Charlie Arlinghaus

September 26, 2013

As originally published in the New Hampshire Union Leader

The government-sponsored insurance plan offered through the Obamacare exchange has come under fire this week for leaving behind some of the hospitals in the state to provide a competitive advantage to the others. People naturally bristle at the government picking winners and losers through its plan, but the situation is more complicated than it first appeared.

Under the new federal health care law, every state must have an “exchange” to offer subsidized health insurance. The latest public relations spin would change the name of these exchanges to “marketplaces” but recent events have revealed they aren’t marketplaces and aren’t subject to market forces.

In New Hampshire, only one company signed up to offer the policies to be subsidized through the exchange. That company, Anthem, is the dominant player in the regular market, issuing 56 percent of policies.

Some had hoped for competition in the new federal exchange, but there would be none. To make matters worse, the new plan, with its additional mandates and required coverages, would manage to find affordability only by limiting access to certain providers. If your doctor or hospital is in, you’re happy. But nearly half of the hospitals (and the doctors they own — most doctor’s practices are owned by hospitals) are left behind.

Let’s start by saying that limited networks are a perfectly reasonable way to save some money. Providers are limited as a way to get them to accept below-market prices. Even so, rates will increase for most consumers. Anecdotally, one consumer I know will see his rates double even with none of his doctors in the plan any longer. On the other hand, he’ll get new coverage he doesn’t want, but still has to pay for.

We’re told by Anthem that despite the increased costs over your old plan, the new, limited plan has costs that are 25 percent lower — not lower than what they were but than what they would have otherwise been.

So Anthem chose to offer a plan with limited providers who have all agreed to accept a much lower payment than they would currently receive for private insurance. Currently, Medicaid pays roughly 1/3 of the price charged to regular consumers. The new plan would be closer to Medicaid than regular insurance.

Why would a hospital accept lower payments? First of all, because if the new health care law is unchanged, the exchange will occupy a greater and greater share of the insurance market each year. It’s easier to be in from the beginning than to be left behind and try to claw your way in from the outside. Second, by leaving so many providers behind, those favored by the government-sponsored plan will get a greater share. A hospital can make less money on each patient if it has more of them and its regional competitors start to wither away.

There would be much less consternation about this plan if there were an alternative in the exchange. If one competitor chose to offer a limited network, consumers with such an interest could instead move to a perhaps more expensive but less-limited network. But consumers have no such choice. There is one company offering plans that vary slightly by deductible size. There are no alternatives, no choices, no competition.

At first, public reports seemed to indicate that the hospital left behind had opted out themselves because they chose not to accept lower rates. Instead, we learn that the opposite is true. Hospitals perfectly willing to accept lower rates were nonetheless not allowed in.

Last weekend on Josh McElveen’s public affairs show on WMUR-TV, we saw the head of the hospital in Rochester (New Hampshire’s sixth-largest community) tell Anthem’s CEO he was willing to accept her rates and ask to be allowed onto the list. She pointedly ducked the question, but the answer is clearly no.

The hospitals cut out of the plan are left with two choices: hope the new system fails miserably and is repealed, or quietly go out of business. Consumers like you and me can look forward to higher insurance rates and only hope that our providers make it onto the government approved list.

Grant D. Bosse

September 8, 2013

As originally published in the Concord Monitor

I know that there are millions of Americans who are content with their health care coverage – they like their plan and they value their relationship with their doctor. And that means that no matter how we reform health care, we will keep this promise: If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”

President Obama, June 15, 2009

“You can’t spend your whole life worried about your mistakes. You f—–d up. You trusted us.”

Eric Stratton, rush chairman, “Animal House,” 1978

For thousands across New Hampshire, and millions of Americans, ObamaCare is taking away their doctor and taking away their health care plan. That’s despite the empty promises used to sell a sloppy law passed by people who didn’t know what was in it.

Last week, Anthem Blue Cross Blue Shield informed the Legislature’s Joint Health Care Reform Oversight Committee that it would not be covering services provided by 12 of the state’s 26 hospitals. The smaller network will apply not only to the Anthem plans offered under the Affordable Care Act Exchange, but to Anthem’s individual and small business plans outside of the exchange. Anthem says letting patients choose any of New Hampshire’s hospitals is simply too expensive, and kicked a dozen hospitals, including Concord Hospital, out of its network.

Anthem will also refuse to cover referrals to out-of-state specialists, period. You’re still welcome to take advantage of the world-class hospitals located just a few south on Interstate 93, but you’ll have to pay for it yourself.

Anthem has since backtracked a little, putting Androscoggin Hospital in Berlin and Littleton Hospital back in its network.

Gov. Maggie Hassan has known about this for a while, and Insurance Commissioner Roger Sevigny has endorsed Anthem’s plan to the Centers for Medicare and Medicaid Services, which is setting up New Hampshire’s exchange.

We still don’t know what kinds of plans Anthem will offer, or how much they’ll cost, because the state Department of Insurance clings to the ludicrous notion that its internal rules trump the state’s Right to Know Law, and that the details of a government-run health insurance scheme are proprietary until Jan. 1, 2014, the day the new policies are supposed to take effect.

Anthem argues that such drastic decreases in accessibility are necessary to prevent drastic increases in premiums. They simply can’t afford to let you see the doctor of your choice. If you’ve been paying attention since ObamaCare passed, you’ve known this was coming.

No insurance company could provide the services mandated under the law for a price anyone would pay. So they’re limiting the options. They’re rationing care.

As we socialize our health care costs, we also socialize our health care decisions. If you were paying my hospitals bills, you’d have an incentive to make sure I’m not wasting your money. But of course, I’m never going to spend your money as carefully as my own. So you step in, through the government and the insurance companies, to limit my choices.

Even if Obamacare had been well-written and properly implemented, rationed care would be inevitable. The incompetence of the Obama administration has been optional. It’s missed deadlines and delayed major provisions of the law. Employers are cutting staff, cutting hours, and dropping dependents for their health insurance plans in order to avoid the law’s costly implications.

Even though the exchanges are scheduled to open enrollment on Oct. 1, only 13 states and the District of Columbia are far enough along to know how much the plans will cost. Avik Roy, whose been tracking this slow-motion train wreck for Forbes, calculates that nine states will see higher rates for the plans offered by the exchanges, and five will get lower rates. On average, health care premiums will jump 24 percent. He hears the Obama administration will have the relevant data for the other 37 states by Sept. 19.

The Patient Protection and Affordable Care Act neither protects patients nor makes care more affordable. It is a bad idea, poorly executed. It was never going to bring down health insurance costs, but it didn’t have to fail quite so catastrophically. They are plenty of dead-enders who insist it’s either working just fine, or would be if people like me weren’t keeping it from speeding off the cliff.

Such delusions are going to get harder to justify as health care costs continue to climb, and patients are turned away from Concord Hospital and Mass General.


Josh Elliott-Traficante

September 5, 2013

As reported by various media outlets earlier this week, the Health Care Oversight Committee held a hearing with representatives of Anthem Blue Cross Blue Shield. Anthem, who will be the only health insurance provider offering plans on the New Hampshire Exchange, confirmed that future exchange customers would only have access to only about half of the hospitals in the state.

Looking at a map of the hospitals in and out of network, (green dot: in network, red: out of network) there are some areas that are disproportionately affected, such as the Concord area, Connecticut River Valley, the Monadnock Region, and particularly the North Country.

Any resident north of the Notches has only the option of Weeks Medical Center in Lancaster, or driving to either Memorial Hospital in North Conway or Speare Memorial Hospital in Plymouth to seek care.

Limiting access will not only affect hospitals, but primary care physicians as well. Throughout the state, many hospitals have acquired primary care practices in their respective areas, building a comprehensive health system. These systems often include primary care practices, urgent care clinics, and laboratories, all under the aegis of a single hospital. While this model can promote efficiency, once a hospital is no longer considered in network, the same is true for the rest of the health system, including those primary care physicians.

This causes two major problems for consumers: those who end up in the exchanges will be forced to change their doctor and will have to travel further to get to their new one. {So much for the idea of keeping your own doctor.} This will be particularly problematic in the Concord Area, as Concord Hospital owns or is affiliated with most of the practices in the area. While it is in theory possible for insurance companies to make access contracts at the practice level, regardless of what health system they may belong to, it remains to be seen if that will be done.

Anthem will remain the only company offering health insurance policies on New Hampshire’s Exchange at least until 2015.

In Network:                                                                                          Out of Network

Androscoggin Valley Hospital: Berlin                             Alice Peck Day Hospital: Lebanon

Catholic Medical Center: Manchester                                            Cottage Hospital: Woodsville

Cheshire Medical Center: Keene                                                      Concord Hospital: Concord

Elliot Hospital: Manchseter                                                               Frisbie Memorial Hospital: Rochester

Exeter Hospital: Exeter                                                                        Monadnock Community Hospital: Peterborough

Franklin Regional Hospital: Franklin                                            Parkland Medical Center: Derry

Huggins Hospital: Wolfeboro                                                            Portsmouth Regional Hospital: Portsmouth

Lakes Region General Hospital: Laconia                                      Upper Connecticut River Valley Hospital: Colebrook

Littleton Regional Hospital: Littleton                              Valley Regional Hospital: Claremont

Dartmouth Hitchcock Medical Center: Lebanon

Memorial Hospital: North Conway

New London Hosptial: New London

Speare Memorial Hospital: Plymouth

St. Joesph Hosptial: Nashua

Weeks Medical Center: Lancaster

Wentworth-Douglass Hospital: Dover


Update 9/6: Late Thursday, Anthem announced that both both Androscoggin Hospital in Berlin and Littleton Hospital will be added to the network.

Red Dot: Out of Network Hospital, Green Dot: In Network.

Map Source: Google Maps


By Grant D. Bosse

As originally published in the Concord Monitor

Obamacare is an awful law. It’s falling apart under its own weight, and President Obama has already been forced to waive key provisions several times to prevent the law’s disastrous consequences from fully hitting us. Repealing Obamacare is a good idea, and Congress should do everything it can to get rid of it. Unfortunately, the push to de-fund Obamacare through the appropriations process just won’t work.

Utah Sen. Mike Lee is gathering allies who promise to oppose any continuing resolution to keep government operating unless it defunds the Patient Protection and Affordable Care Act, known as Obamacare. Federal programs are authorized and defined in statute, but zeroing out federal funding has the effect of repealing that statute, since there is no one being paid to administer or enforce it. House Republicans voted repeatedly to repeal the law wholesale last year, and once again this year, but Majority Leader Harry Reid will never let such a repeal come to a vote in the Senate.

I’ve covered Reid’s complete failure to run the Senate before, but it’s worth mentioning again because it’s the reason why Congress has been unable to pass the appropriations bills that fund the federal government. Instead, the House and Senate have agreed to a series of short-term continuing resolutions to keep the government running.

Lee in one of 11 senators, along with 60 House Republicans, who have said they won’t approve another continuing resolution unless it defunds Obamacare, even if that means a government shutdown like 1995.

Repealing Obamacare outright, defunding it, or simply waiving its requirements like the president did for the employer mandate are worth pursuing. But Lee’s strategy is both short-sighted and politically foolish.

First of all, failure to pass a continuing resolution won’t shut down Obamacare. As New Hampshire Sen. Kelly Ayotte pointed out, the law is funded through mandatory spending, not the year-to-year discretionary spending covered under appropriations bills. A shutdown would close national parks, but the Health and Human Services employees implementing Obamacare so badly would still get paid.

So why are Lee, and Senate firebrands Rand Paul and Ted Cruz, threatening a last stand against Obamacare that is doomed to fail? I blame George W. Bush.

It’s become cliché for the left to blame all manner of problems on the former president, and the current administration certainly isn’t shy about pointing fingers toward the ranch in Texas five years after taking office. But we can trace the origins of the current push by some Republicans to defund Obamacare or shut down government to the Bush administration.

Bush’s first budget to Congress was pretty good, and the Bush tax cuts in 2001 and 2003 helped speed an economic recovery that led to booming federal revenue. But in the aftermath of 9/11, Bush deferred almost entirely to Congress to make budget decisions. Appropriators turned to unprecedented amounts of earmarks to push through unprecedented spending that rose even faster. Deficits skyrocketed, and spendthrifts like Nancy Pelosi and Barack Obama were able to campaign as stewards of fiscal responsibility.

Despite some vocal opposition from House conservatives such as Jeff Flake and John Shadegg, and Senate efforts to curb wasteful spending from the likes of John McCain and John E. Sununu, congressional Republicans lost credibility with their base. (Disclosure: I was Sununu’s legislative staffer tracking the Senate budget debate at the time.) By 2010, discontent with bailouts, boondoggles and deficits fueled the Tea Party movement.

Without credibility, many Tea Party voters seek purity. They want senators like Lee, Paul and Cruz to hold the line, no matter what. In this case, they’re holding the wrong line. It doesn’t help that conservative organizations are eager to raise money on the false promise of ending Obamacare.

Oklahoma Sen. Tom Coburn, the Senate’s most hard-line fiscal hawk and leading Obamacare critic, recognizes that blocking a continuing resolution won’t get rid of the law.

If the Senate were to vote on defunding the law, it’s conceivable that a few shaky Democrats would take the opportunity to distance themselves from the disaster they created. But without the president’s support or two-thirds of the House and Senate, such a road would leave much of the federal government shut down and Obamacare fully funded.

I’ve not been shy about criticizing Reid and New Hampshire Sen. Jeanne Shaheen for their willingness to ignore the rules and traditions of the Senate. I’m just as willing to chide Lee and his colleagues for their failure to understand how the Senate works. Senate Republicans should demand an up-or-down vote on Obamacare repeal, and Reid and Shaheen should be branded as the real obstructionists for refusing to allow one. But refusing to fund federal programs in order to repeal an unrelated law doesn’t make sense.

Daniel Webster, then a New Hampshire congressman, tried to end the War of 1812 by defunding it. The backlash stymied his presidential ambitions for the rest of his life. Webster paid a heavy price for his futile effort. Lee, Paul and Cruz may learn that same lesson.

Grant D. Bosse

July 9, 2013

As originally published in the New Hampshire Union Leader

The state’s Certificate of Need board, an outdated government panel that oversees hospital construction spending, was slated to go away in 2015, but supporters of government rationing slipped a provision into the state budget deal that pushes the day of reckoning back to June 30, 2016.

Officially known as the Health Services Planning and Review Board, the CON board has been around since 1979 and requires New Hampshire hospitals and clinics to get permission before building or expanding their facilities or purchasing expensive equipment. The theory is that a panel of well-intentioned bureaucrats could hold down health-care costs by preventing hospitals from reckless and wasteful expansion. It hasn’t worked.

CON Boards have been around for nearly 50 years and have never been shown to keep costs down. But they have slowed the spread of MRI machines and other miraculous medical devices in the name of cost controls. They have also forced hospitals to navigate a lengthy and expensive maze of regulations and reports. Former Illinois governor and current federal inmate Rob Blagojevich used his state’s CON Board to shake down applicants for bribes.

The deal snuck into the budget shuffles some deck chairs at the CON Board and gives supporters an extra year to keep it alive. New Hampshire would be wise to let the sun set on this costly and counterproductive bureaucracy.

Charlie Arlinghaus

July 17, 2013

As originally published in the New Hampshire Union Leader

There is a right way and a wrong way for the government to do something stupid. It won’t surprise anyone that the current administration in Washington has chosen the wrong – and almost certainly illegal – way while New Hampshire managed to do a whole host of silly things but in the right way.

Routinely, governments find that laws previously passed are quite inconvenient and get in the way of something they are trying to do (or not do) today. But they don’t want to repeal the law for the future, they just don’t want to follow it this year.

That happened recently with the byzantine federal health care law. Those following closely will recall that the law includes mandates to purchase health insurance for both individuals and for businesses. Implementing the law has taken longer and been more complicated than some administrators had expected.

Citing concerns about the complexity of the requirements under the law, the administration unilaterally suspended for a year the portion of the law that applies to businesses. They didn’t ask Congress to pass a temporary repeal. They merely announced that they will cease to enforce a law of the land for a year –businesses get this break, individuals are still out of luck. Apparently the law is too complex for businesses to follow but perfectly fine for individuals.

Businesses with more than 50 employees, the ones to whom the law applies, are only a few percent of all firms but they account for 72% of employment.

While I think delaying the very complex law is reasonable, I would have delayed for both businesses and individuals just to be fair. But, a much more important point, administrators do not have the authority to pick and choose which laws they will enforce or not. If a law making the tax rate 35% passes, can the IRS announce it will only enforce the first 30%? If Congress chooses to require airbags on new cars, would it be OK for the transportation secretary to announce that they won’t actually enforce that?

Administrations can request laws be repealed or suspended but they may not choose to enforce or not laws they disagree with. If a Republican had replaced the current president, would it have been acceptable for him to not try to repeal ObamaCare but instead just announce he won’t be enforcing it? Of course not.

In New Hampshire, we pass temporary restraints on laws all the time. But the governor doesn’t decide to just enforce it. Instead the legislature passes a law temporarily suspending another one.

For example, technically we have a law that requires surpluses left at the end of the two-year cycle to be deposited into a “rainy day fund” – in theory to allow the extra in good years to be a reserve to balance out small revenue shortfalls in bad times. But every budget for the last five has suspended that law.

After state reserves had been drained from $188 million to $17 million by 2003, then-Gov. Craig Benson set of a goal of building the state’s operating reserving back to a more prudent $100 million. Benson’s $82.2 million surplus would have brought the state’s reserves to $99.5 million had the law been allowed to work. Instead, the next governor and next legislature passed a law suspending the rainy day fund law so the surplus would be available for them to spend.

The surplus turned out larger than they thought so they put some of it and some of the $51 million surplus two years later aside but they kept and spent a total of $61 million that should have been set aside for the rainy day that was on their doorstep.

The Republican legislature that decried this sort of practice in 2011 nonetheless passed a law preventing $17 million from going in the rainy day fund and the current divided government hangs on to that $17m and an additional $39m surplus the last budget generated. At this point, it isn’t clear why we have a rainy day fund at all.

As annoying as I find the bipartisan effort to neuter the state’s rainy day fund, our governors and legislatures do it legally. This was never done by executive fiat. Instead, the law was duly suspended by passing another law as opposed to administration in Washington which is just refusing to enforce the laws they are elected to administer.

Grant Bosse

July 7, 2013

As originally published in the New Hampshire Union Leader

The New Hampshire House and Senate may have adjourned for the summer, but a handful of lawmakers have some serious studying to do before their colleagues come back this fall.

A key compromise in the new state budget deal was the establishment of a study committee to examine whether New Hampshire should accept $2.5 billion from the federal government to raise the income eligibility limit for Medicaid.

While the Affordable Care Act originally forced states to expand Medicaid, the U.S. Supreme Court made that decision optional for each state.

The Obama administration promises to pay 100 percent of the costs of expansion for the first three years, and almost all of the costs after that.

Gov. Maggie Hassan and the Democratic House pushed hard to take the free money right away.

The Republican Senate is skeptical, both of the consequences of massively expanding an already troubled program and of Washington’s record of broken promises. The compromise is a nine-member study committee tasked with finding a New Hampshire solution.

It is to give its recommendation to the full Legislature in October.

The members of the newly formed study committee all likely have strong feelings on the issue.

They are not likely to learn much this summer that would change their recommendations. But they should take their task seriously and answer some key questions about this expansive decision:

. How many currently insured Granite Staters would drop their private coverage for free federal insurance?

. How much more would New Hampshire hospitals lose by treating thousands of new Medicaid patients? Hospitals are currently suing the state for its low Medicaid reimbursement rates.

. Do the results from states that choose to expand Medicaid right away line up with the rosy predictions of the Obama administration? The percentage of uninsured people in Maine didn’t budge the last time that state expanded its Medicaid rolls.

. Is the Obama administration’s promise to let New Hampshire Medicaid expansion sunset legally binding, or could Uncle Sam change its mind and block any attempt to bring Medicaid back to its current levels?

Getting these answers will help the Legislature make an informed decision with billion dollar consequences this fall.

Charlie Arlinghaus

May 22, 2013

As originally published in the New Hampshire Union Leader

Like most states in the country, New Hampshire is having a difficult time answering the question about whether or not to expand Medicaid coverage. For the last decade politicians of both parties have not made any attempt to expand Medicaid coverage in New Hampshire. With the federal government dangling some initial money for the program, some are tempted but unsure. Today, with so many unanswered questions and reasons to be skeptical policymakers should avoid a rush to judgment and just say maybe.

The federal government, as part of its new healthcare law, has offered to borrow about a trillion dollars to help states expand Medicaid coverage. Supporters in New Hampshire say it’s too good a bargain to pass up: the feds say they’ll pay 100% of the new costs in the first few years, then 90% and then 50%.

Supporters are excited that Medicaid coverage might reduce the percentage of people without insurance and reduce the amount of charity care (to the uninsured and to Medicaid patients) currently provided by hospitals.

But there are many reasons to be skeptical. There is some reason to believe the federal government may not live up to its promises and the experience in other states suggests the outcomes may not be as promised.

It’s important to remember that no one in New Hampshire would think this was a good idea if we paid for it ourselves at the regular Medicaid match rate. Remember that during the four years of a Democratic governor and Democratic legislature none of them proposed any significant expansion of Medicaid. The same is true of Republican control and divided control. There has been no local thought of expanding Medicaid in decades.

The feds currently claim they will pay 100% of the initial costs but they’ve already hinted at backing away. President Obama is perhaps the biggest supporter of this among any federal politician – it was his idea after all. Yet his 2012 proposal retreated from 100% funding and switched to a blended reimbursed rate attacked by left wing think tanks. If the biggest cheerleader for expansion has signaled a willingness to cut back before the program has begun, we ought not expect the promised federal funds to materialize.

While we are told that expanding Medicaid will reduce the level of uninsured, experienced across the country proves exactly the opposite. In the last decade, two states significantly expanded Medicaid: Maine and Arizona. In Arizona, the percentage of the population uninsured went from 19% to 19% over the decade – no change at all.

Lest you think it has something to do with deserts or warm air, our neighbors in Maine had precisely the same experience. Their uninsured went from 12% to 12%. In both states, the percentage with private insurance declined by the same amount as the increase in Medicaid coverage.

The other supposed policy benefit of expanding Medicaid coverage is a decrease in the amount of charity care provided by hospitals. Hospitals have a small number of patients with no insurance for whom they write off all their costs and a larger number of Medicaid patients for whom they receive payment for less than 50% of costs.

One of the big drivers of Arizona’s expansion was the expectation that it would dramatically reduce charity care and hence cost-shifting to private insurance. Instead, post-expansion, charity care costs rose an average of 9% per year (remember that that the percentage of uninsured didn’t change).

In Maine, a state almost exactly the same size as our own, they too saw increases in charity care. In the first eight years of expansion, charity care has climbed from $61 million to $215 million (in Maine too there was no reduction in the uninsured).

At this point, there are too many questions to say yes to Medicaid expansion. We know the results won’t be as advertised. There is every reason to be concerned about costs and the ability or willingness of a destitute federal government to meet its promises.

Proponents suggest we can adopt the program and just opt out at any time later but practically that isn’t true. The federal could adopt a maintenance of effort requirement like they adopted with the stimulus package that precludes any changes. And rolling back any program is always problematic.

This year, in this budget, there are too many questions, too many reasons to be skeptical to say yes to expansion.

Josh Elliott-Traficante

A recent study published in the New England Journal of Medicine suggests that the expansion of Medicaid, which is currently being debated in many states, including here in New Hampshire, does little to improve the health of the newly covered.

Several years ago, researchers were recently given the rare opportunity to study the effectiveness of Medicaid Expansion in Oregon. The state opted to expand its Medicaid program to include some low income, uninsured adults. However, funds were only available to enroll only a portion of those eligible, so roughly 10,000 individuals were chosen by random lottery to receive coverage. While unintended as such, these conditions laid the groundwork to conduct a scientific study of the efficacy of the program by creating a randomly selected sample (those chosen) with an established control group (those not chosen).

What makes this study so relevant in today’s discourse is that the population covered by Oregon’s expansion is the same population that will be covered under the expansion of Medicaid as part of Affordable Care Act in the other states. The study of nearly 12,000 individuals’ health outcomes grants rare insight into what the benefits and shortfalls of expanded Medicaid would be.

When comparing the newly covered and non-covered groups in Oregon two years out, the study found that there was little difference in health outcomes. The study concluded:

This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years…

The study did find that expansion increased the use of health services, diabetes detection and management as well as reducing financial strain, all of which would be expected. Surprisingly it did lower rates of depression by about 30%, which could be related to the reduced financial strain.

Some have argued that all that the study shows is that insurance is working because people are getting some chronic conditions taken care of, or that just by virtue of having insurance coverage does not make one healthier.

To some extent both are true, however, the gains seen in the Oregon study can be achieved by means other than the expansion of a very expensive program like Medicaid.

Charles M. Arlinghaus

 March 2012

Summary: New Hampshire should join the Health Care Compact to allow different states to try different health care reforms. The results of those reform pilot programs may give New Hampshire the opportunity to replicate better or more efficient programs here if we choose. The compact has no cost associated with it and doesn’t require New Hampshire to expend any money or assume any liability but has the long term potential to uncover cost savings measures.

On February 15, 2012, the New Hampshire House of Representatives voted 253-92 for HB1560 to join a national Health Care Compact[1] of states asking the federal government to play a role as the federal government considers plans to change, among other things, Medicaid and Medicare.  The vote sends a clear message that states should be consulted and states should have options. As the proposal is considered by a second committee, some details are worth addressing. While any new proposal is open to misinformation and demagoguery, this isn’t nearly as complicated as it sounds. Much of the criticism and even some of the support for a compact is based on misunderstanding, or in some cases misrepresentation, of the structure and language of a compact.

The Health Care Compact that has been ratified by four other states in the form being considered in New Hampshire would only happen if the federal government and the state government both agreed. Then, only if it so chose, the state would assume administration and direction only of the specific programs it felt it would manage more effectively than the federal government, quite likely a subset of all federal programs. Although states would receive grants equivalent to the specific funding for the programs it chose to administer, they would assume no long term liabilities for federal programs that currently have long term liabilities.

The Basic Structure of this Health Care Compact

At its most basic level, the Health Care Compact being considered in New Hampshire is a petition to the federal government asking them to allow states the opportunity to take federal health care spending for specific programs and craft a state specific program to replace the federally administered program.

The Compact is a group of states who essentially sign a request to the federal government to grant them (and any other state) that authority. Importantly, the program could not take effect without the federal government granting the authority and with the state opting to administer specific program or perhaps none at all.

To administer a specific program, states would be granted the authority to replace the federal laws regarding a program (Medicaid for example) with state laws. This provision has led to the most misunderstanding. The Compact would provide that a state may “Suspend by legislation the operation of all federal laws, rules, regulations, and orders regarding Health Care….”[2] Critics prefer to end the sentence there to misleadingly suggest Compact supporters are nullifiers. Instead, the sentence continues “that are inconsistent with the laws and regulations adopted by the member state pursuant to this compact.[3]” In other words, new state laws would take the place of previous federal laws under authority granted by Congress.

What’s more, all rules would remain in effect unless suspended by state action in specific areas and for any area not suspended the state will still be “responsible for the associated funding obligations in the state.” In other words, federal laws are not “suspended” except to the extent that the state chooses to act under a compact expressly agreed to by the federal Congress.

There are three steps before New Hampshire would administer any specific health care program.

Step One: States Agree:  Although a compact could technically start “on its adoption by at least 2 Member States and consent of the United States Congress,[4]” Congress will likely pay little attention until a dozen or more states adopt the Compact in their legislature demonstrating a critical mass of support.

Step Two: Congressional Approval and Amendment: Compacts do not become effective without congressional approval. In area like this – a bit more complicated than compacts on things like mutual recognition of drivers’ licenses – that congressional debate will be fairly involved. The compact document specifically anticipates give and take with the federal government by outlining the broad structure which should underlie the final agreement — the authority to use the current federal funds in each state guided by state not federal regulation.

Step Three – Evaluation: Although a Compact would give each state the authority to act, each state would undergo an evaluation process. Different states have different skill sets and few states would immediately take over administering all health care programs. The next step would to evaluate skill levels and decide where we would most likely be able to add value in a cost-effective way.

The Fiscal Impact of a Health Care Compact

The biggest question mark for any proposal is fiscal but joining the compact itself entails no financial obligation at all. Further participation by choosing to administer some program involves limited financial risk and the potential for significant savings.

One of the most significant errors opponents make is in regard to liability and whether or not a state would have to assume any and all health care operations. The question is “if we assent to a compact, would we then have to assume all health operations, and we would not then be liable for unfunded Medicare liabilities?”

First, signing on to the Compact does not obligate us to be one of the state with a good idea. We could, and probably should, wait for promising approaches to develop.

Second, if we do opt to implement a better idea, we do not have to administer all currently federal programs. We can choose ones that make the most sense for us. For example, we might decide that since we currently administer Medicaid, we could craft our state specific rules in exchange for a block granted federal funding. This is essentially a version of how Rhode Island and Florida operate under a Medicaid waiver. Rather than the one set of rules and regulations designed to fit fifty states, they forego the regulation in exchange for a block grant.

Were we to choose to administer Medicaid, we would not also be compelled under the Compact to administer other programs (like Medicare). The federal program as it exists then would remain in effect

The False Liability Issue

If our pilot program didn’t work or didn’t yield the results we wished for, we could “withdraw from this Compact by adopting a law to that effect….[5]” The withdrawal would be effective six months after we gave notice of our intent to suspend. If we were able to administer the program more efficiently than the federal government had, we would benefit from the savings realized. On the other hand, if we discovered we were in over heads, or the program didn’t work as well as the pilot we’d observed in another state, our financial risk would be minimal because of the ability to stop with six months notice.

The liability language in the withdrawal mechanism, though, has led to some confusion. The compact provides “a withdrawing state shall be liable for any obligations that it may have incurred prior to the date on which its withdrawal.[6]

The liabilities mentioned are not long term liabilities of the kind associated with Medicare. They are the typical liabilities associated with any program of this sort. For example, an insurance company would still have an obligation for covered procedures that occurred prior to the termination date of a policy. Similarly, a state would not be able to walk away from bills already incurred but not yet reimbursed. New Hampshire’s own self-insurance plan for state workers includes a similar accounting provision.

In fact, the long term obligations associated with a program like Medicare are exactly what an approach like a Compact is designed to address. Nationally, many competing proposals are being considered. Allowing many states many different options allows greater experimentation with potential long-term solutions. That experimentation will allow states to learn from each with some states acting early and some watching the various pilot programs before deciding whether or not to act.

The Virtue of Doing Nothing

In fact, in New Hampshire’s case we should move cautiously forward. We should petition the federal government to give states authority if they choose to exercise it and then wait and see what other states do. Even though all fifty states would be granted the choice by Congress, only six or eight would exercise that choice but each of those states would amount to a pilot program – and very different pilot programs that should teach us something.

In fact, this is the whole point of a compact that gives each state the authority to try different things. “Laboratories of democracy” has become one of the most hackneyed phrases in American politics but Louis Brandeis’ original thought is at the heart of a health care compact. Brandeis said “It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.[7]

New Hampshire may well not yet be up to the task of coming with useful reforms in all areas but other states may well be. Texas would probably try something more market-oriented, Vermont would almost certainly create a single-payer plan and become a teeny version of Canada.

Perhaps Vermont or Oregon or whoever tried single payer would prove it a failure but perhaps they would not. On the other hand, the New Hampshire way is to watch carefully what other states do and then import the best pieces into our system. Allowing other states to pilot innovative programs – only if they choose to do so –will help us all.

Who Decides What is a Good Idea?

Some will worry that nothing in a compact prevents states from doing something stupid but that’s just the point. We want to allow states to craft their own pilot program with as much latitude as possible. They should use their judgment to replace Washington’s. And New Hampshire should watch the results to reap the benefits.

Today, the federal government decides collectively what is and what isn’t a good idea. They then impose on all states that idea which might be good for New Jersey but not for New Hampshire. Under a multi-faceted approach, different states will evaluate what each other state does. The best experiments will be adopted by many other states. The less promising idea will be abandoned after a year or two. But those pilot programs which Brandeis anticipated are not possible under the current system without a Compact being adopted.

New Hampshire should join in a compact with other states to at least allow the potential for any state which thinks it might have a better idea to experiment with it. There’s certainly no risk to our fiscal order by letting Texas or Vermont try something. At the end of the day, that’s the only commitment we make when we join a compact.


[1]This paper capitalizes Health Care Compact when referring to the specific proposal that is being considered in New Hampshire in 2012 as House Bill 1560, and has been passed in substantially similar forms by four other states as of this writing.

[2] Text of proposed HB1560 (2012) proposed RSA 137-L4

[3] Text of Proposed HB 1560 (2012), proposed RSA 137-L4, emphasis added

[4] Proposed HB 1560 (2012), proposed RSA 137-L7

[5] Text of proposed HB1560 (2012), RSA 135-L9

[6] Text of proposed HB1560 (2012), RSA 135-L9.

[7] Interestingly Brandeis never used the phrase laboratories of democracy. The quote is from the end of his dissent in the 1932 Supreme Court Opinion in New State Ice Co. v. Liebman. Brandeis would have allowed a state to keep Mr. Liebman from selling ice without a license.