCare last March, but further steps are imperative to slow the growth of health care costs and turn back the new law. Governor Jindal presented some of his ideas for reforming health care and repealing ObamaCare earlier this year in the Wall Street Journal.

The continued noncompliance of states is necessary to turn back the economically ruinous health care “reform” of the Obama Administration. Kansas and Louisiana should be applauded for these steps taken. Individual states need to tailor health care reforms to suit their singular needs and not rely on a historically imprudent federal government which may not be able to meet its future obligations.

Jamison Beuerman is a contributing writer and policy analyst at the Pelican Institute for Public Policy. He can be contacted via email at jbeuerman@pelicaninsitute.org or followed on twitter @jbeuerman.

A dispute over the merits and potential defects of health care exchange systems continued to rage last week at the American Legislative Exchange Council’s (ALEC) annual meeting in New Orleans as state officials expressed concern over ObamaCare’s Medicaid mandates.

While it may be politically appealing to resist setting up an exchange system, governors and legislators who adopt this policy stance would actually open the way to greater federal interference, Edmund Haislmaier, the Heritage Foundation’s Senior Research Fellow of Health Policy Studies, explained in a panel discussion.

“We are arguing over strategy and the utility of a hammer,” Haislmaier observed. “There is no special magic to this tool and there is nothing especially threatening either. It depends how you use the exchanges. They can be used as a tool to empower consumers and to move the needle more in the direction of meaningful reform.”

Haislmaier also said free market groups “left an opening for the other side” because they did not move aggressively over the past few years to alter the status quo with policies that would empower patients with more choice and autonomy. If properly configured, exchanges can be used as part of an overall strategy to resist ObamaCare and to shield states from some of its worst effects, he suggested.

“This is going to be an unrelenting fight [against ObamaCare],” he said. “It is going to be house by house, floor by floor, room by room combat. There will be numerous place and lines of attack where we can undermine this law.”

But conservatives who are supportive of exchanges should take note of the opinion from federal Judge Roger Vinson of the Northern District of Florida, Michael Cannon, the Cato Institute’s director of health policy studies, advises.  In response to 26 states that brought the suit, Vinson concluded that Congress exceeded its authority in passing the Patient Protection and Affordable Care Act (PPACA). But he also warned that many of those same plaintiffs are undermining their own case by implementing the law, even while they argue it is unconstitutional.

In his response to the Obama Administration’s “motion to clarify,” Vinson stuck to his original decision but agreed to stay (temporarily set aside) the ruling pending an appeal in part because some states have proceeded with exchanges and other implementation measures, Cannon told audience members.

“States are not required to create exchanges under ObamaCare,” he said. “But if they are implemented voluntarily this will undermine the legal case to repeal the law. The law asks the states to do the heavy lifting of creating these bureaucracies, offers them considerable sums of money, and as a fallback position allows the federal government to create an exchange if a state declines to do so.”

Even if exchanges are started with free-market motives, they will eventually morph into vehicles for ObamaCare, Cannon said. Moreover, he noted, they would have the added effect of giving bipartisan cover to the law.

Cannon also said state officials who have argued against the constitutionality of the new law have a special responsibility to resist implementation because they are essentially violating their oath of office by accepting federal funds and accommodating new bureaucracies.

Rep. Noble Ellington (R-Winnsboro), the national chair of ALEC, said in an interview that he did not have a firm opinion on the exchange system, but that he welcomes the debate.  He also expressed concern about the impact federal mandates and stipulations attached to President Obama’s health care law will have on Louisiana and other states.

“Washington [D.C.] is trying to take control of everything and that’s not healthy for anyone,” he said. “We are already in the middle of a recession as it is, and if ObamaCare does kick in it will mean less jobs, less business activity and less opportunity.”

ALEC has been successful because it has fostered strong relationships between state officials who have been on the receiving end of new directives from the federal government, Ellington continued. There is, for example, widespread concern among his colleagues that rising Medicaid costs will place additional burdens on state budgets that are already strained, he observed.

Under ObamaCare, states are required to extend their Medicaid programs to anyone earning up to 133 percent of the federal poverty level come 2014. This comes out to about $30,000 for a family of four. In addition to the Medicaid expansion, PPACA also creates an individual health insurance mandate, which will further encourage those who were already eligible for benefits prior to the new legislation to now enroll, according to ALEC. The federal subsidies included as part of the new health care law will not cover the entire cost of the Medicaid expansion.

“States will be affected the most by ObamaCare’s budget-busting Medicaid expansion, forced collaboration on federally-dictated health insurance exchanges, the unconstitutional individual mandate, and the federal takeover of state health insurance regulation,”  Christie Herrera, ALEC’s health and human services task force director, said. “That’s why 28 states have stepped forward to challenge this law and reclaim state sovereignty.”

Medicaid currently accounts for about 17 percent of all state-level spending, according to StateHealthFacts.org. Louisiana’s Department of Health and Hospitals has produced a report that shows implementation of ObamaCare will cost Louisiana in excess of $7 billion over a 10-year period. Between now and 2014, Louisiana health officials also expect Medicaid enrollment to grow by more than 50 percent.

Two years ago Gov. Bobby Jindal initiated a plan aimed at reducing Medicaid costs by transitioning over to Coordinated Care Networks (CCNs). The idea is to allow enrollees to choose their own plans and providers, which in turn would alleviate Medicaid spending by increasing competition. Moreover, the networks would emphasize preventive care as a way of heading off alleviating future costs.

The Cato Institute has criticized the plan for increasing eligibility to the entitlement program and for failing to embrace genuine free market reforms.

State lawmakers are opposed on procedural grounds.

They claim Jindal bypassed the legislative branch by inserting the program’s authorization into an amendment in state budget legislation. The House unanimously passed a resolution that would end the program by 2014 unless it gains approval from the state legislature.

Meanwhile, a new study that explores the financial impact of shifting Medicaid recipients into HMOs and other forms of managed care concludes that impact on spending has been marginal at best and that there is very little savings.

Cannon, the Cato analyst, has said that the managed care programs help demonstrate how little control states actually have over Medicaid programs. But by refusing to implement their own exchange system, state lawmakers could be playing into the hands of Obama Administration officials with regard to Medicaid, Haislmaier has argued. Whoever controls the exchange system “becomes the de facto gatekeeper for both the state’s Medicaid program and the new federal subsidy program,” he wrote. Haislmaier favors a “defensive approach” that allows for states to shape exchanges and “maximize” local control of Medicaid programs.

The “State Legislators Guide to Repealing ObamaCare” ALEC released earlier this year includes several recommendations crafted with an eye toward delaying and ultimately blocking the federal legislation.  The Guide includes a description of ALEC’s “Freedom of Choice in Health Care Act, which provides for a “state-level defense against ObamaCare’s excessive federal power.” It also advises state lawmakers to enact a moratorium on ObamaCare rulemaking and to decline federal grant money that come with “federal strings.”

“States should let the federal government spend the time, money, and political capital required for implementation,” Herrera said.  “I don’t think that states will be able to escape federal rules if they decide to get involved.  Barring congressional repeal or a Supreme Court decision, this law will go forward as enacted — so state legislators would be wise to step back and let the federal government take ownership over the consequences.”

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and you can follow him on Twitter.

By refusing to set up a health care insurance exchange system that could be used to advance ObamaCare regulations, Gov. Bobby Jindal has cut a path that other state officials should follow, argue analysts with the Cato Institute. However, other leading figures within Gov. Jindal’s own Republican Party remain divided on this question.

Governors Rick Scott (R-Fla.), Scott Parnell (R-Alaska), Susana Martinez (R-N.M.) and Rick Perry (R-Texas) have all expressed opposition to an exchange system in their states. But Gov. CL “Butch” Otter of Idaho, Rep. Bill Cassidy (R-La.), and other GOP officials, disagree. They view the exchange system as a viable tool for advancing patient-centered, market-friendly health care reforms that can lower costs and expand consumer choice.

Earlier this month, the U.S. Department of Health and Human Services (HHS) released a set of proposed rules that “set minimum standards” for the exchanges. But the suggested guidelines are so incomplete and uncertain that states cannot make an informed decision on whether they should participate, said Bruce Greenstein, Louisiana’s secretary for the Department of Health and Hospitals (DHH). Greenstein supports Gov. Jindal in his decision to remain outside of the exchange system.

“This is very good policy on the part of Gov. Jindal for today, and tomorrow it will be seen by the rest of the market as very forward thinking, and very savvy in terms of the way we move forward and protect the market of health insurance in Louisiana; we need to be able to access high quality insurance products at a good cost,” Greenstein said. “We continue to be very prudent in our approach.”

However, Cassidy, who is a medical doctor and a vocal opponent of the federal health care law, said in an interview that it may be advantageous for states to put their own “imprimatur” on a health care exchange before federal officials advance new regulations.  He cited the Utah system, which is already up and running, as a model for what might work in Louisiana and other states.

“The governor might know something that I don’t,” Cassidy said. “But I think it’s possible to set up a free market exchange system that benefits consumers; that’s the impression I get from our own private insurance agents [in Louisiana] and I think this is a model that can work. There is a robust discussion about exchanges among conservatives going on now. What I see out of Utah has been successful.”

Mike Leavitt, the former Republican governor of Utah, recently told the Republican Governors Association (RGA) that states would only further empower federal officials if they avoid setting up exchanges. Leavitt also served as the federal HHS secretary under President George W. Bush.

Leavitt now serves as an advisor to Massachusetts Gov. Mitt Romney, who is seeking the Republican nomination for president and is widely viewed as the front runner. Cassidy, and other conservatives figures have been critical of the exchange system that was set up under Romney’s watch because, they argue, it closely correlates with ObamaCare.

Gov. Otter in Idaho sees no contradiction between supporting the exchanges and opposing ObamaCare. States are more likely to succumb to federal regulations, if they do not take the lead in setting up exchanges that can be tailored to fit local needs, Otter has said in media interviews.

Edmund Haislmaier, a senior research fellow with the Heritage Foundation, shares this assessment. Although it may be “politically appealing” to resist setting up the exchanges, this decision could open the way for greater federal interference, in his view.

“The best strategy for state lawmakers is to adopt their own reforms—separate from, and independent of, ObamaCare’s exchange design,” Haislmaier wrote in a policy paper. “State policymakers should then consider augmenting their “counter reform” initiatives with defensive measures designed to minimize federal interference, while the ultimate fate of ObamaCare is debated in Congress and litigated in federal courts. Taking such an approach will give state lawmakers a strategy that has both offensive and defensive components.”

The exchange design included as part of the federal legislation, formally titled the Patient Protection and Affordable Care Act (PPACA),  is a “perversion of the core concept” of what is an otherwise a sound approach to health care, Haislmaier has argued. State lawmakers can use exchanges to implement market reforms independent of the federal law, he wrote.

But Michael Cannon, a health care scholar with the Cato Institute, has been sharply critical of this approach. Republican governors who are inclined to set up the exchanges, despite their stated opposition to ObamaCare, should reconsider their position, he has said.

In an opinion piece, he advises Virginia’s Republican Gov. Bob McDonnell, to remain mindful of Thomas Jefferson’s warning that goes back over 200 years: “The natural progress of things is for liberty to yield, and government to gain ground,” Jefferson said.

McDonnell has set up a commission to study whether the federal health law should be implemented, even though he sees it as unconstitutional.

“Creating any sort of exchange is unnecessary, wasteful and counterproductive,” Cannon wrote. “If the Supreme Court overturns ObamaCare, any money Virginia spends creating an exchange would be wasted.”

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org. Follow him on Twitter.