Straight talk on health care reform: The false promise of health care compacts

The latest buzzword among those determined to undermine federal involvement in everything from health care to environmental regulation is "compact." Take, for example, House Bill 1273 (the so-called "HOPE Act"), which recently passed the Colorado House and will be heard in the Senate early next week. It is supposed to be about allowing Colorado to "design the health care regulatory regime that best meets the needs of its citizens."(1) In reality, it's about opting out of the national health care reform law with nothing to replace it.

The idea for HB 1273 didn't originate in Colorado, and the bill's language was actually drafted inside the Washington Beltway by Texas construction magnate Leo Linbeck III and Wisconsin investor Eric O'Keefe. They are chair and vice-chair of the Health Care Compact Alliance in Alexandria, Va., and the language of the "Colorado" legislation can be found on the alliance's website.(2) That boilerplate language has also been used for legislation in several other states.

In terms of improving health care, the compact strategy offers little more than a vague promise that individual states on their own will somehow find a way to address their health care problems. No matter, because better outcomes are not really the goal. Linbeck and O'Keefe wrote in an editorial in the Washington Examiner that health care compacts are not about health care reform but "governance reform."

"It would change who decides health care policy, not who or what is covered," they wrote. And "unlike most such initiatives, the compact does not presume to 'solve the health care crisis.' It does not promise, for example, to guarantee coverage to the 47 million Americans who reportedly lack insurance."(3)

Only a handful of states are currently considering compact legislation, and so far it has become law in only one. These states are Colorado's potential compact partners. According to Linda Blumberg, a health care expert with the Urban Institute, "It's interesting that the states that are most interested in the concept are the ones where the federal government already spends most of its health care dollars and will spend even more under the Affordable Care Act."

"That means their residents have the most to lose," she adds. "In general, those are the poorest states in the country."(4)

The alliance's strategy is to use Article I, Section 10 of the U.S. Constitution (the so-called Compact Clause) as the legal framework for opting out of the Affordable Care Act, the national health care reform law. By creating a joint compact, each member state would take complete responsibility for its own health care policy. Once approved by both houses of Congress (which would be very unlikely in the near term), each state would receive its entire federal health care funding through an unrestricted block grant that would not be subject to any external oversight. Each state in the compact could work together, or most likely separately, to create its own unique healthcare system.

In other words, back to square one.

Compacts are ill-fitted to address our health care challenges. Of the more than 200 compacts implemented since the ratification of the U.S. Constitution, most manage waterways between states or deal with issues like environmental protection, waste disposal and even cross-border adoption.(5) Until now, no compacts have been created for the express purpose of allowing states to exempt themselves from a federal law. To that end, the compact strategy will no doubt face lengthy legal and legislative challenges.

And very few compacts have been created to address issues related to health care.(6) Most of these compacts are narrow in scope and certainly have never been used to manage a state health care system. Compacts have also been rejected as tools for managing the individual health insurance market between states.(7)

So why bother?

Because HB 1273 isn't about improving health care. It's about politics. The Health Care Compact Alliance does not offer a roadmap for health care reform. It provides only an ideological statement about governance reform. Compacts present no detail or direction on how to improve health care. They only prolong the debate about state versus federal authority. They are not about a better or more practical replacement for the Affordable Care Act, they are about trying to nullify it.

Meanwhile, Coloradans have much to lose in this game. According to a Colorado Trust issue brief, under the Affordable Care Act, health care cost growth will be between 5.5% and 17% lower in Colorado than it would be without the law. As a result, families and businesses in Colorado could expect premiums for employer-sponsored insurance to be $1,962 less per year for individuals and $3,917 less per year for families in 2019 than they would have been without the new law. In addition, increasing health insurance coverage in Colorado will also increase economic activity and create more jobs. The same issue brief projects that in 2019, Colorado's economic output could be nearly 1% higher than it would be without the federal reform. This could create almost 19,000 new jobs in that time frame.(8)

If HB 1273 passes and a compact is approved by Congress, Coloradans would be denied those benefits. Colorado would no longer automatically receive federal help during a public health crisis or pandemic. Nor would we be likely to receive federal assistance during a major economic downturn. If Colorado joined a health care compact, annual federal funding through an unrestricted block grant would likely be adjusted only for inflation and population growth, as opposed to the state's needs at the time.

Any legislation that claims to offer a better pathway to health care reform must show how it can meet or surpass the benefits of the existing Affordable Care Act. HB 1273 fails that fundamental test. The General Assembly should send it back where it came from.

End notes

1) Health Care Compact Alliance, Dispelling a Myth, May 3, 2011.
2) The Health Care Compact
3) Leo Linbeck III and Eric O'Keefe, The Washington Examiner, Health Care Compact among states is the alternative to Obamacare, March 22, 2011.
4) Vestal, Christine, Stateline.org, Interstate compacts offer new weapon against health care plan, May 2, 2011.
5) Adam Winkler, professor of law, University of California at Los Angeles, Republicans' Latest Effort to Circumvent the Constitution: Interstate Compacts.
6) Examples include the Interstate Compact on Adoption and Medical Assistance, the Northern New England Medical Needs Compact, the Interstate Compact on Mental Health, the New England Compact on Radiological Health Protection.
7) Washington State Office of the Insurance Commissioner, Feasibility Study on Use of an Interstate Compact to Provide Individual Health Insurance, Dec. 1, 2008.
8)  Weinberg, Micha, Ph.D., Colorado Trust issue brief, The Economic Impact of Health Reform in Colorado, February 2011.