On behalf of AARP’s nearly 40 million members, thank you for convening this hearing regarding state health care reform initiatives.  Ensuring that all Americans have access to affordable, high quality health care is critically important to AARP members and their families.  AARP has been centrally involved in state health care reform efforts through our offices in the 50 states, as well as in the District of Columbia and the territories.  AARP has not only represented the health care coverage issues facing the 50+ population, but has been an advocate for health care consumers of all ages.   

We have seen a great commitment in many states to provide affordable, high quality health care.  But while the states can be laboratories of experimentation, they are often hampered by resource and legal constraints.   

There are several lessons that can be learned from the successes and challenges states have encountered to date in their health care reform efforts: 

(1) Comprehensive state health care reform relies upon a stable, clearly defined funding source;

(2) The employer role – and the applicability of federal standards under the Employee Retirement Income Security Act (ERISA) -  is unclear, particularly as to how ERISA applies to shared employer funding for health care; and

(3) Cost containment is a critical element and must be administered carefully. 

Need for stable, clearly defined funding

Comprehensive state health care reform is unlikely without stable, clearly defined funding.  In most instances, without a stable federal funding source, state health reform efforts are jeopardized.  For instance, Vermont’s request for an exception from Medicaid rules for federal matching funding for subsidies to provide coverage for those up to 300 percent of the Federal Poverty Level (FPL) for its Catamount health care reform program was recently rejected, forcing a significant increase in premiums that will push some individuals back into the ranks of the uninsured.  This federal action will also likely reduce take-up of Catamount Health, particularly at a time when many families are already feeling growing economic pressure.  And Massachusetts, which successfully enacted comprehensive health care reform legislation in 2006, is now negotiating to continue to use Medicaid funds for the population at 200-300 percent of FPL that currently has subsidized premiums and out-of-pocket costs.  A final example is Louisiana, where lack of clear federal Medicaid commitments was a major factor in the failure to enact health coverage legislation in Louisiana post Hurricane Katrina.   

Recent experience demonstrates that in order for state initiatives to guarantee health security, federal funding sources are critical. Adoption of federal standards such as matching funds up to at least 300 percent of the FPL, requiring full Medicaid coverage for all those with incomes up to 100 percent of the FPL, and requiring uniform, minimum federal standards on coverage, cost and quality, would foster state reforms with access to affordable, high quality health care.  Improvements in federal Medicaid financing policy could also address inconsistencies that arise from the wide variation in health status, number of uninsured, poverty rates, and state fiscal conditions found across the states.  

Effective state health care reform efforts have relied upon federal assistance to serve all needy populations.  Current state health care systems are highly fragmented, typically with dozens of programs, each serving different populations with different eligibility criteria and different benefits — all predicated on a hodgepodge of Medicaid and SCHIP limitations and waivers.   This fragmentation is a particular issue for working families and older adults.  We need to do much more to ensure that older adults enter their Medicare years in good health.  Reforms need to take into account the premiums that target groups will face, otherwise older individuals or people with health problems can be charged significantly higher premiums, and many will still not be able to afford the coverage made available to them.   In Massachusetts, for example, some 62,000 individuals with incomes over 300 percent of the FPL have been exempted from an individual mandate to purchase insurance because the premiums required are not affordable.   

Lack of clarity about ERISA’s impact

Employer-sponsored coverage for current employees and retirees continues to erode.  While state insurance regulation can set standards for coverage for all health insurance products, states generally view ERISA as a barrier to shared financial responsibility with the business sector.  Employer mandates were enacted in Vermont and Massachusetts, but they require a relatively small “contribution” from employers who do not provide coverage — $295 and $365 per employee per year, respectively.  Even these requirements may be susceptible to legal challenge under ERISA.   Some states have enacted laws that encourage employers to provide coverage.  For example, Maryland and Iowa offer subsidies to small employers, and Massachusetts provides employers access to lower cost insurance.  But real health care reform will likely require state and federal governments, individuals, health care providers, insurers, ­and employers to share financial responsibility.  At present, the scope of ERISA preemption on state health reform -- as defined through the case law -- is unclear, and the lack of clarity has contributed to inaction on state health care reform efforts.  Therefore, further examination of how ERISA impacts state reform efforts is warranted.

Cost containment is critical

Stemming the tide of rising health care costs is a critical health care reform element.  Unless we are able to rein in health care spending, affordable coverage will continue to elude millions of Americans.  Cost pressure on employers and private individuals, as well as the pressure on public programs like Medicare and Medicaid, will continue to erode health care coverage and affordability. 

AARP believes that consumers share responsibility for living healthier lives.   We have supported state efforts to expand the use of preventive services and chronic disease management, including efforts to implement and appropriately reimburse care coordination.  We have also supported programs that encourage and facilitate consumer use of these services, such as Vermont’s Catamount and Blue Print for Health programs.  These programs provide access to preventive care and chronic management services without consumer cost sharing and promote healthy behaviors through programs in schools, public health agencies, and other community-based sites, including the workplace.  With the portion of the population with chronic diseases growing, these initiatives hold promise for long-term health benefits and cost containment in the public and private sector that will inure to the advantage of consumers as well. 

Similarly, AARP believes that payment needs to be reformed to better align delivery system financial incentives with desired health outcomes; evidence should be the basis of clinical, consumer, and public sector decisions; and quality and safety should be improved by reducing waste, medical errors, and disparities based on socio-economic factors, race, and gender.  These objectives could all be hastened, we believe, by accelerating the pace of adoption of health information technology.  We support efforts to discourage over-utilization of medical services.   Incentives need to be designed so that they produce the proper response, and that do not establish barriers to needed care or impose incentives that will have unintended consequences. Ultimately, these changes should help prevent the continued shift of medical costs to consumers and other payors.     

Quality and price transparency is an effective tool in changing provider and patient behavior. Although information for consumer decision making is growing and improving, we must have realistic expectations for its use.  For example, “good” information is not ubiquitous and does not always apply to the level of analysis most important to consumers; and the public still is not informed about where to find information on quality and cost even when it has been developed.  Moreover, millions of consumers have poor health literacy or inadequate decision skills and require support to use information on quality and cost.  Finally, designing information can be a source of contention among stakeholders -- health care providers are particularly sensitive to publishing information on their performance.  And collecting and reporting information is costly. Massachusetts has been trying to develop consumer-oriented cost and price reporting for over two years.  Iowa and Minnesota recently enacted price and quality transparency legislation, but implementation has been slow due to controversial debates as to appropriate measures of quality and calculation methodology for cost.

All stakeholders, including patients, purchasers, and providers, should collaborate in identifying information that is published for consumer decision making.  In addition, purchasers and providers should use evidence-based information for making their own contracting and referral decisions.  Quality and price transparency are just two components of a multi-faceted approach to quality improvement and cost containment.  Developing the evidence base to support the development of guidelines and performance measures that can be used as the basis for payment reform, as well as using health information technology to support better clinical and patient decisions, are additional components of an agenda to reform our state and national health care systems.

Conclusion

We commend the Subcommittee for holding this important hearing to focus more attention on state efforts to tackle health reform.  We hope that this hearing is just the beginning.  AARP looks forward to working with you and your colleagues on both sides of the aisle to enact measures that broaden health care reform in the nation and the states.