Published in POLITICO
If the Supreme Court upholds the health care reform law, can a state keep fighting its implementation?
The law is very clear: The Department of Health and Human Services has the power to set up a federal health insurance exchange in states that don’t set up their own. But a federal exchange can’t function solo. It needs some help from a state’s Medicaid program and insurance department.
“The exchange is very difficult to make work if there isn’t some level of cooperation,” said Joel Ario, who oversaw exchange policy at HHS before joining Manatt Health Solutions.
HHS has the legal authority to fight back — but it’s not easy. The steps it can take are like a nuclear bomb: They’re useful as a deterrent but have fallout that the department would most likely try hard to avoid. For instance, Washington could penalize a state by cutting off its Medicaid funds. But blowing holes in state budgets and taking away coverage from thousands of people would accomplish precisely the opposite of the health care law’s goals.
For the resistant states, in contrast, obstruction wouldn’t require lifting a finger. To block the federal exchange, they could just do nothing. And if they don’t make the legally required changes in state programs — such as Medicaid — to coordinate with the federal exchange, the federal exchange can’t work.
This would frustrate one of the major goals of the law: creating a one-stop marketplace to make it easier for low-income individuals to enroll in Medicaid and to help others buy private insurance, with subsidies available to those who are eligible.
For what it would be worth, the federal exchange would still be able to determine which individuals are eligible for Medicaid. Those individuals wouldn’t actually get the benefits unless state officials added them to the rolls.
A state could also decline to enforce new consumer-protection regulations to private insurance sold outside the exchange. These include the ban on insurers denying coverage to sicker people or charging higher premiums. This could push people with the highest health costs into the exchange plans — driving up the costs and forcing them out of business.
Yet beating health care reform is not so easy. The state’s “civil disobedience” would break federal law, and that could pose major risks for the state.
“You would have to be willing to cause chaos in your state,” said Larry Levitt, executive director of the Kaiser Initiative on Health Reform and Private Insurance at the Kaiser Family Foundation.
In addition to the unpalatable option of cutting off Medicaid funding, HHS has the power to essentially usurp a state’s power to regulate insurance if it won’t enforce federal law. And people in a state without an exchange wouldn’t get the new premium subsidies available under the health care law. That could prove politically unpopular once the dollars start flowing to help people get insurance in other states.
The stakes are so high, said Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, that the idea of a state stonewalling the law after it’s upheld by the Supreme Court is “far-fetched across the board.”
A more realistic scenario might be for a state to do just enough to avoid triggering HHS enforcement action, but not enough to fulfill all the legal requirements. And that’s what consumer advocates expect in Wisconsin if Gov. Scott Walker survives a recall election.
Robert Kraig of Citizen Action of Wisconsin said he anticipates Walker will “pursue a nullification strategy” by dragging his feet on integrating with Medicaid and stalling for time by creating a health exchange that doesn’t meet the law’s requirements.
Whether a state tries outright civil disobedience or subtler stonewalling, HHS may have trouble using its powers to bring it into line, say health law experts.
Cutting off Medicaid dollars would be both bad policy and bad politics. And usurping state powers would open HHS to massive accusations of a “federal takeover,” which could further inflame political attacks on the health care reform law.
“Even if they could do that, I don’t think they would,” said Cheryl Smith of Leavitt Partners, an exchange consultant that is working with policymakers in several states that would prefer that the Supreme Court strike down the law.
Smith is skeptical that HHS even has enough personnel to take over a recalcitrant state’s insurance regulation on top of coaxing along states that are not in outright violation of the law. She expects only a handful of states to be fully compliant with the health care law when the exchanges open for business in 2014, and the department’s resources will be stretched thin.
But even if most states comply, it seems likely that at least a couple Republican lawmakers are going to test the department, suggested former Virginia Rep. Tom Davis, a moderate who abandoned a Senate bid in the face of stiff conservative opposition.
Davis noted that pragmatic Republicans, who have argued that their states should do exchange planning in case they lose in the Supreme Court, have already attracted challengers from the right. If the law is upheld, officials who cooperate could face primaries from those who promise to block an exchange at all costs.
Opposition to health care reform has become such a conservative shibboleth that Davis predicted, “You’re going to get some demagoguery.”
Officials in some states that are leading the opposition to the Affordable Care Act, such as Louisiana and Florida, have said they will comply with the law if they lose in the Supreme Court.
But Virginia Attorney General Ken Cuccinelli declined to rule out the possibility of civil disobedience.
“It would be contrary to the law, yes,” he said last week, but added, “It’s not like there’s criminal penalties out there. It becomes a power struggle.”