The Gallery: Transforming the States’ Approach to Health Care

The promise of the new health care legislation is momentous, says Deloitte’s Robert N. Campbell. In an opinion piece for CivSource’s The Gallery, Mr. Campbell discusses the importance of thinking strategically in managing the implementation of federal health care reform at the state level.

Perhaps the most hotly contested policy issue over my 39-year career in public policy and government consulting has been that of the government’s role in health care. Whatever your personal view, it is clear that the new health reform legislation will intensify this debate.

It is now also clear that much of the action and implementation responsibilities of health reform will reside with the states. Just as the states have previously assumed responsibility for expanded Medicaid eligibles and the SCHIP program, they will now be responsible for many of the newly eligible citizens covered and technology and business processes supporting the reform program.

This is certainly not the first major wave of health care transformation to hit the states over the last several decades. Over my career, I have observed several major waves of change hitting state health care and state Medicaid including efforts to:

  • Control cost and fraud abuse in the 1970s — a few years after the initial implementation of the act.
  • Emulate commercial managed care developments in state Medicaid in the early to mid 1980s — leading to a number of insurance and capitated programs.
  • Bolster the capacities of a number of public safety net health care systems in the 1990s to better manage care across the various provider groups serving Medicaid patients.
  • Expand eligibility in Medicaid through Congressional actions and large number of state Medicaid wavers.
  • Transition from serving the long term care populations in institutions to serving them in the community

It is also apparent that health care reform legislation will ultimately be evaluated in the context of how well it is implemented and whether or not the cost savings are realized. In that regard, I believe that there are significant insights to be gained from each of these earlier waves of change that can be applied today. For example I believe that state leaders and state Medicaid administrators should be contemplating the following as they position for the modifications to come:

  • In an environment where actuarial risk is assumed, it is important to establish a reasonable history of experience for new individuals covered. This will be particularly challenging for the newly eligible population as a claims cost history will typically not exist.
  • As in earlier change movements, a large number of new commercial entities will likely enter the market, with varying levels of experience and capabilities. To avoid the performance issues seen in the past, states will need to carefully evaluate the experience level, management capacity, and financial wherewithal of new entrants into the market.
  • Balancing supply and demand will be an important consideration. As significant numbers of newly eligible individuals come into publicly administered programs, it is important that health care providers and health care clinics be properly placed in relationship to where significant groups of individuals reside.
  • Given the cost containment objectives of the legislation, it is important to quickly get on top of issues of supply induced demand and manage it properly. From my perspective, the inability to do this was one of the more vexing issues facing many of the states that have significantly expanded coverage in recent years under Medicaid waivers.
  • Given the considerable technology challenges of health information exchanges and providing important information on health conditions and outcomes across providers, a significant level of capital investment in health information technology will be required to meet the objectives of the legislation. The states have frequently not demonstrated a capacity to properly fund such needs.
  • Understanding the “woodwork” effect. In previous reform initiatives it was common for individuals applying for new service to find that they were also eligible for previously existing services. For example, the mother that applied to cover her child through CHIP may have found that her family was also eligible for child care assistance. While this type of outreach is certainly appealing in terms of public service, the cost to the states of such unintended consequences need to be understood and budgeted.

The promise of the new legislation is momentous. While the implementation and management challenges are perhaps the most daunting of any major federally enacted initiative of our generation, we have a great opportunity with health reform to create positive change not only for ourselves but for generations to come.

Mr. Robert N. Campbell III is Vice Chairman, Principal, Deloitte LLP and is the U.S. State Government Leader, based in Austin.

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