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Health Reform via State Waiver

By Erin Fuse Brown and Chelsea Campbell

The path to systemic health reform in the U.S. may run through the states. To get there, the Biden/Harris administration should use its existing waiver authority under federal health care statutes to facilitate progressive state health reform efforts, including a state-based public option or single-payer plan.

One of the benefits of the United States’ federalist system, in which the power to enact policy and govern is divided between the national government and the states, is that we can test policies at the state level, and if we can establish a proof of concept there, it smooths the way for federal reform.

For example, the ACA of 2010 was patterned off of Massachusetts’s health reform in 2006. Similarly, Canada established its single-payer system at the national level after one province, Saskatchewan, proved it could be done. Sometimes it takes more than one state, such as the 33 states that passed laws protecting patients from surprise medical bills, before Congress finally passed the federal No Surprises Act in late 2020. State experiments allow us to test which models work best and build public and political support for reform.

Using a similar strategy, the Biden Administration can take steps towards a federal public option or single-payer health care by promoting state health reforms. But states face additional barriers that the federal government does not. These include fiscal barriers — states cannot borrow and deficit-spend like the federal government — and legal barriers in the form of federal laws (Medicare, Medicaid, ACA, ERISA, and tax) that constrain the degrees of freedom to design a state-based single-payer or public option plan.

Together with colleagues Elizabeth McCuskey, Jaime King, and Katherine Gudiksen, I’ve surveyed state single payer and public option proposals: in the decade since the ACA was passed, legislators in 21 states have introduced 66 unique single-payer bills, and legislators in 20 states have introduced 38 unique public option bills, including one in Washington state that was signed into law. A lot of health policy innovation is happening in the laboratory of the states, despite the considerable fiscal and legal barriers they face.

So what role could the Biden administration play? The federal government can either grease the skids or throw sand in the gears of these state health reform efforts. Though federal laws create barriers, most contain authority for HHS to waive certain legal requirements to promote state health reform innovation. To facilitate state health reforms, HHS should adopt a policy to assist states with obtaining waivers under the ACA Section 1332, Medicaid Section 1115, and Medicare, or a coordinated “super-waiver” combining all of these for states to pursue systemic health reforms such as a single-payer or public option. ERISA stands out for its lack of a waiver; a problem Elizabeth McCuskey seeks to rectify.

A broad waiver policy from HHS could allow states to expand or mix eligible populations (e.g., allowing a state plan to serve Medicaid and Marketplace populations); unify streams of federal funding under the ACA, Medicaid, and Medicare; relax or allow calculation of budget neutrality requirements across programs; allow a state entity to offer a qualified health plan and receive premium tax credits and other federal funds; and allow employers to opt-in to the public plan without penalty under the ACA’s employer mandate. A broad waiver of this sort would allow states to offer a unified public plan to its entire population and combine the financing and administration in a single state health agency.

To be sure, any policy allowing broad waivers must contain sufficient guardrails to ensure maintenance of key consumer protections under the federal laws. Attempts to promote greater state flexibility must preserve these protective bulwarks and avoid the weaponization of waivers to undermine the purposes of the federal laws.

Still, waivers may be the Biden administration’s best tool for its next phase of health reform.

Though the Biden administration has accomplished much in its first 100 days, many of these early actions were those that could be done unilaterally by the executive branch via executive orders, rulemaking, or sub-regulatory guidance — largely freezing or undoing Trump administration policies promulgated in the same manner. Congress passed the American Rescue Plan, which significantly expanded support for health coverage as part of a massive COVID-19 response and economic stimulus measure, in March under budget reconciliation.

Enacting sweeping health reform, such as a national public option plan or Medicare for All, will be much harder because these measures likely cannot be passed via budget reconciliation. Under current Senate filibuster rules, these reforms would require at least 60 votes and bipartisan support, both unlikely prospects.

If the Senate doesn’t change the filibuster rules, the best path to structural health system reform may be through the states.

The Biden administration could facilitate the approval of waivers aimed at expanding healthcare at the state level. If states can demonstrate success in implementing progressive health reforms, national health reform may follow.

Erin C. Fuse Brown is Catherine C. Henson Professor; Associate Professor of Law; and Director, Center for Law Health & Society at Georgia State University College of Law.

Chelsea Campbell is a Health Law & Policy Intern at Georgia State University.

The Petrie-Flom Center Staff

The Petrie-Flom Center staff often posts updates, announcements, and guests posts on behalf of others.

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