Governors on Divergent Paths to Control Health Costs

When Republican Gov. Jeb Bush of Florida talks about healthcare, he stresses his plan to “empower” low-income families with choices while cutting costs for government and spurring efficiency in the medical system.

When Democratic Gov. Rod Blagojevich of Illinois talks about the same issue, he focuses on first-in-the-nation legislation he signed in November guaranteeing all the state’s children access to health insurance. “We have now done for kids what 40 years ago Medicare did for seniors,” Blagojevich said.

From coast to coast, Democratic and Republican governors are pursuing divergent policies to control healthcare costs and expand access to services. In the process, they are grappling with the same basic question facing Washington: Should government attempt to reinforce the existing system under which most Americans receive health insurance as part of large groups, or tilt the nation toward an approach that shifts more control, but also more financial burden and risk, to individuals?

In tune with President Bush’s agenda, GOP plans in Florida and South Carolina attempt to reduce the growth of healthcare costs by directing more of the cost away from government and private insurers and toward individuals. Republican leaders promote these plans as models to guide healthcare changes.

“One of the reasons we have a healthcare crisis is because, as a consumer, I don’t have that much skin in the game,” said Arkansas GOP Gov. Mike Huckabee. “A lot of us feel there needs to be a transformation from a third-party [insurance] system to more [financial] participation by the [patient].”

By contrast, Democratic proposals seek to reinforce public and employer-based healthcare systems that partly shelter individuals from medical bills. That philosophy underlies efforts in California, Illinois and New Mexico to guarantee coverage of all children -- and efforts in Maryland, Wisconsin and Iowa to encourage or compel more employers to insure workers.

In these states, “We are very explicitly talking about whether we pool together to share the risk in healthcare or we devolve into a system of everybody for themselves,” said Anthony Wright, head of the liberal group Health Access California, which supports a proposed ballot measure that would guarantee universal coverage for the state’s children.

In Massachusetts, Republican Gov. Mitt Romney is pushing a plan that blends each party’s approach. He would require all state residents to purchase health insurance, but offer financial aid to lower-income people to help them buy the coverage.

With the share of people in America receiving health insurance at work dropping, the number covered by public programs has soared by 27% since 2000 to more than 37.5 million, according to Census Bureau figures. That has led many governors to complain that the money they must funnel to healthcare is squeezing other priorities, such as education.

In one of the most ambitious GOP proposals, Gov. Bush of Florida gained federal approval in October for a Medicaid experiment that supporters and opponents agreed could fundamentally reshape the giant state-federal healthcare program for the poor.

“It’s a step out of ... the status quo or Band-Aid approach of just trying to balance Medicaid budgets for the next year,” said Nina Owcharenko, a health policy analyst at the conservative Heritage Foundation think tank in Washington.

Medicaid currently guarantees recipients access to a fixed menu of services. Under the Florida program, the state instead will provide Medicaid recipients with a fixed sum of money to purchase private insurance.

This change transforms Medicaid from a program that offers recipients a defined benefit to one that assures only a defined contribution.

Republican Gov. Mark Sanford of South Carolina is seeking federal approval for a similar program with a twist -- he wants to test the use of health savings accounts for Medicaid recipients.

Such accounts, the core of Bush’s national healthcare plan, allow individuals to accumulate money tax free to be used to pay hundreds or thousands in medical expenses. Then, they purchase a health insurance plan to cover catastrophic expenses. The South Carolina plan would use state funds to establish such a system.

Advocates say these changes will restrain healthcare costs by increasing competition and making Medicaid recipients more sensitive to the services they use. But the programs alarm many liberals, who say they are little more than attempts by states to limit their healthcare costs by shifting more of the bill to individuals.

In Arkansas, Huckabee won federal approval last week for a Medicaid experiment that mixes priorities of each party. The plan will provide subsidies for small businesses to offer coverage at work -- thus advancing a top goal of liberals. But it will allow the firms to offer their workers bare-bones policies, which advances the GOP push to make patients more sensitive to healthcare spending by limiting insurance coverage.

Efforts in several states spotlight the Democratic priority in the healthcare debate: stabilizing and expanding group-based coverage.

In Maryland, the Democratic-controlled Legislature overrode a veto by GOP Gov. Robert L. Ehrlich Jr. and enacted legislation requiring large employers to spend at least 8% of their payroll on employee healthcare -- a bill aimed at Wal-Mart Inc.

Advocates have introduced similar bills in 13 other states.

Democratic leaders in other states are focusing on healthcare coverage for children.

The Illinois law Blagojevich signed in November opened the state’s Medicaid and Children’s Health Insurance Program to all children, with costs to families adjusted on a sliding scale for income.

In California, the ballot initiative advocates hope to put before voters in November would raise tobacco taxes to provide coverage for every child in the state. (Recent data suggests about 1.1 million minors are uninsured.)

Democrats say their various plans affirm the concept of the collective safety net against GOP efforts to place more risk on individuals. Republicans counter that their plans would provide patients more choice and control in ways that could slow the relentless rise of healthcare costs.

As these arguments are honed at the state level, the likelihood increases that they will become more prominent in Washington -- and on the 2008 presidential campaign trail.