New Private Plan Options. In August 2001, HHS Secretary Tommy Thompson developed an innovative initiative to expand coverage under the Health Insurance Flexibility and Accountability (HIFA) demonstration project, with a new and expedited waiver process for state officials to reduce the number of uninsured using Medicaid and funding from SCHIP funding. The President's team at HHS created HIFA to give states the flexibility to use almost $3 billion in unexpended SCHIP funds to cover uninsured childless adults with private health insurance. New Mexico recently won approval to cover 40,000 persons under the HIFA program through private health insurance. Many more Americans could benefit from this expedited waiver process.
Slowing Progress. While S. 3018 would properly reverse the Medicare pay cuts that are facing doctors, it also includes a provision that would significantly damage a major presidential initiative to get quick relief for uninsured individuals. Section 706 of S. 3018 would require that all unexpended SCHIP funds be returned to the Treasury instead of being used to expand coverage for uninsured adults. Moreover, Section 706 would add new regulatory requirements that would slow the waiver process and thus undermine its fast-track features. This provision is backed by Senator Max Baucus (D-MT), chairman of the powerful Senate Finance Committee, and Senator Charles Grassley (R-IA), ranking minority member of the committee.
MAINSTREAMING THE POOR INTO PRIVATE PLANS: HOW HIFA WAIVERS WORK
America's uninsured want to enroll in private health plans. In a Commonwealth Fund survey of uninsured Americans between the ages of 19 and 64, the respondents were asked what type of health insurance coverage they preferred. Thirty-four percent of the uninsured said that they wanted to enroll in employer plans, and 20 percent said that they wanted to enroll in individual health plans. By contrast, only 12 percent said that they wanted to enroll in Medicaid or Medicare, and only 18 percent said that they wanted to enroll in a new, but unspecified, government health care program.
The Bush Administration wants to accommodate these preferences. In August 2001, HHS Secretary Thompson unveiled a new HHS program: the Health Insurance Flexibility and Accountability demonstration program. The objective of the HIFA program is to enable state officials to coordinate the federally funded Medicaid and SCHIP programs with private health plan options. The HIFA initiative enables state officials to use Medicaid and SCHIP funds in concert with private insurance to expand coverage to low-income individuals, particularly those with incomes below 200 percent of poverty. The HIFA initiative is also designed to make it easier for states to request waivers from federal rules and to quicken the government's response to state requests.
One of the key features of the HIFA initiative is the promotion and utilization of private health plans for expanding coverage. To facilitate this federal policy, governors and state officials are encouraged to develop innovative benefit designs and cost-sharing arrangements to target differing populations with differing needs more effectively. In effect, the Bush Administration is asking the states to tap their wellsprings of creativity. Among the states that have obtained approval for HIFA waivers are Arizona, California, Maine, New Mexico, and Illinois.
The HIFA initiative has not been without its critics. In a report issued last July, the U.S. General Accounting Office (GAO) said that the Bush HIFA initiative raised "legal and policy concerns" and stated that the use of SCHIP funds, designed to cover children, was not intended by Congress to cover adults who were without insurance. The Bush Administration strongly disagrees with the GAO assessment and views the proposed Senate restrictions as an attempt to undercut the flexibility of its administration of these HHS health programs.
HOW THE SENATE BILL WOULD SLOW ACCESS TO PRIVATE COVERAGE
Under S. 3018, the Bush Administration's fast-track approach to covering the uninsured would be halted and the Administration would be prohibited from allowing unexpended SCHIP funds to cover childless adults.
In place of an expedited waiver process, the Senate bill would impose on governors and other state officials a detailed set of procedures governing the waiver process. Under Section 706, the new rules would apply to any demonstration project at the state level that would have a "non-trivial impact" on eligibility, enrollment, benefits, cost sharing, or financing with regard to either Medicaid or SCHIP waivers. Apparently, matters having no serious impact on any of these categories relating to the state administration of these programs are not encompassed by the Senate bill.
Under Section 706, the initiation of the waiver process must not be undertaken unless state officials henceforth certify that they have complied with the new Senate-specified process. Specifically, the Secretary of HHS may not approve a proposal for a Medicaid or SCHIP waiver unless the state first certifies that it has publicized a notice of the state's intent to develop a waiver proposal, provided notice to a medical advisory committee, and convened at least one meeting of a medical advisory committee to discuss the proposal and any modifications to the proposal.
The legislation further specifies that the Secretary of HHS may not approve a waiver unless the state has published written comment at least 60 days prior to the date that the state submits the proposal and the notice of the proposal contains "at least" the information governing the way the public may submit comments on the proposal and the states' projections regarding "the likely effect and impact of the proposal on any individuals who are eligible for, or receiving, medical assistance, or other health benefits coverage under a state program…." The language of the Senate bill is quite specific: State officials are to make projections of the impact of their waiver request on "any individual" in any health program they administer. This is a formidable task.
The Senate bill specifies that after publication of the notice, state officials must convene at least two public hearings on the proposal or any modifications to the proposal and hold at least one public hearing at least 15 days before the state submits the request for a waiver to the Secretary of HHS.  When the state submits a proposal to the Secretary of HHS for a waiver for the Medicaid program, the SCHIP program, or any amendment of any of these programs, the state must submit to HHS a complete record of the public notice and "input" process, copies of all required notices, the dates of the meetings, a summary of the public comments and hearings, and a certification that the state officials complied with all of the new federal requirements in developing the proposal.
The Senate bill would also require HHS to publish a report each month in the Federal Register on all the proposed waivers and amendments to waivers using Medicaid and SCHIP funds, and impose restrictions on HHS ability to waive certain benefit requirements in giving states flexibility.
New Congressional Micromanagement. As HHS Secretary Thompson has noted, the states actually manage the Medicaid program, but they need to have the freedom and flexibility to manage it. The same is true with the SCHIP. They want to use unexpended SCHIP money to expand insurance coverage, but the Senate bill would set up a system of congressional micromanagement of HHS administration of the waiver process for the Medicaid and SCHIP programs.
These proposed Senate restrictions would, of course, undermine the fast-track process for granting states waivers to secure private coverage for uninsured Americans. Their cumulative effect would be to delay or close off government assistance to Americans who want to enroll in private health plans. And they would increase pressure for low-income Americans to be enrolled in Medicaid, a poorly performing welfare program, or to go without health care coverage altogether. Under the Senate bill, also, unexpended SCHIP funds would have to be returned to the federal treasury.
WHAT THE SENATE SHOULD DO
The Senate should enact much-needed Medicare physician payment increases so that doctors continue to practice in the Medicare program and serve senior citizens. Congress should also enact physician payment increases to encourage doctors to continue to see new Medicare patients. It is the new Medicare patients who are most vulnerable to congressional cutbacks in physician Medicare payment.
At the same time, the Senate should encourage the President's efforts to mainstream millions of Americans now without coverage into private health insurance coverage. Beyond a generous tax credit program, the HIFA waiver process is yet another way to expand coverage. In the meantime, Congress should not lock any uninsured Americans out of private coverage and force them into ineffective or substandard government programs, particularly Medicaid.
During the 1990s, Governor Tommy Thompson, one of America's most energetic governors, successfully used the HHS waiver process to make significant changes in the welfare program by imposing work requirements on welfare recipients and getting thousands of people off the Wisconsin welfare rolls and into a productive life. Wisconsin's success helped to pave the way for the revolutionary 1996 welfare reform law, one of the most successful pieces of social legislation in American history.
America is now locked in a health care debate. At the center of this continuing debate is a profound difference among policymakers as to whether or not the American health care system should be transformed into a public utility, financed and managed by government officials, or whether it should be transformed into a patient-centered, consumer-driven system in which individuals and families make the key decisions over the choice of benefits and treatments, physicians and health plans.
This is the reason why every single debate on Capitol Hill is tantamount to a proxy battle over national health insurance. This is evident in the recent debates over how to cover the uninsured, the provision of tax relief for insurance in the stimulus package, the proposed federal regulatory regime in the stalled patients' bill of rights legislation, the coverage of displaced workers through the trade adjustment legislation, Medicaid expansions, Medicare prescription drug, and the reform of Medicare itself. The resolution of each of these issues is inevitably a triumph of control either for patients or government officials. And that includes the current debate about the HHS health care waivers.
Congress should back the President in his efforts to help the millions of Americans who are uninsured, not throw more bureaucratic obstacles in his way and theirs.
Robert E. Moffit is Director of Domestic Policy Studies at The Heritage Foundation.
Jennifer Edwards et al., "The Erosion of Employer Based Health Coverage and the Threat to Eworkers' Health Care," Issue Brief, Commonwealth Fund, August 2002, p. 7.
Beneficiary Access to Care and Medicare Equity Act of 2002, Section 706(a).
Beneficiary Access to Care and Medicare Equity Act of 2002, Section 706(d)(1)(A).
Beneficiary Access to Care and Medicare Equity Act of 2002, Section 706(a)(1)(C).
Beneficiary Access to Care and Medicare Equity Act of 2002, Section 706(a)(D) and (E).