Health Care Compact Gives Healthcare Back to States

The U.S. Constitution established a system based on federalism with limited and enumerated power provided to the federal government. The founding fathers specifically delegated those powers not outlined in the Constitution to the states. Their vision stood in contrast to the centralized control over health insurance and medical care contained in last year’s federal healthcare reform.

Under the Patient Protection and Affordable Care Act (Obamacare) the federal government has attempted to usurp this authority from the states and make centralized decisions for states that have very different healthcare needs and financial constraints.

A Healthcare Compact (Compact) could be the solution to bringing power and control over healthcare back into the hands of the states.  A Compact is an interstate agreement between two or more states, approved by Congress. Once approved, the laws in the Compact supersede federal laws and regulations. In this case, a Compact could enable states to cooperate in order to undermine much of the federal regulation and mandates contained in Obamacare (excluding military healthcare).

In addition, a Compact would not enforce any particular healthcare system on member states.  States may choose their own healthcare reform systems.  The intent is that by placing responsibility on the states, state legislators will more effectively use healthcare funding resources based on the particular needs of their constituents, rather than a “one size fits all” national approach.

Furthermore, such a Compact would not conflict with any existing efforts by state or federal legislators, or state attorneys general, to challenge the constitutionality of Obamacare.  Instead, it simply creates a “regulatory shield” for member states, rendering Obamacare ineffective in participating states.

The regulatory shield would be created through three main objectives: give member states primary responsibility for healthcare regulation; ensure relevant state laws supersede conflicting federal laws and regulations; and secure federal funding for states that choose to invoke their authority under the Compact.

States would have more autonomy in regards to regulating their health insurance and medical care industries. States already have much of this authority.  For example, each state has created its own set of mandatory services that must be included in insurance policies.  Additionally, states may already declare that their citizens are not required to purchase health insurance – in contrast to the federal mandate included in Obamacare.

Funding under a Compact would transform federal payments to providers and states for Medicare and Medicaid services into a single block grant payment to each state. Currently, funding for the Medicaid program is divided between the states and federal government. The federal government provides it funding with several strings attached, with different payout rates for different services or eligible populations for example. Medicaid is administered by the states, with limited leeway for what services and population groups it covers due to broad oversight by the federal government. Medicare is a federal program, administered at the federal level.

In a Compact arrangement, these programs would be changed into block grant programs. A system of block grants basically means that states receive a predetermined sum of money for their Medicaid and Medicare programs, and have flexibility over how to structure these programs. This shift would represent an especially significant change to the Medicare program, by allowing states to create and oversee different programs for Medicare recipients.

Under a Compact, states would bear the risk of medical spending growth on their own and would also be responsible for all future regulation and responsibility related to these programs.  Healthcare programs would no longer be governed at the federal level as they currently are.  In return, they would have flexibility to consolidate and adjust public health spending as they see fit. The federal funding would be mandatory spending and not subject to annual appropriations.

Funding for each state would be based on federal healthcare spending in that state in 2010, adjusted for population growth and general inflation. The inflation factor is calculated using the GDP deflator, a broad measure of price levels.

Allowing states to control federal funding dollars puts states in a position to drive healthcare reform.  States have greater flexibility to adapt and anticipate local healthcare markets and better understand their own budgetary constraints.

In order for the Compact to become law, each member state must pass the Compact (which includes approval by the General Assembly and Governor’s signature). The Compact must then be approved and ratified by the U.S. Congress. It would not require the signature of the U.S. President to take effect.

With Congressional federal approval, healthcare authority is transferred through the Compact to the states.  Because the Compact transfers authority to the states, healthcare laws enacted by the states under the Compact would supersede federal regulations.  Of course, Congress retains the ultimate authority and could pass laws to undermine the Compact in the future.

However, by several states joining a single Compact, their collective power to compel Congress to consent to and ratify the Compact increases.  It also places pressure on Congress not to revoke any future Compact authority granted to the member states and minimizes the potential for federal interference down the road.     In addition, if member states choose to amend the Compact, it would allow them to do so as needed without further Congressional consent.  Furthermore, any member state could withdraw from the Compact at any time if they felt it was no longer effective.

The Compact, as opposed to required state health insurance exchanges, would provide greater control and autonomy to the states while also guaranteeing federal funding.  Several states have begun to consider, and even vote on, joining a Compact.  Could North Carolina be next?