Reform Outlook: State and Local Differences

Last week’s blog post addressed the possibility of differences between what the health reform laws promise and what they will ultimately deliver.  I argued that the probability of reform evolving as enacted is considerably less than 100%.  This forecast is not uniformly negative.  I expect somewhat less than half of the authorized expenditures will be disbursed over time, yet some beneficiaries could actually receive all that the laws have promised (while some others get nothing).  Separate from the national perspective, who gets what and where the benefits are realized will be determined by two significant factors—state politics and local economic conditions.

Substantial implementation powers are delegated to state governments, and states are responding in very different ways.  At one extreme, voters in three states have passed referenda that effectively prevent their states from implementing the federal laws.  Attorneys General in approximately 20 states are pursuing constitutional challenges that would, if successful, make ObamaCare a moot point.  At the other extreme, several states are moving full-speed ahead to implement the powers delegated to them, such as creation of insurance exchanges to facilitate purchase of mandated insurance by 2014.  The ultimate impact of the federal reform laws in a state that has opted out of reform will obviously be very different from the impact in a state that is pursuing full participation.

State and local differences in economic circumstances will also have a major influence on reform’s ultimate payoff, most notably in the adoption of Medicaid as a vehicle for expanding coverage.  Many states will not have the funds or the desire to meet their long-term obligations for enrolling patients in Medicaid, which will cause the projected number of insured patients to fall short of expectations.  In addition, the number of patients insured by employers will depend on the strength of local economies.  Reforms’ projections of reducing the portion of uninsured Americans from 17% in 2010 to 6% by 2018 are based on economic forecasts that are widely believed to be overoptimistic for the country as a whole, but actual results will vary substantially by locality. 

If you are confused by this analysis, you understand the situation.  It is confusing.  The health reform laws of 2010 embody incredible complexity due to the politics of getting them passed at all.  They are not the result of a rational, methodical, non-partisan process to solve a well-defined problem.  The latest reform laws are based on so many assumptions and other “guesstimates” that their outcome is literally unpredictable, and the resulting uncertainty needs to be adjusted for significant differences at the state and local levels.  How do you think reform will play out in your neck of the woods?  In your opinion, how much does location matter?