State’s decision to halt health exchanges worries insurers

By Guy Boulton of the Journal Sentinel
Jan. 1, 2012 |<>

A recent decision by Gov. Scott Walker could give the federal government greater influence over the state’s health insurance market – and that worries some in the industry.

Walker announced late last month that the state would halt work on the online marketplaces, or exchanges, required under federal health care reform until the U.S. Supreme Court rules on the constitutionality of the law.

The exchanges could help consumers and small businesses compare competing health plans.

They also could increase price competition by requiring health insurers to offer more standardized plans and by providing consumers with better information about what they are buying.

But how well they work will depend on dozens of decisions, such as how much flexibility to give health insurers in determining what to cover, and the roles of insurance agents and brokers.

Under the health care reform law, the state must have a plan in place to set up an effective exchange by January 2013. If it doesn’t, the federal government will set up the exchange.

There’s a risk in halting the work on the exchanges until the Supreme Court rules: If the law is upheld, the state would have only about six months to put together a plan.

Whether that can be done in that time frame is a question. It also is a concern for health insurance companies.”We do not want decisions about Wisconsin’s insurance market to be made in Washington,” said Phil Dougherty, senior executive officer of the Wisconsin Association of Health Plans.

One worry is that health insurers would face stricter regulations from the federal government than from the state Office of Free Market Health Care.”No question,” said Jon Rauser, president of the Rauser Agency, an insurance broker in Milwaukee.

The Office of Free Market Health Care has said it backs a “free-market, consumer-driven approach” for the state’s exchange. Consumer advocates have already criticized the working groups set up to advise the state, saying they are dominated by representatives of insurance companies and brokers.

Walker betting against it
Walker, who opposes federal health care reform, said that moving forward with the exchanges could be a waste of time and effort if the law is declared unconstitutional.

He denied that he was bowing to pressure from conservatives who have encouraged states not to plan for the exchanges.

His decision could be seen as a bet that the revamping of the health insurance market under federal health care reform won’t happen.

Under this scenario, the Supreme Court would declare the entire law unconstitutional – not just the provision that requires nearly everyone to have health insurance – or a Republican candidate would win the presidency in 2012 and be able to stop the law from being implemented.

Walker contends the state still can put together an exchange by the end of next year if the law is upheld.

But that would require the state to make a slew of quick decisions, ranging from arcane details on how to determine the actuarial value of the health plans to what information to provide consumers.”There are a lot of things that have to be worked out and thought through to make it work effectively,” said Barbara Zabawa, a Madison lawyer who is on the main working group to advise the state.

The state could meet the deadline, she said, but it would be a challenge.

Spokesmen for the state Office of Free Market Health Care have not responded to interview requests.

Legislation needed
Another potential obstacle is that the state may need to pass legislation to set up an exchange. That would require a special session of the Legislature if the law is upheld.

A lengthy debate on that legislation could further delay work on the exchange. Whether the Walker administration could get lawmakers to pass legislation is also a question.

Sen. Frank Lasee (R-De Pere), chairman of the Senate Committee on Insurance and Housing, has pledged to block legislation needed to set up an exchange.”We can come up with a lot of questions,” said Dougherty of the Wisconsin Association of Health Plans. “But we don’t have a lot of answers just now.”The state also may have to give back at least part of a $37 million federal grant to offset the initial cost of the exchanges.”I don’t know why the feds don’t pull that money, because they are not accomplishing anything with it,” said Bobby Peterson, a lawyer with ABC for Health, a public-interest law firm in Madison. “It’s a shame, because Wisconsin was in a position to be a leader.”At the same time, consumers might fare better if the federal government sets up the exchange rather than the Walker administration, Peterson said.

If nothing else, the governor’s decision adds to the uncertainty surrounding federal health care reform for health insurers.”The uncertainty is the worst part, because it’s hard to plan, it’s hard to budget, without knowing what’s on the horizon,” said Zabawa, the Madison lawyer on the working group.

She was disappointed by the state’s decision to stop work on the exchanges.”Wisconsin would be best served to have its own exchange tailored to the needs of the people of the state,” Zabawa said.

Rauser of the Rauser Agency said even people who oppose the federal law agree with that.”It’s a pragmatic alternative to doing nothing,” he said.

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Why Medicaid Is No Longer a Voluntary Program

Why Medicaid Is No Longer a Voluntary Program

BY Jeffrey A. Singer

It is widely believed that Medicaid is a voluntary program. While this may have once been true, it is no longer the case. Today, states confront the dilemma of having to choose between joining Medicaid or being forced to sacrifice any health care “safety net” for their indigent populations. This is all because of a law enacted by Congress in 1986 called the Emergency Treatment and Labor Act (EMTALA).

In 1986, Congress passed EMTALA, making it a federal crime to transfer a patient from one hospital/emergency room to another for financial reasons. It compels hospitals to render care, even without any compensation.

EMTALA led to an explosion in uncompensated care. It became common knowledge that, if a person presents to a hospital emergency department, the hospital must provide care and may not transfer the patient elsewhere without the patient’s permission. This became a major cause of “cost-shifting,” as hospitals and doctors tried to recoup their losses from uncompensated care by raising their fees on insured patients.

Many doctors resigned from emergency room coverage, tired of rendering uncompensated care to people who might turn around and sue them for malpractice. EMTALA forced many hospitals to close their emergency rooms.

But EMTALA did more. It killed the voluntary nature of the Medicaid system.

Four years before the passage of EMTALA, Arizona still had its own state-run indigent care program.

Arizona law required each county to establish a comprehensive indigent care system. Maricopa County, home to metropolitan Phoenix, maintained a system of health clinics staffed with full-time physicians. At its heart was the Maricopa County Medical Center, a full-service teaching medical center, including a trauma center and the largest burn unit in the southwest. Patients who were seen in private hospitals and needed hospitalization were transferred over to “County.”

The system provided preventative care, prenatal care, mental health, and long-term care. Eligibility was tied to income and assets. Patients presenting for the first time as an emergency would be treated and retroactively enrolled in the system.

I was a surgical resident at “County” (1976-81). It was commonplace for a doctor at some other hospital to phone me and say, “I have an indigent patient in my emergency room who has an ‘acute gallbladder’ and who doesn’t have insurance. Can I send her over to you?” Like all of my fellow residents, I would enthusiastically accept the patient (we were a teaching hospital and wanted the experience). They would get prompt treatment, supervised by full-time faculty, cared for in a ward setting.

This system worked well and was popular. But in 1982, after pressure from various factions, Arizona became the last state to join Medicaid.

Today, if Arizona decided to leave Medicaid and resume its pre-Medicaid system, it couldn’t do so. EMTALA would prevent it from functioning. EMTALA specifically bans any hospital from transferring patients for financial reasons. Arizona’s pre-Medicaid system depended upon the transfer of indigent patients from private centers into its indigent health system, thus relieving private hospitals and providers from the burden of constantly providing uncompensated care.

Last year, when 26 states and the National Federation of Independent Business challenged, in federal court, the Patient Protection and Affordable Care Act (“Obamacare”), they argued there was no constitutional authority for the so-called “individual mandate.” But they also challenged the authority of the PPACA to require states to expand their Medicaid rolls, and thus their Medicaid budgets.

The plaintiffs claimed that compelling the states to increase the amount they spend on Medicaid was a federal “commandeering” of the states’ treasuries.

Medicaid is a voluntary program, said the Feds. If the states opt in they receive matching funds of 50% or more from the federal government to fuel the system. But nothing prevents the states from opting out of Medicaid, so state sovereignty is not being usurped.

The states responded that the loss of federal matching funds resulting from an opt-out would be so severe as to amount to coercing the states to stay in the program.

The District Court, and later the Appeals Court, didn’t buy this part of the states’ case. While they agreed that the “individual mandate” is unconstitutional, they didn’t see the state Medicaid mandates as usurping state sovereignty.

The U.S. Supreme Court recently agreed to hear the case in the spring of 2012. And it will revisit the Medicaid issue. Hopefully, at that time, the EMTALA factor will finally get the attention it deserves.

If a state opts out of Medicaid, it forfeits federal matching funds amounting to anywhere from 40% to 60% of the state’s Medicaid budget. It is fiscally impossible for the state to create anything remotely resembling Medicaid using solely state funds without imposing massive tax increases on its residents, as well as draconian cuts in other services.

But if a state chose to leave Medicaid and adopt a less extravagant, more cost-effective, county-based indigent care system, like Arizona enjoyed until 1982, it couldn’t do that either. How, for instance, can an indigent patient be transferred to the County Medical Center or any of the satellite County treatment centers for financial reasons? It would be a violation of EMTALA.

By banning the transfer of indigent patients to indigent care facilities, this 1986 federal law unintentionally denies states the freedom to exercise their traditional sovereign powers to design their own cost-effective forms of indigent care.

EMTALA leaves states no real choice. Any choice to opt out of Medicaid effectively forces them to abandon indigent health care delivery.

EMTALA is the heretofore-unnoticed 800-pound gorilla in the room that just might secure the argument that “Obamacare” violates state sovereignty.

Jeffrey A. Singer, MD practices general surgery in metropolitan Phoenix, writes and lectures on regional and national public policy, and writes for Arizona Medicine (the journal of the Arizona Medical Association).

To view this article by Jeffrey A. Singer for The Hawaii Reporter in its original context, please visit