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What if the Road to Single-Payer Led Through the States?

November 8, 2019
In The News

As presidential hopefuls campaign on a national “Medicare for all” system, a California congressman is pushing for a different path to universal coverage: letting the states go first.

Ro Khanna, a Democratic representative, will introduce legislation Friday that lets states bundle all their health care spending — including Medicare, Medicaid, Affordable Care Act dollars and more — to fund a state-level single-payer system.

The policy could create something akin to Medicaid for all. It would be 50 separate programs, jointly funded by the state and the federal government, with local officials making decisions about whom to cover, how much to pay doctors, and what benefits to cover.

Mr. Khanna concedes that his bill will not move forward during the Trump administration, but instead sees it as laying groundwork for next year, when Democrats hope to gain control of the White House and Senate. It is also a response to recent agitations from Gov. Gavin Newsom of California, who ran on a single-payer platform in 2018 and has cited federal inflexibility as a key obstacle toward delivering on that promise.

Mr. Khanna worries that complaints about federal bureaucracy might turn out to be an excuse for politicians who like the idea of single-payer, but worry about the hard work and political enemies they’d encounter along the way.

“The reality is there are a lot of interests that don’t want the process started,” Mr. Khanna said in an interview. “I wanted to make sure that people aren’t using this as an excuse. This takes away any excuse for California to say: We can’t legislate on this issue.”

Federal rules can make it difficult for states to create single-payer systems. Medicare, for example, accounts for 20 percent of national health care spending and covers 60 million people. The federal government has full control of the program, deciding what it covers and how it pays doctors and hospitals.

The federal government also regulates a large share of private health plans, typically those provided to workers at large companies, under a set of rules known as Erisa. This means that states that want to introduce a single-payer plan would have to leave enrollees in those plans, as well as those using Medicare plans.

“It’s clear the structural hurdles are real,” said Heather Howard, a Princeton lecturer whose work focuses on state health policy. “Erisa and Medicare are the big gorillas. Until you can braid all your funding together, you’re going to be really disadvantaged.”

The Khanna legislation would try to get rid of those hurdles. It envisions a waiver that would allow states to take over the Medicare money that flows their way and combine it with funding for Medicaid, the Affordable Care Act marketplaces, the Tricare program that covers military families and funds for veterans’ health care.

A state would need to submit a plan for how it would use those funds to cover at least 95 percent of its population within five years, then cover the remaining uninsured within a decade.

“The ideal would be that we have a full country with single-payer,” Mr. Khanna said. “That is what I think either a Sanders or Warren administration would produce. But in the absence of that, it’s preferable that we have some models of a single-payer system succeeding rather than no model at all.”

What he envisions is similar to Canada’s progression toward universal coverage. It began with a single province, Saskatchewan, which started hospital insurance in 1947. Other provinces followed, and within two decades, the entire country had government-provided health coverage.

Canadian provinces retain control of their coverage programs, which means the health benefits and payment rates in, say, British Columbia vary slightly from those in Ontario.

Medicaid has a similar history. When the program began in 1966, only half the states opted to participate in the new health plan to cover low-income residents. It took more than a decade for all states to join, with Arizona signing up last in 1982.

“States vacillated but eventually they came in, because the money was good and the other states were already providing the coverage,” said Sherry Glied, dean of N.Y.U.’s graduate school of public service and a former Obama administration official.

Ms. Glied and others question whether something similar could happen today. Health prices have risen sharply since Medicaid’s creation, meaning that states would have to take on the risks of managing a large, new budget item. An expensive new drug or an economic recession would create significant risks for a state buying health coverage for all its residents.

Vermont attempted to build a single-payer system in the early 2010s but abandoned the effort after realizing the significant tax increases it would entail.

“States do get around that in all sorts of ways, but when health spending is so big, there is only so much getting around that you can do,” Ms. Glied said. “I don’t think a state can do single-payer on its own because of the need to raise so much money.”

The politics have gotten trickier, too. States like Florida and Texas that have declined the Affordable Care Act’s Medicaid expansion dollars would probably be reluctant to follow an example set by California. Then there’s the challenge of disrupting current health care programs — like telling all Medicare enrollees they have to switch to something new, when their counterparts in neighboring states get to keep the status quo.

Joel Ario worked for Gov. John Kitzhaber of Oregon as an insurance regulator in the mid-2000s, and recalls him floating an idea similar to Mr. Khanna’s: letting the state take over its share of Medicare dollars.

“The AARP was very quickly on it, telling us they weren’t comfortable with Oregon making decisions about Medicare rather than the federal government,” said Mr. Ario, now a managing partner at the health consulting firm Manatt.

California represents an interesting test case. It’s a large state with a strong single-payer movement and a willingness to spend extra state dollars to expand coverage. In July, California became the first state to subsidize Affordable Care Act coverage for some undocumented immigrants.

A single-payer bill passed through its Senate in 2017. On his first day as governor, Mr. Newsom sent a letter to the Trump administration and congressional leaders asking for permission to “reallocate funds to best meet the needs of all the state’s population.” (It went unanswered.)

Governor Newsom’s spokeswoman declined a request for an interview with her or him. “This legislation would provide states like California more flexibility and more federal funding in order to accomplish that ultimate goal,” the spokeswoman, Vicky Waters, said in a statement.

Beyond appealing to a potential Democratic administration in 2020, Mr. Khanna said, the new bill is something that could motivate liberal states to keep pressing forward on the issue.

“If California could get this right, that would be a big deal,” he said. “So what I wanted to do is make sure California can move forward, and not use the federal waiver issue as an excuse for a lack of political courage to get this done.”