January 10, 2020

By Ashley Fuoco Antonelli, Senior Editor

While it often seems like the nation's biggest health care debates happen on the federal level, states often serve as testing grounds for innovative policy ideas—and we can expect that to continue in 2020. Here are three key ways states could help to transform health care this year.

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1. 'Public option'—and even single-payer—plans could make waves in several states

The debate over a potential "public option" health plan or single-payer health system has been a central focus of Democratic candidates for president. But these ideas also are gaining traction at the state level—particularly as a looming legal challenge threatens the Affordable Care Act.

Take Colorado and Washington. Each state is moving forward with proposals to launch public option health plans that would cap reimbursement rates for providers as a means to curb premiums. Though, as Vox's Tara Golshan notes, the plans are not traditional public options because they would be run by private health plans, as opposed to the states' governments. (New Mexico also is making headway on a different type of public option that would allow state residents to use subsidies to buy into Medicaid.)

Supporters argue the public option plans will give consumers more coverage choices—as well as more affordable coverage options. But hospital and provider groups have been vocal in their opposition.    

For instance, in Washington, lawmakers walked back their original proposal to cap providers' reimbursement rates at Medicare rates, after providers argued that Medicare often doesn't cover the actual cost of providing care. Instead, lawmakers capped provider reimbursements at 160% of Medicare reimbursement rates, down from an estimated rate of 174% of Medicare fees currently paid by private insurers in the state's exchanges.

In Colorado, the state proposed an even higher cap, ranging from 175% to 225% of Medicare's rates—still lower than the current average of 289% in the state.

It remains to be seen whether providers will agree to participate in the plans. Washington made provider participation voluntary, and while Colorado might require providers' participation, it's not yet clear what consequences providers would face if they don't participate. In addition, it remains to be seen whether capping provider reimbursements would, indeed, keep premiums down long term.

Further, experts have noted that implementing a public option health plan could disrupt the states' insurance markets—which has sparked pushback from the insurance industry. Larry Levitt, EVP for health policy at the Kaiser Family Foundation, told the New York Time's Margot Sanger-Katz that "the better" a public option health plan "works, then the less likely it is to actually preserve a private insurance market."

As such, some experts have said a public option health plan would likely serve as a stepping stone to a single-payer health system—and some states are considering skipping that step altogether. For example, policymakers in California and New York are considering implementing single-payer health systems in the states. However, experts say state single-payer efforts might face an even tougher path to fruition than public options, noting the comparatively higher costs of implementing a single-payer system—which ultimately killed Vermont's plan to launch a single-payer system in 2017—as well as resistance from industry stakeholders and other policymakers.

2. Medicaid could be reined in by some Republican-leaning states—and expanded by others

States also will continue to play a key role in reforming Medicaid in 2020, and likely will serve as the battlegrounds for contentious Medicaid policies.

CMS has made clear the Trump administration will continue approving states' requests to implement Medicaid work requirements, despite court rulings striking down work requirements in a few states. Some states have paused or rescinded their proposals to implement Medicaid work requirements in light of the legal issues, but others have pledged to move forward.

And at least one state is looking to implement larger-scale, and perhaps even more controversial, reforms to its Medicaid program. Tennessee last year submitted a proposal seeking the Trump administration's permission to convert the state's Medicaid financing structure from an open-ended federal funding system into a fixed block-grant system. The move has long been touted by Republicans as a way to give states more flexibility to implement Medicaid, but has garnered concern from patient advocates and others who fear the shift could harm beneficiaries' access to care.

At the same time, some states could look to expand Medicaid in 2020, particularly as voters push for Medicaid expansion via ballot initiatives. For example, Kansas Gov. Laura Kelly (D) and state Senate Majority Leader Jim Denning (R) on Thursday unveiled a proposal to expand Kansas' Medicaid program, breaking state policymakers' previous impasse on the issue.

Inside Health Policy's Chelsea Cirruzzo notes that, ultimately, the outcomes of state elections could play a key role in "determin[ing] the future direction of" Medicaid, with gubernatorial and legislative races and ballot initiatives all placing the fates of states' Medicaid programs in voters' hands.

3. More states want to import prescription drugs from Canada

States also are exploring a new federal policy that would allow them to import lower-cost prescription drugs from Canada.

The Trump administration last month issued a notice of proposed rulemaking and draft guidance that together would allow states and drugmakers to import lower-cost versions of drugs from other countries—though the proposals exclude certain high-cost and specialty drugs, such as biologics and insulin, that have been major concerns in discussions about drug pricing.

HHS outlined a pathway that would allow states, drug wholesalers, or pharmacists to develop systems to import certain brand-name drugs from Canada, where they are typically sold at a lower price. Separately, FDA detailed a second pathway that would let drugmakers import versions of their own FDA-approved drugs from foreign countries, as long as the drugs have been approved by Canada's health ministry and meet FDA's criteria for a drug application.

Florida and Vermont already have submitted concept papers to HHS outlining how they would import prescription drugs from Canada, and other states are considering similar actions. Still, the states could face roadblocks. HHS has yet to finalize its proposals, and some Canadian drug distributors have said they can't—or simply won't—export lower-cost drugs to the United States because of shortages in the country.

Daily Briefing will continue to keep you up-to-date on the latest developments in states. And for a deeper dive on some of the biggest health care policies affecting the nation, check out our Health Care Cheat Sheets.

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